FREE CHAPTER from ‘The Limits of Separate Legal Personality: When Those Running a Company Can Be Held Personally Liable for Losses Caused to Third Parties Outside of the Company’ by Dr Mike Wilkinson



When third parties outside of a company are harmed by a company, they might naturally want to consider not only suing the company but also the human persons behind it that were involved. Such third-party outsiders, and even their advisers, are often deterred from bringing a claim action against those running a company by a misapprehension of the outsider’s legal rights. Does an outsider have to pierce the corporate veil before they can sue a company’s controllers?1 Do they need to establish some special assumption of responsibility on the part of the controller towards such a third party before they can bring any cause of action against the controller for their role in the wrongdoing?2 Does the rule against reflective losses prevent an outsider from bringing a claim to hold controllers liable where the company might have its own cause of action against them?3 And do the rules of attribution exclusively attribute liability to the company and in other words alleviate the liability of the company’s agents?4

It may be surprising to learn that the answer to all of those questions is ‘no’. Yet all too often, it seems, an assumption prevails that third parties outside of a company can only sue the company for harm caused to them and not the individuals involved for their role in the relevant wrongdoing.

However, that assumption is misplaced. It is a misconception of the limits of a company’s separate legal personality. It can be simply stated: there is no rule of law, legal principle or doctrine that exonerates a controller of a company from being personally liable for their role in any wrongdoing whilst acting for a company and/or which permits them exclusively to attribute responsibility to their company. It is fallacy to think otherwise. Quite the contrary, third parties outside of a company who suffer losses by wrongdoing committed or commissioned by those running a company can sue not only the company but also such controllers.

Unfortunately, it seems, a proper understanding of the relevant principles has been confounded by the application of other, sometimes confusing, rules. The application of the principle of separate legal personality in a contract setting for example is liable to cause confusion. A party to a contract with a company cannot sue the company’s controllers for breaching that contract. That is because the contracting party is the company, and not its agents. Only the company can thus be bound on the contract and liable for any breach5.

A principle of agency law known as the Said v Butt rule6 is also liable to cause confusion. The rule holds that an agent cannot be liable in tort for procuring a breach of their principal’s contract unless they were acting in bad faith towards their principal beyond their authority. But that is a general rule of agency law and not limited to companies and their controllers. And it does not give rise to a general immunity from liability on the part of company controllers for any wrongdoing they do whilst acting for the company. It is wrong to assume otherwise.

The rule against reflective losses was also liable to cause further misunderstanding. Until 2020, that rule meant that a third-party creditor could not sue those controlling a company for any losses which reflected the losses suffered by the company as a result of the same or similar wrongdoing by those controllers7. If a director of a company owing a third party millions of pounds stole all of the company’s money to avoid payment, the third party could not sue the director directly8. Legal policy instead favoured the third party first going after the company and if necessary making it insolvent and controlling the insolvency rather than resorting to direct personal action. It provided an embargo of sorts for outsider actions against company controllers. Thankfully, that rule has now been definitively abolished, at least as far as third-party outsiders are concerned9. However, the confusion engendered by this rule may take much longer to dispel.

Book scope

This book is intended to correct some of the misunderstandings that still prevail and to clarify how those running a company can be held liable to third parties outside of the company for harm they cause.

The book deals with liability between those running a company and outsiders and not between their liability to the company itself or to their shareholders or to the general body of creditors in an insolvency context. To connote the third parties’ lack of involvement in the company, the book sometimes refers to them as ‘outsiders’.

Since those running a company are typically directors, it also refers to those persons not only as ‘controllers’ but also ‘directors’ but that latter terminology is not intended to refer to the legal office of a director, but rather that person’s function or involvement in running or controlling the company. Indeed, statute commonly imposes personal liability on not only for de jure directors, but also for de facto directors or shadow directors, and in other words somebody who, respectively, either acts as a director and whose acts are directorial in nature10 or somebody in accordance with whose directions others are accustomed to acting11.

The word ‘controller’ is also inexact as any person involved in running a company might become a tortfeasor, including employees or other officers or agents. Typically, it will be those in control that are contemplated as defendants on any ‘outsider action’. But what matters is not the extent of their control over the company but rather the extent of their involvement and participation in bringing about the tort or other actionable wrong that causes losses to the outsider.

