THE COMPANY AS A SEPARATE LEGAL ENTITY
Date | 01 September 1968 |
Published date | 01 September 1968 |
Author | Murray A. Pickering |
DOI | http://doi.org/10.1111/j.1468-2230.1968.tb01206.x |
THE
MODERN
LAW
REVIEW
~
Volume
31
September
1968
No.
5
THE COMPANY AS A SEPARATE
LEGAL ENTITY
UNDER
English company law the company is
a
separate legal entity.
Yet, although this is a fundamental concept,
it
has proved
extremely intractable to define and to describe satisfactorily. The
difficulties experienced by the courts from time to time in separating
the company as a legal entity from its members are evidenced by
the remarkable range
of
judicial expletives
or,
in Younger
L.J.’s
phrase,
“
term[s]
of
polite invective,” which they have used on
appropriate occasions to describe corporations, including, for
example,
“
a
mere nominee,”
“
a mere fraud,” an
“
agent,”
“
a
trustee,” a
“
mere device,”
“
a myth and a fiction,”
“
a pre-
tended association,” an
“
unreal
y’
procedure,
‘‘
a
cloak,”
“
an
artificial legal thing,”
“
a
legal abstraction,”
‘
“
mere machinery,”
‘(
a
metaphysical con-
ception,”
‘‘
a sham
or
bogus,”
lo
“
an abstract conception,”
l1
a
‘‘
simulacrum,”
la
“
a cloak,”
lS
a
“
mere alter ego,”
l4
“
an
abstract being,” a
“
creature,”
“
a screen
”
and even
a
“
bubble,”
“
an alias,”
“
a
name,”
1
2
3
4
1
0
7
8
0
11
12
13
14
15
16
17
I.R.C.
v.
Sansom
[1921]
9
K.B.
499
at p.
614
(C.A.).
Rroderip
v.
Salmon
[l895]
9
Ch.
323
&t pp.
330,
331,
3%.
999,
341.
Salomon
v.
Salmon
d
Co.
[1897]
A.C.
22
rtt
p.
39.
Re Carl Hirth
[lam]
1
Q.B.
61%
at
p.
619.
AtLCen.
for
Dominion
of
Canada
v.
Standard Trust
Co.
of
New
York
[1911]
A.C.
498
at
p.
606.
Re Darby
[1911]
1
K.B.
95
at
Continmtal Tyre
d
Rubber
&.
(G.B.)
Ltd.
V.
Daimler
Co.
Ltd.
[1916]
1
K.B.
893
at p.
916.
Ibid., rub
nom.
Daimler
Co.
v.
Continental Tyre
1
Rubber
Co.
[1916] 2
A.C.
307
st
p.
316.
Lennard’s Carrying
Co.
Ltd.
v.
Asiatic Petroleum
Co.
Ltd.
[lOlS]
A.C.
705
at
p.
715.
lo
R.
v.
Grubb
[19151
2
R.B.
683
at p.
691.
Houghton
d
Co.
v.
Nothard, Lome and
Wills
Ltd.
[l928]
A.C.
1
at p.
14.
E.B.M.
Co.
Ltd.
v.
Dominion Bank
[1937]
3
All
E.R.
666
at
p.
563.
Gilford
Motor
Co.
Ltd.
v.
Home
[1933]
Ch.
936
at p.
966.
Pegler
v.
Craaen
[1952]
2
Q.B.
69
at
p.
79.
Austin Reed Ltd.
v.
Royal Assurance
Co.
Ltd.
(July
18, 1966,
C.A.,
not
reported; but cited
[1966]
3
All
E.R.
699).
I.R.C.
V.
Lithgozos Ltd.
(1960) 39
T.C.
97?,
at
p.
276.
In
the same vein
a
company
has
been likened
to
”
a motor-car
:
BarclEys Bank Ltd.
v.
I.R.C.
[1959]
Ch.
659
at p.
671,
by
Lord Evershed
M.R.:
The company
ia
in
thia
respect like
a
motor-car the speed
and
direotion
of
which
is
controlled by
the
driver.
.
.
.”
Barclays Bank
v.
I.R.C.
[1960]
3
W.L.R.
a80
et p.
288.
101.
481
VOL.
31 17
482
THE
MODERN
LAW REVIEW
VOL.
ai
"
black sheep."
