Academic journal article Melbourne University Law Review

Corporate Structures, the Veil and the Role of the Courts

Academic journal article Melbourne University Law Review

Corporate Structures, the Veil and the Role of the Courts

Article excerpt

Contents    I  Preface: Professor Ford  II  Introduction III  Directors' Liability  IV  Limited Liability and Corporate Groups   V  Direct Liability of Parent Entities          A Chandler v Cape          B The Australian Cases          C Canada          D Comparison of the Different Approaches to Liability VI  Conclusion 

I PREFACE: PROFESSOR FORD

This lecture is in honour of Professor Harold Ford, an Australian doyen of corporations law and trusts law.

Professor Ford enrolled in the Articled Law Clerks course at the University of Melbourne prior to World War II, and completed it after six years of service in the Royal Australian Navy during the war. He won the Supreme Court Prize for Articled Clerks in 1948, and shortly after commenced his illustrious academic career at this university. (1)

He was Professor of Commercial Law at Melbourne Law School until his retirement in 1984, and was Dean of the Law School in 1964 and from 1967 to 1973. (2) Beyond the Law School, he was engaged in extensive law reform work, including chairing the federal government's Companies and Securities Law Review Committee. (3) In the Committee's final report, the Committee members acknowledged Professor Ford's 'industry and intellectual leadership' as being the 'driving force' in the Committee's achievements. (4) He was also the founding chairman of the Leo Cussen Institute. (5) He was made a Member of the Order of Australia in 1994 for his services to the law. (6)

For those who did not have the privilege to be taught by, or work with, Professor Ford, his influence is strongly felt through his seminal texts. Professor Ford's textbook Principles of Corporations Law (7)--which was unprecedented on its initial publication, Australian students and practitioners having previously relied on Gower's English text, with an Australian supplement--is indispensable to those studying or practising in the area. (8) Similarly, every good legal library has a copy of Ford and Lee's Principles of the Law of Trusts.

Those who were fortunate enough to be taught by, or work with, Professor Ford speak not only of an intellectual giant, but also of a kind and generous man of integrity. He was a respected teacher and mentor who influenced generations of law students and lawyers. It is a privilege to have been invited to give this lecture in Professor Ford's memory.

II INTRODUCTION

In this lecture, I have chosen to canvass a topic that has been the subject of intense discussion for a long time, but which remains fascinating and in significant parts unresolved. That is the problem of the 'veil'--to what extent can courts look behind legal structures to commercial realities in determining the disputes before them?

The topic of piercing the veil has been described as an 'unprincipled and "arbitrary"' area of the law. (10) In a sign of how controversial this area is, in the 2013 United Kingdom Supreme Court decision of VTB Capital plc v Nutritek International Corporation ('VTB'), (11) Lord Neuberger queried whether it was even possible for a court to pierce the corporate veil in the absence of a statutory mandate to do so. (12) His Lordship subsequently drew back from this position in the case of Prest v Petrodel Resources Ltd ('Prest'), (13) which was decided a few months after VTB. In Prest, Lord Neuberger was persuaded by Lord Sumption that the doctrine of veil-piercing did have a place in the law, albeit a narrow one.14 In reaching that conclusion, however, Lord Neuberger remarked that:

   It is ... clear from the cases and academic articles that the law    relating to the doctrine is unsatisfactory and confused. Those    cases and articles appear to me to suggest that (i) there is not a    single instance in this jurisdiction where the doctrine has been    invoked properly and successfully, (ii) there is doubt as to    whether the doctrine should exist, and (iii) it is impossible to    discern any coherent approach, applicable principles, or defined    limitations to the doctrine. … 
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