Trustor AB v Smallbone (No 2)
The court will pierce the corporate veil where a company is used as a device to receive money in breach of a person's duties, so that the person is treated as receiving the money himself.
Facts
Mr Smallbone was the managing director of Trustor, a Swedish company. He transferred large sums of Trustor's money, without authority, to a company called Introcom, which he controlled. Introcom then paid some of the money to Mr Smallbone and others. Trustor sued Mr Smallbone for knowing receipt of the money, and argued that Introcom's receipt should be treated as his receipt.
Legal principle
Sir Andrew Morritt V-C held that Introcom's receipt should be treated as Mr Smallbone's receipt, so he was liable to account for the money. He said that the court is entitled to pierce the corporate veil and recognise the receipt of the company as that of the individual who controls 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. Introcom had been used as a device to receive money that Mr Smallbone could not receive himself, in breach of his fiduciary duties.
Related cases on separate legal personality and the corporate veil
- Adams v Cape Industries plc [1990] Ch 433
- Chandler v Cape plc [2012] EWCA Civ 525, [2012] 1 WLR 3111
- Re Darby, ex p Brougham [1911] 1 KB 95
- DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852
- Gilford Motor Co Ltd v Horne [1933] Ch 935
- Jones v Lipman [1962] 1 WLR 832
- Lee v Lee's Air Farming Ltd [1961] AC 12
- Macaura v Northern Assurance Co Ltd [1925] AC 619
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