GRAD LLB: COMPANY LAW FORMATIVE ASSESSMENT: SPTI
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GRADUATE LLB COMPANY LAW
FORMATIVE ASSESSMENT: SPTI
LLB (Hons) Programmes
The Supreme Court decision in Prest v Petrodel Resources Limited [2013] UKSC 34 held
that the doctrine of English law, which enables the courts i...
GRADUATE LLB COMPANY LAW
FORMATIVE ASSESSMENT: SPTI
LLB (Hons) Programmes
The Supreme Court decision in Prest v Petrodel Resources Limited [2013] UKSC 34 held
that the doctrine of English law, which enables the courts in very limited circumstances to
pierce the corporate veil, was only to be invoked where a person was under an existing legal
obligation or liability or subject to an existing legal restriction which he deliberately evaded or
whose enforcement he deliberately frustrated by interposing a company under his control.
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Lord Sumption stated at [27]:
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“the recognition of a limited power to pierce the corporate veil in carefully defined
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circumstances is necessary if the law is not to be disarmed in the face of abuse”.
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With reference to decided case law, critically consider the circumstances in which a
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third party can claim against a company’s shareholders, and the extent to which you
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agree with Lord Sumption.
The SPTI are for guidance only. There is discretion to give recognition for arguments, cases
and examples not included in these notes.
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SPTI
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Suggested essay plan
1. Introduction, signposting subsequent discussion and analysis.
2. Definition of the corporate personality, limited liability and corporate veil, and brief
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application by reference to relevant cases.
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3. Some consideration of the policy reasons guiding this area of law.
4. Fuller explanation of corporate veil and general discussion of the circumstances in
which pre Prest the courts were prepared to pierce the corporate veil.
5. Full examination of the Prest decision.
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6. Critical analysis of Lord Sumption’s judgment.
7. Conclusion – agreeing with Lord Sumption or not but at the very least linking the
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conclusion back to the question.
Introduction
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The introductory sentences should set out the essay plan with reference to the quotation, with
key issues being identified and a clear indication being given of what approach the student
will take in dealing with these.
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, GRAD LLB: COMPANY LAW FORMATIVE ASSESSMENT: SPTI
This essay requires an analysis of corporate personality, limited liability and corporate veil in
the context of relevant case law and then a critical analysis of the ratio in Prest and, in
particular, Lord Sumption’s judgment.
Main Body
Definition of the corporate personality, limited liability and corporate veil, and brief application
by reference to relevant cases.
Briefly explore corporate personality and limited liability by reference to Salomon (not in too
much detail, only as background as this is not the focus of the question).
Consideration of the policy reasons guiding this area of law.
Brief consideration of the policy rationale: do the courts favour legal certainty as to when the
veil may be pierced, over the possibility of piercing the veil where it would be in the interests
of justice to creditors of the company to do so?
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Fuller explanation of corporate veil and general discussion of the circumstances in which pre
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Prest the courts were prepared to pierce the corporate veil.
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Explain lifting the corporate veil as an exception to limited liability, using case law to give
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examples of where the courts have been prepared to do this (see topic 2).
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This is the doctrine that a company is a separate and independent legal person, which is
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distinct in law from its members. The concept is central to the existence of a corporate body.
The court may only "pierce the corporate veil" when it deems it appropriate and absolutely
necessary to look behind the status of the company as a separate legal entity, distinct from
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its shareholders. In so doing, the court will consider who are the individuals, as
shareholders, directing and controlling the activities of the company.
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The corporate veil may be pierced if there is some form of wrongdoing, which involves the
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fraudulent or dishonest use of the corporate personality, for the purpose of concealing the
true position.
A sample of cases which might be considered include:
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Adams v Cape Industries
Lee V Lee’s Air Farming
Re Produce Marketing Consortium
DHN v Tower Hamlets
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Woolfson v Strathclyde Regional Council
Jones v Lipman
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Daimler v Continental Tyres
Gilford Motor Co Ltd v Horne
Most recent key decision before Prest:
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VTB Capital Plc. V Nutritek International Corp. & Ors [2013] UKSC 5.
In summary, VTB was the English claimant in an action to recover c.US$225 million loaned
to "RAP", a Russian company, for the purpose of RAP's proposed acquisition of Nutritek.
RAP defaulted on the loan and VTB also learned that the security it had taken for the loan
was of significantly lower value than it had been led to believe. VTB's case was that, inter
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