Caselaw on the Separation of Legal Personality

July 24, 2017 Philosophy

The fact of theAtlas Maritime Co SA V Avalon Maritime Ltd[ 1 ] is that Mr Richard Morrison is the manager of Stewart Marine, a company which run ship agents. He wants to purchase a vas which had some broken and the company appointed a proficient adviser, Mr Melville Price which from Drake Maritime SA. Drake Maritime SA is a proficient company and London agent of Stewart Marine. After the rating, Mr Price said that the vas is appropriate to purchase. Then, they ask Mr Jeffery whether privation to purchase or non. Then, he was agreed and said that he had form a company for a intent to purchase the vas called Avalon. Marc Rich is Avalon’s parents company and lends the money to purchase the vas. After few old ages, the vas was sold to Atlas. Staughton LJ said that there has two manner to definite of the lifting or piercing the corporate head covering that is for piercing, it is handling the company and stockholder liabilities, rights or activities in the same. While to raise or look behind it is that stockholders have usage the power to make some legal intent from the company.

A company once it is incorporated, the company is an unreal individual in jurisprudence which means distinguishable from its members and stockholders. It is able to action or being sued by its company ain name, use the power to acquire belongings and etc. The philosophy of Separate Legal Personality had cleared that a company is treated as distinguishable legal individual with an independent being from that its members and managers. The legislative assembly and the tribunals have the ability to see the buttocks of the company is being manipulated by whom and this procedure is called as “lifting the head covering of incorporation” ( KOH, 2006 ) . As normal the tribunal will non raise the corporate head covering unless there is a particular fortunes need to raise behind the head covering. ( SHANTHY RACHANGAN, JANINE PASCOE, ANIL JOSHI, 2010 ) Over a century ago, the determination of the House of Lords inSalomon v Salomon & A ; Co[ 2 ] are widely used for mention in justification for separate legal personality and are non frequently be disputing and oppugning. Salomon had his ain concern and subsequently on he promoted a company and transferred his concern to the new company. The company has seven stockholders, which is Salomon, his married woman and five kids. His new concern is fail and owes a debt. The house of Godhead held that Salomon no demands to counterbalance with the debt to creditors because this is non personally apt.Salomon V Salomon Coexpressly gave consequence to the rule of Separate Legal Personality which protects those behind the head covering, which can impart itself to mistreat lifting/piercing the head covering efforts to turn to this maltreatment. But this instance is no uncertainty recognized as “one-man company” .

As aforementioned, the tribunals will non merely to raise the head covering unless there is a particular circumstance. In fact, they can raise or pierce the head covering by legislative act or common jurisprudence. Once the tribunal lifts the head covering, Judgess will analyze whether the members had abuse their power to get belongings or any illegal and the owner’s personal plus will all expose in the proceeding of tribunal and. In Pioneer Concrete Service Ltd v Yelnah Pty Ltd [ 3 ] had merely showed that although a company is separate legal entity but tribunals will look behind to the world to happen out who is the accountant in the certain occasions. ( Forji, 2007 ) For common jurisprudence, when there is a corporation instance relation to a figure of distinct factors such as fraud, bureau, group entity, or justness and equity so the tribunal will make up one’s mind to raise the corporate head covering.

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InAspatra Sdn Bhd & A ; 21 Ors v Bank Bumiputra Malaysia Bhd[ 4 ],the Aspatra and 21 other companies were appealed to the Supreme Court to bespeak to dispatch the Mareva injunction and Anton Piller which agreed by the test justice. Lorrain was the manager of two bank, Aspatra Sdn Bhd is one of the company that he controlled. He had breached his fiducial responsibility and makes a secret net income. Then, the secret net income was transferred to Aspatra which is under his control. There was a fraud but yet the tribunal prefers to raise it because of justness. The justice was lift the head covering and disclosed that he was alter self-importance of Aspatra and his full plus was identified ( SHANTHY RACHANGAN, JANINE PASCOE, ANIL JOSHI, 2010 ) . A fraud in Malaysia that will make the justness whereas the manager premeditates to take advantage of company for an indirect intent and a concern will non run for a long clip if they keep doing deceitful concern.

Another state of affairs where to raise the corporate head covering is an bureau, bureau is that a company is subordinate which keeping by its parent company and the company is acted like agent for its stockholders. “Alter ego” is besides a term that is representative bureau in the tribunal ( Ian M Ramsay, David B Noakes, 2001 ) . The stockholders will be apt for the Acts of the Apostless of the company. In the instance ofFG Films[ 5 ] , An American Company formed a company in UK called FG Films Ltd. The American company keeping the 90 % portions of the company and want to get subsidy offer by UK authorities for its production of a movie called “Monsoon” in India in the name of a British company. The tribunal held that this company is non operated by the British company, it merely simply an agent of the American Company. Therefore, the FG movie can non bask the British authorities benefits because the British authorities refused to register the movie as a British movie. The tribunal decided to raise the company head covering with do the equity and justness ( William, 2011 ) . It is the same in Atlas’s instance, Staughton LJ besides stated that signifier a shell company and have an bureau relationship between creditor and debitor is non an honest manner to make concern and would be radical.

The group entity construct mentioned that the company who seek the advantages of separate corporate personality at the same clip must accept the corresponding loads and the tribunal will to look behind of the economic entity of the whole group. However, whether to pierce the corporate head covering or non, the Court ever depend of the fact of the instance.DHN Food Distribution Ltd V Tower Hamlets London Borough Council[ 6 ] is a instance which similar withSmith, Stones & A ; Knight Ltd[ 7 ] with the implementing purchase. DHN is the parent company of Bronze Investment and DHN Food Transport, major in food market concern while Bronze had the premises and DHN Food Transport had the vehicle. The Council compulsory buying the premises and will merely pay the value of the land to Bronze but ignore the compensation for any concern on the land. But DHN is whose focal point on run the concern and Bronze merely had the premises, . The held of the tribunal when justness is treated the three companies as a individual economic benefit and raise the head covering to do a collectible for perturbation to the parent company because it was no outside concern other than this group. ( Singh, 2013 )

In peculiar, Courts sometimes will raise corporate head covering to protect the justness and equity of everyone. In the instance ofCreasy V Breachwood Motors Ltd[ 8 ] , Creasy was fire by his employment company, Welwyn Motors Ltd. Creasy was sued his employer for wrongly fired him but Welwyn had already reassign all his concern to his other company called Breachwood Motors Ltd. Breachwood paid all Welwyn’s creditors but non Creasy, he felt that he was no apt for to pay the compensate because the two companies are separate legal entity. With the involvement of justness, the tribunal lifts the head covering as Welwyn was portion of the Breachwood, therefore it was responsible to pay Crease for the compensation.


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