The book will explore an outsider’s ability to sue company controllers by considering:

  • how veil-piercing or lifting is not necessary for controllers to be liable and how that piercing doctrine is extremely limited anyway and what is involved in both lifting or piercing (Chapter 2);

  • which contractual situations still give rise to personal liability for company controllers (Chapter 3);

  • what relevant legal principles, rules and doctrines are applied to uphold personal liability upon controllers for visiting wrongdoing on outsiders (Chapter 4);

  • what types of torts and other causes of action (not only the economic torts) have given rise to personal liability in widely reported authorities (Chapter 5);

  • how personal liability can arise in the particular context of asset-stripping where directors fleece their companies of assets (Chapter 6);

  • how personal liability commonly arises for corporate controllers in legal proceedings involving their companies (Chapter 7);

  • what statute directly imposes liability upon corporate controllers, and not only civilly but also by giving rise to personal criminal responsibility (Chapter 8); and finally

  • what the overall conclusions are and the implications for practitioners faced with clients outside a company wanting to sue those running it (Chapter 9).

What follows below is an overview and summary of those chapters which follow. Whilst every effort has been made to ensure the chapters flow on from one another, readers should not feel obliged to proceed in linear fashion, but might resort to a chapter according to its relevance.

Chapter 2 – Lifting / piercing the corporate veil

Piercing the veil involves disapplying a company’s separate legal personality. It is very different to holding controllers liable for their wrongdoing, whilst also recognising the existence of a company’s separate legal personality. Lifting or piercing the veil is especially relevant in cases where a party needs to prove that property registered to a Company or rights under a contract held in a Company’s name should be treated instead as belonging to the controller. Veil-piercing or lifting is not necessary however when an outsider has a cause of action to claim losses against a controller.

The jurisdiction of the courts to disapply corporate personality in cases where there has been some abusive exploitation of the company form (if indeed there is such a jurisdiction at all12) is an extremely limited one. According to Lord Sumption, the veil-piercing doctrine can only be justified where a company has been interposed by its controllers to evade an already existing obligation or legal restriction they fell under13.

That narrow rationalisation for veil-piercing, as distinct from lifting or looking behind the veil, was itself obiter, and it has since been doubted by the Supreme Court14. Despite plenty of cases raising veil-piercing claims, its jurisdictional basis still remains controversial. At any rate, it appears to be an exceptional and limited doctrine. Indeed, Lords Neuberger and Sumption each suggested that it is a doctrine of last resort, available only where there are no other remedies15 or which only comes into play when other legal principles, relationships or causes of action cannot achieve the same result16. There is thus a strong prevalence amongst the highest authorities governing veil-piercing ­­to prefer instead to resorting to more clearly established legal doctrines and principles, and causes of action, with clearer jurisdictional bases.

It remains to be seen whether veil-piercing will still be a relevant doctrine to invoke in exceptionally rare cases where the company is the proper party to a contract or disposition (and it is not a mere agent or trustee) and in cases where there are no other cause of action giving rise to the same losses. It is however hard to conceive of situations where an evasive interposition of a company can take place which would not also give rise also to liability on some other cause of action or according to some other legal principle or relationship.

The obvious implication for practitioners is that thought should be given first to advancing alternative causes of action and invoking other legal principles and relationships, before resorting to readily to the veil-piercing doctrine.

Unfortunately, that does not make the task of establishing other causes of action or relationships any easier. Those seeking to prove an agency relationship should be wary of the difficulties in doing so17. Where practitioners are contemplating setting up trust relying on inference, care should be taken to explain any uneven contributions18. Particular consideration should also be given in such cases to the need to vitiate any deed or disposition or to alter land registration19.

Chapter 3 – the proper party to the contract

In a purely contractual context, provided the company is the proper party to the contract, any liabilities upon the contract will belong exclusively to the company and not fall on any individual director personally, notwithstanding their involvement in breaching the contract20. There are however two situations where those running a company typically incurs personal liability upon a contract.

The first is pre-incorporation. Under s51 of the Companies Act 2006 persons promoting a company they plan to form will be personally liable on any contracts they purport to arrange for the company.

The second is post-incorporation where those running a company do not give enough notice of the company’s existence or involvement so as to make the company the proper party to the contract. In such case, those negotiating the contract risk engaging themselves contractually and being personally liable. Who the proper party to a contract is will be a question of construction which, for written contracts, will involve an objective assessment. For oral or part-oral, part-written contracts, however it will be a question of fact who the third-party outsider subjectively intended to contract with21. Practitioners should check companies have complied with their trading disclosures not only for the commission of any criminal offences but if a company has not complied, they may well be at risk of being unable to enforce a contract by claim or counterclaim in accordance with s83 Companies Act 2006.

