Trustor AB v Smallbone (No 2)
| Jurisdiction | England & Wales |
| Judgment Date | 2001 |
| Date | 2001 |
| Court | Chancery Division |
Company - Director - Action against - Company controlled by director used as vehicle for receiving money in breach of duty to plaintiff - Company in knowing receipt - Whether receipt by company also receipt by director
The first defendant, in breach of his duty as the managing director of the plaintiff company, transferred substantial sums belonging to it to I Ltd. In March 1998 the plaintiff commenced proceedings and later applied for summary judgment against I Ltd. The master ordered I Ltd to pay various sums to the plaintiff on the ground that it had knowingly received moneys belonging to the plaintiff which had been paid out without the plaintiff's authority. I Ltd appealed to the judge, who, in upholding the master's order, found that I Ltd was controlled by the first defendant, that the payments from the plaintiff were effected by the first defendant in breach of his duty as its managing director and that I Ltd was a facade used as a vehicle by the first defendant for receiving money from the plaintiff. On a further application the plaintiff sought an order for summary judgment against the first defendant as being jointly and severally liable with I Ltd on the ground that receipt by I Ltd was, in the circumstances, to be treated as receipt by the first defendant also.
On the application—
Held, granting the application, that the court was entitled to pierce the corporate veil and recognise the receipt of a company as that of the individual or individuals in control of it if the company was used as a device or facade to conceal the true facts thereby avoiding or concealing any liability of that individual or those individuals; that on the judge's findings the court would recognise the receipt of the plaintiff's money by I Ltd as receipt by the first defendant also and that I Ltd was a facade used as a vehicle for that receipt; and that, accordingly, an order for repayment by the first defendant would be made (post, pp 1185H, 1186A–D).
Per curiam. It is not permissible for the court to pierce the corporate veil merely because the company is involved in some impropriety or because it considers that justice so requires (post, pp 1183D, 1185F–G).
The following cases are referred to in the judgment:
Adams v Cape Industries plc [
Barnes v Addy (
Barney, In re [
Company, In re A [
Cowan de Groot Properties Ltd v Eagle Trust plc [
El Ajou v Dollar Land Holdings plc [
Gencor ACP Ltd v Dalby [
Gilford Motor Co Ltd v Horne [
H (Restraint Order: Realisable Property), In re [
Jones v Lipman [
Mubarak v Mubarak The Times, 30 November 2000
Ord v Belhaven Pubs Ltd [
Salomon v A Salomon & Co Ltd [
Westpac Banking Corpn v Savin [
Woolfson v Strathclyde Regional Council
Yukong Line Ltd of Korea v Rendsburg Investments Corpn of Liberia (No 2) [
No additional cases were cited in argument.
The following additional case, although not cited, was referred to in the skeleton arguments:
Creasey v Breachwood Motors Ltd [
APPLICATION for summary judgment
By a re-re-amended writ dated 22 December 1998 the plaintiff, Trustor AB (a Swedish limited company), claimed (1) against the first defendant, Lindsay James Trevor Smallbone, compensation and/or damages for breach of trust and/or fiduciary duties and/or duties owed as a director under the plaintiff's articles of association and/or Swedish company law, and (2) against the first to eleventh defendants, Lindsay James Trevor Smallbone, Introcom (International) Ltd (a company incorporated in Gibraltar), Guinness Management Ltd, M & A Financial Services Ltd, Thomas Jisander, Joachim Posner (also known as Joe Falk), Yumina Trading Corpn (a company incorporated in Panama), CMB Change Mont Blanc Finance SA (a company incorporated in Switzerland), Peter Claes Mattsson, Selrex Corpn Ltd (a company incorporated in the Republic of Ireland) and Robert Harbord-Hamond, an injunction, restitution, compensation and/or damages on the ground, inter alia, that they had knowingly received funds belonging to the plaintiff obtained unlawfully by the first defendant.
By a summons dated 3 June 1998 the plaintiff applied for summary judgment pursuant to
The plaintiff subsequently applied for summary judgment against the first, third and fourth defendants.
The first defendant's appeal from the order of Master Bowman and the plaintiff's application for summary judgment against the first, third and fourth defendants were heard together before Rimer J, who, on 25 June 1999, dismissed the appeal and allowed the plaintiff's application for summary judgment but held that the plaintiff was not entitled to an award representing all its loss but was obliged at that stage of the proceedings to give credit in respect of Sw Kr 417m which was the subject of a claim by the plaintiff against a third party in proceedings in Luxembourg.
By a notice of appeal dated 28 July 1999 the plaintiff appealed from that order. The Court of Appeal (Sir Richard Scott V-C, Buxton LJ and Gage J) allowed the plaintiff's appeal against the reduction of its restitutionary remedies, indicated that the first defendant's liability was not limited to the amount of the judgment against him but extended to a joint and several liability for the amount for which the second defendant had been found to be liable, but did not then extend the judgment against the first defendant to the larger amount.
By an application notice dated 12 September 2000 the plaintiff applied pursuant to
The facts are stated in the judgment.
Stephen Smith QC for the plaintiff.
The first defendant appeared in person.
16 March. SIR ANDREW MORRITT V-C handed down the following judgment.
1 On 25 June 1999 Rimer J gave summary judgment under
2 Trustor is a company incorporated in Sweden. Formerly it held major investments in the steel, engineering and automotive parts industries. On about 23 May 1997 Lord Moyne acquired voting control of Trustor. On 13 June 1997 Lord Moyne, Mr Smallbone and others were appointed to the board of Trustor. At a directors meeting held on the same day Mr Smallbone was appointed to be the managing director and it was resolved that Trustor's bank accounts might be operated on the signature of any two directors.
3 Without having obtained the approval of the board, on 18 June 1997 Lord Moyne and Mr Smallbone opened an account for Trustor with Barclays Bank plc, Cheapside and procured the transfer to the credit of that account of moneys of Trustor amounting to Sw Kr 779m. The only signatories to that account were Lord Moyne and Mr Smallbone. Between mid-June and early November 1997 Sw Kr 486m (£38.88m) was paid out of that account on the signatures of Lord Moyne and Mr Smallbone without reference to Trustor or its other directors. The recipients included Mr Smallbone (£33,334.34) and Introcom (Sw Kr...
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