Separate Legal Personality in UK Law

In my view, the principle that the court may be justified in piercing the corporate veil if a company's separate legal personality is being abused for the purpose of some relevant wrongdoing is well established in the authorities. This is because I think that the recognition of a limited power to pierce the corporate veil in carefully defined circumstances is necessary if the law is not to be disarmed in the face of abuse.

It is that the court may disregard the corporate veil if there is a legal right against the person in control of it which exists independently of the company's involvement, and a company is interposed so that the separate legal personality of the company will defeat the right or frustrate its enforcement.

These considerations reflect the broader principle that the corporate veil may be pierced only to prevent the abuse of corporate legal personality. It may be an abuse of the separate legal personality of a company to use it to evade the law or to frustrate its enforcement. It is not an abuse to cause a legal liability to be incurred by the company in the first place. It is not an abuse to rely upon the fact (if it is a fact) that a liability is not the controller's because it is the company's.

I conclude that there is a limited principle of English law which applies when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control.

But constitutional and factual control and the exercise of sovereign functions do not without more convert a separate entity into an organ of the State. The presumption will be displaced if in fact the entity has, despite its juridical personality, no effective separate existence.

An entity which is constituted in such a way that its purpose is to assist, promote and advance the industrial development, prosperity and economic welfare of the area in which it operates, can be seen as effectively carrying out government policy in the way that a government department does and therefore to assume the position of an organ of government (see Mellenger v New Brunswick Development Board [1971] 1 WLR 604 (CA) at page 609, although in that case the entity had never pursued any ordinary trade or commerce at all and was equivalent to the Board of Trade in England, as it then was).

In summary, this case demonstrates that in appropriate circumstances the law may impose on a parent company responsibility for the health and safety of its subsidiary's employees.