"It is wrong to look for principles in terms of which the courts lift or decline to lift the veil of incorporation.

It is sufficient that the court has a wide equitable discretion in this regard to do whatever justice the case before it demands." Discuss whether, in your view, the case law supports this conclusion. The corporate veil represents the counterintuitive principle of company law that separate legal corporate bodies form a barrier to parties wishing to connect them in proceedings. It provides for the limited liability of shareholders and members of companies, as well as to protect companies within corporate group structures from the liability of companies within their structure. The principle expounded in Saolomon v. Saolomon typifies the nature of separate legal personalty. The body of case law which deals with cases where the courts will lift the veil (i.e. ignore the separate personalty of different companies) is described by Farrar and Hannigan as an inarticulate attempt to mark the limits of incorporation, and that no clear principles can be derived from this. The main theoretical and practical tension highlighted in this question is the opposing objectives of certainty an flexibility that piercing the coproate veil reuirees. The sanctity of the Saolomon principle must be upheld in order to promote certainty and investment within companies (Lowry); whereas there are cases, often arising through the use of coporate group structures, where creditor and tortious claimants can be denied justice if the courts are to refuse to acknowledge other policy and equity consideration other than that of corporate confidence (Haansman & Kraakman). In this essay, it will be argued that the case law does not support the conclusion that it is sufficient for the court to have a wide equitable discretion to lift the veil in cases of justice, and that it is not wrong to look for underlying principles. It is conceded, however, that the case law yields no clear principles, yet we should seek to establish cateoriges and instances, so that stakeholders and creditors chasing debts, and potential tortious claimants can predit, as best as possible, their chance of succeeding before the courts in pericing the corporate veil. This will help to reduce spurious litigation,m and will protect companies from being unduly disrupted in their operations from pending lawsuits. It will also garner investor confeidence, but perhaps to the detriment of creditor confidence. A final point will be made is that juscitce can be found through other strategies rather than corporate veil piercing (Chandler v. Cape per Aren L.J.). The seminal Court of Appeal case of Adams v. Cape sought to establish, as far as possible, some of the main categories to which the court can pierce the corporate veil. This case promoted the sanctity of the Saolomon principle in stating that piercing the corporate veil was not a question of moral value, but an inherent right of corporate bodies enshrined in English company law. The court quoted the speech of Lord Keith in Woolfson v. Strathclyde where the main case of piercing the veil was where there were special circumstances indicating that the company being potentially pierced was a mere faade conceling the true facts. The court also considered that direct agency in a group structure may allow veil piercing (Smith, Stone & Knight); and where the court is interpreting a statute or document allowing a group structure to be treated as a single enttite (see Beckett Investments in the context of an employment contract in a corporate group structure). In Adams, a large number of asbestos claimants were denied justice through shrewd use of the corporate form, and the court itself refusing to lift the veil. Adams represents a severe narrowing of circumstances where the veil can be pierced from cases where justice was considered an overrider of a legitimate use of the corporate form (Re a Company (1985)). Adams is clear evidence from the case law that it is not sufficienmt for the courts to lift the

veil when justice demands, and that the poliy considerations of certainty for investors and corporate vehicles forms the most important aspect of this area of the law. Another case to support my argument is that of Creasey v. Brentwood Motors. In this case, Richard Southwell QC ignored the restricitive approach in Adams, and found, on the basis of a breach of directors duties within a corporate structure, that the corporate veil could be pierced. This was done in the interests of justice. However this case has been described as having a confused rationale and a maverick status ( ). It was quickly overruled by Ord v. Bellhaven Pubs, who stated that the faade exception as being the real legitimate basis for piercing, and not in the interests of justice. The further case of Trustor AB v. Smallbone (No. 2) cemented Adams as the seminal authority in this area of the law, while recgonising the abiulity of companies to act with impropriety through the use of the corporate veil. However in that case the Vice-Chancellor held that impropriety was not sufficient (see also Jones v. Lipman), and that the impropriety must flow through the use of the corporate structure (an affirmation of the faade exception). It ois clear from the case law that the couets do not find it sufficient to hold a wide equitable discretion to pierce the veil, nd instead prefer to rely on the sanctity of the Saolomon principle, save for cases of sham companies (Adams). It is submitted that this is the best way to protect the capitalist functioning of company kaw, and, in line with Otto-KahnFreunds thinking, allow capital and labour to negotitiation freely under a limited liability scheme, without fear of being liabile for another legal persons liabilities. Furthermore, Gower & Davies have noted that veil piercing need not be the central strategy for achieving justice in these circumstance. Cases such as Chandler v. Cape, where a Caparo v. Dickman style test was adopted, can be seen to balance the commercial certainty policy objective of Saolomon with the idea of the necessity of justice. Nevertheless, this is a circumvention of coproate veil, and the case law clearly demonstrates that the court having a wide equitable discretion to serve individual cases of justice is not sufficient because it would undermione the functioning of English company law and, as Gallagher and Zeigler note, an erosion of this could have detrimental effects on other areas of company law, such as directors duties and the rule in Foss v. Harbottle.