Trustor Ab v Smallbone and Another (No 2): ChD 30 Mar 2001

Directors of one company fraudulently diverted substantial sums to another company owned by one of them. The defrauded company sought return of the funds, from the company and from the second director on the basis that the corporate veil should be lifted by treating the receipt by the company as his.
Held: Not every impropriety would lead to such a conclusion, but here the company was a device or facade used for a fraud, and the court treated the receipt by the company as receipt by the defendant. Sir Andrew Morritt V-C identified three suggested categories of cases in which it may be appropriate to pierce the corporate veil, including (1) cases in which the company was shown to be a facade or a sham, and (2) cases where the company was involved in some impropriety, and (3) where it is necessary to do so in the interests of justice and no unconnected third party is involved.
Sir Andrew Morritt VC said: ‘Companies are often involved in improprieties. Indeed there was some suggestion to that effect in Salomon v A Salomon and Co Ltd [1897] AC 22. But it would make undue inroads into the principle of Salomon’s case if an impropriety not linked to the use of the company structure to avoid or conceal liability for that impropriety was enough.’
and: ‘the court is entitled to ‘pierce the corporate veil’ and recognise the receipt of the company as that of the individual(s) in control of it if the company was used as a device or facade to conceal the true facts thereby avoiding or concealing any liability of those individual(s).’
James Morritt V-C
Times 30-Mar-2001, Gazette 17-May-2001, [2001] 1 WLR 1177, [2001] EWHC 703 (Ch)
Bailii
England and Wales
Citing:
See AlsoTrustor Ab v Smallbone and others CA 19-Jan-1999
Appeal against refusal to allow the defendant, subject to a Mareva injunction, to charge his house to pay his legal fees. . .
See AlsoTrustor AB v Smallbone and others CA 9-May-2000
. .

Cited by:
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The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
CitedColes and others (Trustees of the Ward Green Working Mens Club) v Samuel Smith Old Brewery (Tadcaster) (Unltd Company) and Another CA 29-Nov-2007
The claimants appealed refusal of an order for specific performance of a contract for the purchase of land under the exercise of an option agreement. The defendant had conveyed the land to a subsidiary in order to defeat the option.
Held: ‘The . .
CitedBen Hashem v Ali Shayif and Another FD 22-Sep-2008
The court was asked to pierce the veil of incorporation of a company in the course of ancillary relief proceedings in a divorce. H had failed to co-operate with the court.
After a comprehensive review of all the authorities, Munby J said: ‘The . .
CitedLindsay v O’Loughnane QBD 18-Mar-2010
lindsay_oloughnaneQBD11
The claimant had purchased Euros through a foreign exchange dealer. The dealer company became insolvent, causing losses to the claimant, who sought to recover from the company’s managing director, the defendant, saying that he was aware of the . .
CriticisedPrest 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 . .

These lists may be incomplete.
Updated: 18 January 2021; Ref: scu.90013