This essay will examine the area of corporate piercing after the leading UK company law decision of the UK Supreme Court "Prest v Petrodel Resources Ltd". With the support of case-laws and the commentary by critics, it will be demonstrated that besides Prests’ efforts, it has failed in its’ aims of providing clarity to the law. The following arguments will be discussed: veil piercing as the remedy of last resort and corporate veil is just a label of an existent principle. Furthermore, the dichotomy introduced by Lord Sumption in evasion and concealment, with support of case laws.
Table of Contents
1. Introduction
2. The "Last Resort" Principle and Judicial Discretion
3. The Doctrine vs. Label Debate
4. Historical Application of Veil Piercing
5. Evasion and Concealment: The Sumption Dichotomy
6. Judicial Confusion and the Aftermath of Prest
7. The Interchangeability of Lifting and Piercing
8. Conclusion and Future Outlook
Objectives and Research Themes
This essay critically examines the doctrine of "piercing the corporate veil" in English corporate law following the Supreme Court's decision in Prest v Petrodel. The primary research objective is to demonstrate that, despite judicial efforts to refine the doctrine, the law remains characterized by ambiguity, a lack of judicial consensus, and a failure to provide a clear, autonomous framework for legal application.
- The role of "veil piercing" as a remedy of last resort.
- The distinction between "evasion" and "concealment" principles introduced by Lord Sumption.
- The debate regarding whether veil piercing constitutes a formal doctrine or merely a descriptive label.
- The practical inconsistency in judicial application post-Prest.
Excerpt from the Book
The confusion regarding the veil piercing rule
When the judgement of Prest was first released, it was seen as limiting the instances in which court could pierce the veil, with it simply performing a re-tagging task for "sham" and "façade" situations. It may be rightly concluded that replacing cases of "facade" with "concealment" and “sham” with "evasion”, made very little difference to court decisions. ‘Façade’, was used by the Court of Appeal (CoA) in Adams v Cape and was held to be the only ground on which it would pierce the corporate veil, as had been established in Salomon. It was clear that it still allowed "piercing the corporate veil" simply being one particular expression of other general principles. However, a critic, Daniel Prentice, describes the word "façade", as a word of no real clear meaning. Thus, it goes without saying that absence of a clear-cut classification, indeed, adds to the confusion surrounding the veil piercing rule. Even, Lord Sumption himself acknowledged the confusion that had been caused by failing to clearly distinguish the two; concealment and evasion principle. To date, there have been no successful "sham" cases in which corporate veil has been pierced, since Prest. It has been often critiqued and emphasised that concealment is actually inherent in many evasion cases, in-fact evasion is commonly achieved through concealment.
Summary of Chapters
1. Introduction: Outlines the research focus on the post-Prest landscape of corporate veil piercing and the controversy surrounding its judicial application.
2. The "Last Resort" Principle and Judicial Discretion: Discusses the necessity-based approach and the judicial tendency to pierce the veil unnecessarily when other common law remedies are available.
3. The Doctrine vs. Label Debate: Examines Lord Walker’s assertion that veil piercing is not a formal doctrine, but a mere label for imposing liability.
4. Historical Application of Veil Piercing: Reviews historical cases such as Ord v Belhaven to highlight the lack of autonomous development in the doctrine.
5. Evasion and Concealment: The Sumption Dichotomy: Analyzes the unclear distinction between evasion and concealment principles formulated by Lord Sumption.
6. Judicial Confusion and the Aftermath of Prest: Discusses how the Prest decision failed to clarify the law and resulted in continued uncertainty in legal interpretation.
7. The Interchangeability of Lifting and Piercing: Explores judicial admissions, including those by Lord Neuberger, regarding the interchangeable use of "lifting" and "piercing" the veil.
8. Conclusion and Future Outlook: Concludes that the current state of the law is inadequate and suggests that further clarification is required to resolve persistent legal ambiguities.
Keywords
Corporate Veil, Piercing, Prest v Petrodel, Evasion, Concealment, Salomon, Limited Liability, Judicial Discretion, Company Law, Veil Lifting, Façade, Sham, English Law, Legal Uncertainty, Remedy of Last Resort.
Frequently Asked Questions
What is the core subject of this paper?
The paper provides a critical analysis of the "piercing the corporate veil" doctrine in English law, specifically investigating the impact of the Prest v Petrodel judgment.
What are the primary themes discussed?
Key themes include the distinction between evasion and concealment, the "last resort" principle, the interchangeable use of terminology, and the overall lack of clarity in judicial application.
What is the central research question?
The research asks whether the Prest judgment successfully provided the necessary clarity to the doctrine of veil piercing or if it merely introduced further confusion into the law.
Which scientific methods were utilized?
The paper employs a legal-analytical method, examining case laws, judicial precedents, and critical commentary by legal scholars to evaluate the consistency of the doctrine.
What topics are covered in the main section?
The main sections cover the historical development of the doctrine, the shift in terminology from "façade" to "evasion/concealment," and the subsequent difficulties courts face in applying these concepts.
Which keywords best describe the document?
Keywords include Corporate Veil, Piercing, Prest, Evasion, Concealment, Limited Liability, and Judicial Discretion.
How does the author interpret the "evasion" principle?
The author argues that the "evasion" principle is restrictive and unclear, often failing to offer a distinct legal mechanism compared to existing common law principles.
Why is the Prest decision criticized?
It is criticized for failing to eliminate ambiguity, for creating a confusing dichotomy between concealment and evasion, and for leaving practitioners and judges without clear guidance.
Does the author consider veil piercing a formal doctrine?
The author highlights that certain judges view it not as a doctrine, but as a "mere label" used to justify the imposition of liability on company controllers.
What is the significance of the "last resort" argument?
It represents the debate over whether veil piercing should only be used when no other legal remedy is available, a condition that courts have struggled to apply consistently.
- Quote paper
- Hania Shakeel (Author), 2022, Prest v Petrodel. Veil piercing, corporate veil and the dichotomy introduced by Lord Sumption, Munich, GRIN Verlag, https://www.grin.com/document/1195195