In Re
Bugle
Press
Ltd.,lg
Harman
L.J.
added
"
a hollow sham
yy
and an
"
elementary
. . .
device," going
on
to
elaborate in more picturesque language
"
.
. .
the transferee
company was nothing but
a
little hut
.
.
."
whose legal existence
could be likened to
c'
the walls
of
Jericho
,'-"
The minority share-
holder has nothing to knock down, he has only to shout
a1
and the
walls
of
Jericho fall flat." The apparent need to resort to such
terms indicates an unexpected degree
of
uncertainty
on
the part
of
the courts
on
some occasions when dealing with the separate
existence
of
the company.22
Relatively few writers
on
English company law have made
a
determined attempt to unravel what R.
S.
Wels'h has called
23
"
the
perplexities of corporate personality."
In
most
of
the texts the
topic
of
separate legal entity as such is either ignored
or
dealt with
only
in
an indirect
or
cursory manner. Professor Gower
in
Modem
Company
Law
24
is the notable exception, although even here sepa-
rate legal entity
is
considered more elaborately
in
relation to its
exceptions than to its substance.a6 The term
"
lifting the veil,"
which is sometimes employed to describe exceptions to the concept,
is derived from usage in the United States and has been adopted
by a number of writers in this country but not, as yet, by the
courts.
It,
too,
lacks any precise and generally accepted definition.
At least three separate and distinct meanings may be attributed to
18
I.R.C.
v.
Samom, au a,
at
19
[l96l] Ch.
270
at
pp.
28&289.
20
Ibid.,
at
p. 288.
21
Presumably wihhin earshot
of
the High
Court.
22
Cf.
also
a
"
front
"
in
Clarkson Co.
Ltd.
v.,Zlielko
(1967),64,D.L.R.
$7
at
p. 458 and the American use
of,
e.g.,
department, condult
and
I'
double."
25
"
The Criminal Liability
of
Corporations
"
(1946)
02
L.Q.R.
845
at
p.
346.
24
2nd ed., 1957, Chaps.
4
and 10.
26
Ibid.
Chap. 10, entitled
"
Lifhing the Veil."
26
Nomenclature
of
this nature
has
not received universal qprovel
in
the
U.S.A.
H.
W. Ballantine, for example, in (1943)
31
Calif.L.Rev.
at
p.
426, criticised
the use of such
"
customary verbiage
"
(~1
"
disregarding
%he
corporate
fiction,"
because
it
"
serves
no
purpose
wnd
obecuree
a
clea;,understsndlng
of
what the
COU~~E
are doing and what is the basis
of
doing
it.
There
is
never-
theless an extensive literature
on
this topic
in
the
U.S.A.,
in addition
to
the
works cited
by
Gower,
cit.
p.
183,
n.
1.
See,?.
W.
Ballantine,
"
Separate
Entity of Parent, and Tibsidiary Corporations (1925) ,I4 Calif.L.&V.
la;
I'
Corpor,:tions
:
Disre arding ate Entity
ELI
a
Regulatory
Process (1943)
31
GalifL.R.ev.,4%; :.oyCanfield,
"
The
@cope
and
li~m'ts
of the Corporate Entity Theory
The
Endless P;pblem of Corporate !Personalit&','
(19N)
89
Col.L.Rev. 643;
Horowitz, Disregarding the Enhity
of
ivate Corporations
"
(1939) 14
Wash.L.Rev.
285;
(1940
15 Wash.L.Rev.
1.
See also
,p.
A. Maston,
I'
'
One
Man
Corn anies' and their Controllinq Shareholders (1938) 14 Can.B.R.
663;
and
b.
J.
Cohn and C. SiTitis "Liftin
the
Veil'
in
the
Company
Laws
of
the
European Continent (1663) 12 1.Ck.Q. 189. English literature
includes Gower,
op.
cit.;
Palmer's
Company
Law,
21st
ed.
Chap. 17;
Friedmann,
Legal Theory,
6th ed., pp. 5W572; Martin Wolff (1938) 54
L.Q.R.
494
at
,p.
612
et aeq.;
Dim,
Jurraprudence,
2nd
ed.,
pp.
%303;
and
Alec Samuels,
,
514. Younger
L.J.
did
not
maage
to
avoid
himself the practice wEch he {eprecated, of using
an&
terms.
1917)
17
Col.L.Rev.
128;
M.
Radin,
Lifting the Veil
"
[1964]
J.B.L.
107.
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