Case
Company Law Essential Cases
- Module
- Law (LL3004)
- Institution
- Royal Holloway University Of London
This document contains facts, issues and ratio decidendi of each of the essential cases in Company Law, crucial to know for the exams.
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ESSENTIAL CASESCASE FACTS (150) ISSUE (100) RATIO DECIDENDI (150)
A British company, which This case predominantly The appeal was firmly
Adams v Cape predominantly mined and focused on the issue of dismissed, and it was held
Industries Plc used asbestos, had a separate legal personality and that one of the subsidiaries
[1990] BCLC 479 subsidiary in the USA which exceptional agency. It was to of Cape was indeed
was sued by employees for be determined whether the US incorporated as a façade,
[Lifting the personal injuries as a result subsidiary was acting as an yet, on the facts would not
Corporate Veil] installing asbestos in the agent of the UK parent be enough to result in the
factory. Although this had company, particularly as their holding company being
been settled, further actions have given rise to tort liable. Therefore, subsidiaries
asbestos related activities liabilities. This case further are not agents, particularly
were carried out which illustrated in which instances since the subsidiary leased
resulted in the employees the British courts will the offices, recruited their
that became ill to sue the recognise a foreign courts’ own employees, and carried
Texas subsidiary. The jurisdiction over a company on business as principal on
victims sought to enforce when it is resident in this its own account.
the judgements in the foreign country. Therefore, if Furthermore, on the issue of
English courts and the Cape Industries plc is to be Cape’s presence in America,
requirement here was that found present in the US the Court of Appeal
Cape Industries was either jurisdiction, the US judgement illustrated the principles that
present in the USA, or that would be enforceable in must be established for a
it was under the Texas England by the English courts. company to be present in a
jurisdiction. It was to be foreign jurisdiction. First,
determined whether Cape that the company has a fixed
Industries was indeed premises from which
present through the Texas business is conducted for
subsidiary. It was necessary more than a minimal period,
in this instance for the veil and secondly, that the
of incorporation to be lifted business has been transacted
so the two companies from this fixed premises. As
would be seen as one. Yet, Cape had no fixed place of
it was held that the parent business in the USA, the
company, Cape Industries English courts would not
plc was not present in the recognise, or enforce the US
USA, to which the claimants judgement.
appealed.
Lehman issued loan notes This case predominantly focused The appeal was firmly
Belmont Park using special purpose vehicles on the anti-deprivation principle dismissed by the Supreme
Investments Pty which were taken up by a and the Supreme Court had to Court as it was held that the
Ltd v BNY group of investors. The determine whether the provision agreement was entered in good
Corporate agreements contained in the is enforceable. In order for the faith and not in order to evade
documentation included credit Court to come to a conclusion, insolvency laws. Lord Collins
Trustee Services
default swap agreements and the extent and meaning of the asserted that a contractual
[2011] UKSC 38
set out priorities in the event anti-deprivation principle had to provision which attempts to
of default. Belmont instructed be explored. As well as this, it had vary the pari passu rule would
[Insolvency 2]
, BNY to terminate the swap to be considered to which extent be unenforceable and goes
agreement, triggering the the principle would apply to against public policy, regardless
payment of ‘unwind’ costs. commercial transactions and if it of good faith. Yet, he remarks
However, as the provisions could indeed apply where the on the application of this rule in
stated, in the event of default event of default is triggered prior case law in which the parties
(including insolvency) the to the insolvency of the party that have acted in good faith and
priority over the collateral has been deprived of the assets. used commercial sense,
would be in favour of resulting in the rule being held
Belmont. As this meant BNY not to apply. In his judgement,
could not recover the costs to he states the anti-deprivation
‘unwind’, the appellant raised rule is “only breached in cases
a claim against the validity of where there is a deliberate
these provisions on the intention to defeat the
grounds that they breached statutory insolvency regime”.
the anti-deprivation principle. Furthermore, he also
The High Court of Justice held consolidated that the anti-
that the provisions were in deprivation rule would not
fact effective and did not go apply in instances where the
against the anti-deprivation deprivation occurs for reasons
rule and this was further other than bankruptcy (para
upheld in the Court of Appeal. 79). As well as this, Lord Collins
This judgement was appealed agreed with the judgement in
to the Supreme Court, which the Court of Appeal that the
granted the application. anti-deprivation rule will not
apply in the event of default
occurring prior to the party’s
insolvency. Therefore, the
provisions were held to be valid
and enforceable.
Eurosail issued loan notes, The issue for the court to It was held by the Supreme
BNY Corporate which were secured on consider here was whether the Court that Eurosail was not
Trustee Service properties in the UK and as company was balance sheet balance sheet insolvent since
Ltd v Eurosail this was done in several insolvent or not. This is it could not be ascertained
[2013] UKSC 28 different currencies, swaps because even as the company that the assets will fall short
were taken out to hedge had been meeting its in comparison to its liabilities
[Insolvency 1] the currency risk. Here, the obligations, it would only be in 2045. This is because
event of default to occur able to do so for a short time. “currency movements,
was defined under the It was for the court to interest rate fluctuations,
Insolvency Act 1986 (IA) determine if this is adequate and the success of the UK
s.123(1) and s.123(2). As for the company to be market” are outside the
the Lehman group insolvent or if it had to reach company’s control and the
collapsed and the currency the point where no funds current assets could have a
and interest rate fluctuated, remained. In the instance that better chance in making the
Eurosail’s accounts the company was deemed company solvent. To deem
portrayed liabilities higher insolvent, an event of default the company balance sheet
than its assets. A class of would be triggered. On the insolvent, considering these
noteholders requested the contrary, if the company was factors, is described by Lord
trustee of the notes to found not to be insolvent, the Walker to be merely
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