Chapter 4 – the relevant principles, rules and doctrines for upholding personal liability to third-party outsiders

It is a general principle of the law of tort that a person must be held responsible for his own acts and omissions which amount to a tort22. It is only in a contractual context that an agent can attribute his liability for breaching a contract to his principal in a way that exonerates such agent for liability for breach. The agent in such case has no liability because the contract is not theirs but that of their principal. But as a matter of agency law, personal liability is not extinguished merely because a person commits the tort whilst acting as an agent for their principal23. That agency relationship may give rise to the principal having vicarious liability for his or her agent, but vicarious liability is a form of secondary liability and not primary liability to be attributed to them.

The same principles apply also to directors acting for a company24. Separate legal personality does not exonerate a director from liability for the torts they commit even where they may be attributed to the Company. The attribution of an agent’s acts to a company does not absolve the agent from his own liability25. It becomes a question of the extent of their involvement and participation in the tort.

Personal liability can arise in one or more of two ways: where the controller commits all of the elements of the tort themselves; or where they commission it such as to become joint tortfeasor26. In either case, by committing a tort themselves or by actively participating in bringing it about the director will likely exceed their authority as mere agent27. Establishing liability is fact-sensitive and there is no simple formula for determining whether the requisite level of assistance and combination in some common design has taken place, but the assistance must be more than de minimis or trivial, and whilst a common design would normally be expressly communicated between the principal and the accessory, intention is something capable of being inferred28.

Chapter 5 – types of torts giving rise to personal liability

Chapter 5 considers the types of torts and other causes of action where the courts have upheld personal liability including:

  • Procuring a breach of contract: a director can be personally liable for procuring a breach of their company’s contract where they exceed their authority by acting in bad faith towards their company. That can include exposing their company to potential liabilities, and even reputational harm. In Antzuzis & Others v DJ Houghton Catching Services & Others [2019] EWHC 843 (QB), for example, directors of a company that exploited their employees amongst other things by requiring the employees to work excessive hours, for less than the minimum wage were considered to act in bad faith towards their company by potentially exposing the company to claims and liabilities. They could thus be sued by their employees in tort for losses caused by procuring a breach of their employment contracts29.

  • Negligence causing pure economic losses: directors can be liable on an action for negligence causing pure economic losses where they have voluntarily assumed responsibility to protect the claimant from suffering such losses30. That commonly arises in a professional negligence context out of negligent mis-statements, but it is not limited to such contexts31. An assumption of responsibility, whilst difficult to prove32, may arise where:

    1. the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given;

    2. the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment.33

  • Injury to property or person: a person running a company may carry out activities that give rise to a personal duty of care to prevent injury or damage to third parties. Whilst the involvement of a company may negate a duty of care on the part of those running it, the ordinary principles for establishing a duty of care apply. Therefore situations involving a foreseeable risk of harm in circumstances of close proximity generally give rise to a duty of care being owed, and the fact such duty can be attributed also to a company does not necessarily negate the directors from also being liable34. Directors might thus be liable for causing personal injury whilst placing workers in a dangerous working environment35, for damage to customer property whilst responsible for safekeeping their goods36, for crashing a motor vehicle being driving for the company37, and for running a ship aground when it was unseaworthy due to defective boilers38. In similar ways the law is also willing to impose a duty of care on a parent company to those dealing with its subsidiary39.

  • Causing waste to property: directors were held responsible for actions done on behalf of their company which led to third-party property being damaged. In Mancetter Developments Ltd v Garmanson Ltd [1986] Q.B. 1212 a director of a tenant company was liable in waste for causing his company to remove industrial machinery without making good holes made in the walls for the installation of fans and pipes.

  • Conversion: where a controller themselves commit the act of conversion40 or they procure others in their company to do it, they can be liable on an action for conversion41, but they will typically have to have control of the goods and deny the true owner’s claim to the goods upon notice of it42.

  • Passing off and copyright infringement: a director will be liable where he ‘procured of or commissioned’ copyright infringement by others in his or her company and he or she cannot escape liability by arranging for the company he controls to commit the breach43. Liability commonly arises too in passing off cases44.

  • Deceit: a director that knowingly makes a false representation intending an outside third party to rely on it will be personally liable on an action for deceit where that outside third party acts in reliance on it and suffers losses45. In this context, a false representation can include a statement about a company’s creditworthiness which induces a customer to enter into a transaction when the director knows the company cannot meet its obligations46. The mere signing of a contract can itself constitute the misrepresentation by impliedly representing that the company is able to meet its payment obligations when the person signing it knows for a fact it cannot47. A statement that money invested in a company will be used for a specific purpose can also give rise to a deceit when the misrepresenting director intends to use the money to repay existing debts48. Care must be taken in advancing any action in deceit to identify the correct directors that made the misrepresentations as in cases involving multiple directors, innocent co-directors who are not involved in making the representations will not be liable for the deceit of their co-directors49.

