Whilst it would be wrong to find a principal/agency relationship between a creditor and a debtor which was a shell company whose sole activity was sponsored, funded and controlled by the creditor (a proposition described by Staughton LJ as ‘revolutionary doctrine’), the reality of the relationship meant that payment to the creditor would not be in the ordinary course of business so that release of the debtor’s assets from a Mareva injunction for that purpose would be inappropriate.
Staughton LJ observed: ‘The creation or purchase of a subsidiary company with minimal liability, which will operate with the parent’s funds and on the parent’s directions but not expose the parent to liability, may not seem to some the most honest way of trading. But it is extremely common in the international shipping industry, and perhaps elsewhere. To hold that it creates an agency relationship between the subsidiary and the parent would be revolutionary doctrine’.
He expressly separated the two concepts of ifting and piercing the corporate veil, on the basis that ‘pierc[ing] . . is reserve[d] for treating the rights or liabilities or activities of a company as the rights or liabilities or activities of its shareholders’, whereas ‘lift[ing] . . [is] to have regard to the shareholding in a company for some legal purpose’.
Judges:
Staughton LJ
Citations:
[1991] 4 All ER 769, [1991] 1 WLR 917
Cited by:
Cited – Prest v Petrodel Resources Ltd and Others SC 12-Jun-2013
In the course of ancillary relief proceedings in a divorce, questions arose regarding company assets owned by the husband. The court was asked as to the power of the court to order the transfer of assets owned entirely in the company’s names. The . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 04 May 2022; Ref: scu.519430
