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Lloyd's Maritime and Commercial Law Quarterly

SKIRTING AROUND THE ISSUE: THE CORPORATE VEIL AFTER PREST V PETRODEL

William Day*

Orthodox private law principles of contract, tort and unjust enrichment can be used to “skirt around” the separate legal personality of a company so as to impose liability on those behind it. The Salomon principle requires no modification of these causes of action in the corporate veil context. Indeed, the principle demands that corporate personality is treated no differently to natural personality, even for controversial causes of action such as joint tortfeasance and the tort of procuring a breach of contract. If these private law stratagems are given their due recognition, litigants seeking to reach directors and shareholders should seldom rely upon the special company law doctrine of “veil piercing”, which itself is now narrowly confined after the decision in Prest.

I. introduction

The recent decision of the Supreme Court in Prest v Petrodel Resources Ltd 1 has clarified and restricted the circumstances in which the corporate veil between those dealing with companies and those operating them can be pierced so that the latter can made liable to the former instead of liability stopping with the company itself. Their Lordships narrowed the doctrine to an “evasion principle”, triggered only 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”.2 This position was made possible by reinterpreting cases previously thought to be examples of veil piercing as being instead instances where

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