  • Conspiracy: a director can be liable for conspiring to cause losses to a third party, including planning to fold a company or strip it of assets50, and such liability for conspiracy may be capable of being attributed to the company itself at least in civil law so that the corporate personality is a co-conspirator involved (at least notionally) in the collusion for the purposes of establishing conspiracy of the director51. A claimant can sue for losses caused by a conspiracy where it can be shown that two or more persons combined to perform acts which were unlawful or which although not unlawful were done with the predominant intent of causing injury52.

  • Unlawful means tort: a director can be personally liable to an outside third party for using unlawful means towards his or her own company to cause economic losses not to the company (or not just to the company) but to that outsider53. Primarily this claim is based on the principles upheld by the House of Lords in OBG Ltd v Allan [2007] UKHL 21; [2008] A.C. 1.

  • Dishonest assistance: a director of a company that assists or procures his company to act deliberately in breach of trust, or a fiduciary duty54, knowing of that breach55, can be held liable for dishonestly assisting a breach of trust, or fiduciary duty, and they will be liable to pay equitable compensation, akin to damages, for all losses flowing from the breach of trust or fiduciary duty56, including in cases where the company is insolvent57.

  • Knowing receipt: a director may be required to account as a constructive trustee if he or she lets their company be used for fraud that he or she has notice of by way of actual or constructive knowledge, including by turning a blind eye58. In any case, where a director takes receipt knowing it is trust property and/or converts trust property to their own use, they will be liable to account and there will be no time limit in limitation to recover such trust property59.

  • Bribery and secret commissions: a director can be personally liable to account for a bribe he or she receives for a company60.

Chapter 6 – Asset-stripping

In addition to any conspiracy to defraud61, a director may also incur personal liability when stripping a company of its assets in three common scenarios.

The first is where an asset-stripper helps themselves to the assets of a company with the intention of prejudicing creditors. In such case, the asset-stripper may be personally liable for committing an unlawful means tort62.

The second is where the company itself enters into an undervalue transaction purposefully to defraud its own creditors. Where an asset-stripper causes his company to enter into an arrangement for example to transfer assets to another party (or themselves) for an undervalue with the purpose of avoiding creditors, the court has powers to reverse the transaction or to order the recipient to pay compensation in relief63.

The third is the phoenix situation. It arises where the first company is liquidated but the asset-stripper starts up a new company carrying on using the name of the liquidated company without permission to do so. In such situations, those running the newco can be personally liable unless they comply with legislation permitting the newco to acquire the former company’s trading name or they obtain permission64.

Chapter 7 – Liability in proceedings

Those running a company can be personally liable in proceedings in three common situations.

First, the courts may require a party other than a claimant to pay security for the defendant’s costs under r25.14CPR if satisfied it is just to make such order in all of the circumstances. That can arise where a director has contributed to paying the claimant’s costs65 and a failure to furnish documents relating to such funding can be treated as ‘deliberate reticence’ and lead to adverse inferences being drawn66.

Second, those running a company may be ordered to pay the costs of proceedings that involve their company under s51 of the Senior Courts Act 1981. Whilst such non-party costs orders are exceptional, and they are only to be made where the court considers it just in all of the circumstances, they can be made, for example, where company controllers have: derived personal advantage from the litigation67; or pursued speculative litigation or incurred unreasonable costs by improperly arguing a case68. And it is not necessary to show that the director has acted in bad faith, or in abuse of the court’s process or involved himself in some other impropriety69. The non-party will however need to be joined under r46.2 CPR and adequate notice given to ensure an opportunity to respond.

Third, those controlling a company may be committed for contempt of court and contempt may arise, for example, where: they have aided and abetted a company to commit a breach of court order; or they knowingly cause their company to avoid paying a judgment debt or to breach a court order; or they do not take reasonable steps to ensure compliance; or they are criminally responsible for interfering with the course of justice for example by deliberately frustrating the purpose of an order70.

Chapter 8 – Liability imposed by statute

It is not surprising that the main statutes imposing liability upon directors are the Companies Act 2006, the Insolvency Act 1986, the Companies Directors Disqualification Act 1996 and various pieces of tax legislation. But there is also a wide range of other areas where statute imposes personal liability upon company controllers, including: employment law, housing law, and environmental law.

Chapter 8 considers some of the more common instances where statute imposes liability on company controllers for example: the Bribery Act 2010, the Data Protection Act 2018, the Environmental Protection Act 1990; the Equality Act 2010, the Financial Services and Markets Act 2000, the Health and Safety at Work Act 1974 and the Housing Act 2004.

It considers for example causes of action which might be brought against company controllers for misinformation in their Environmental Social Governance (ESG) reporting, or for breach of data protection obligations or breach of competition law.

It also considers not only statute imposing personal liability in civil law, but also some of the statutes that result in personal criminal liability, and when statutory duties can be enforceable by third parties.

Chapter 9 – the conclusions and implications for practitioners

The concluding chapter summarises when third-party outsiders can hold those running a company personally liable for their involvement in wrongdoing causing them harm:

  • Contract law will not give rise to liability for a corporate agent provided the company is the proper party.

  • The agent will also not be liable in the tort of procuring a breach of contract unless they acted in bad faith to the company.

  • Where the company is apparently the proper party to a contract or appears to own property in its right, veil-piercing or veil-lifting may be relevant, according to the tests of concealment or evasive interposition.

  • Lifting the veil will be appropriate where upon scrutiny of the underlying facts the Court can be satisfied that the company is not the true actor and any transactions putatively in favour of the company are really shams or do not negate the reality that the company is the controller’s agent or nominee holding on trust.

  • Piercing the veil may be appropriate where there is an existing restriction or liability that is being evaded by the subsequent interposition of a company but it should only be resorted to where other relationships, principles or causes of action are unavailable.

  • Outside of contract, it is a question of proving the controller’s involvement in committing or commissioning the tort.

  • It is not necessary to prove fraud upon an economic tort: directors can be personally liable on other causes of action too, including in negligence.

  • In cases of negligence causing pure economic losses they are subject to the special assumption of responsibility test.

  • Directors can be liable in negligence causing harm to property or person, for nuisance, for waste, and in equity for knowing receipt or dishonest assistance.

  • In cases of conversion of property being dealt with by the company, there typically needs to be control of the goods and denial of the true owner’s claim or the director will commission the conversion by being involved in bringing it about in bad faith71.

  • If all of the elements of the offence cannot be made out against a director, it may be possible to prove they commissioned the tort by being sufficiently involved in it to be joint tortfeasors.

  • Joint tortfeasorship can arise in instances where one instigates another to commit a tort or where they both share a common design to bring it about.

  • Stripping a company of assets to defraud a third party might give rise not only to claims in conspiracy, but on an action based on the unlawful means tort.

  • The Insolvency Act 1986 also covers asset-stripping in phoenix situations where a liquidating company’s name is re-used and also in cases where the company transfers assets to controllers at an undervalue to prejudice creditors.

  • The fact directors may be personally liable, does not detract from the difficulties in establishing liability.

  • Often decisions will be made in small companies without any formal minuting being produced recording decisions made at formally convened meetings. Practitioners may thus find it hard formulating and advancing their cases with such informational asymmetry.

  • Practitioners will thus want to consider the array of disclosure levers at their disposal including through resort to pre-action correspondence, pre-action disclosure applications or subject access data requests.



1Veil-piercing involves vitiating the company’s separate personality exceptionally where there is interposition to evade existing obligations or restrictions, whereas a company’s separate personality does not need to be destroyed or disapplied in cases where a director commits a tort or commissions it, so as to give rise to joint liability.

2Only negligence claims seeking to recover pure economic losses are subject to the special assumption of responsibility test upheld by Williams v Natural Life Health Foods Ltd [1998] 1W.L.R. 830 HL, and that test does not apply to other torts: see Standard Chartered Bank v Pakistan National Shipping Corporation (Nos 2 and 4) [2003] 1 A.C. 959.

3As regards the rule against reflective losses, it has now been overturned, see Marex v Sevilleja [2020] UKSC 31. As for the rules of attribution, there is no general immunity from suit for company controllers for their liability in any wrongdoing: per Dillon LJ in Welsh Development Agency v Export Finance Co Ltd [1992] B.C.C. 270 at p288.

4As for the rules of attribution, just because liability is attributed to a company does not mean liability is alleviated from the company controllers: per Dillon LJ in Welsh Development Agency v Export Finance Co Ltd [1992] B.C.C. 270 at p288.

5Unless they procure a breach of contract in bad faith to the company or in excess of their authority in which case they may be sued on procuring a breach of contract: see Said v Butt [1920] 3 K.B. 497.

6See Said v Butt [1920] 3 K.B. 497.

7See the since overturned decision of Johnson v Gore Wood [2002] 2 A.C. 1 2002, and also the since rebuked interpretation of that case placed on that decision by Lord Neuberger in Gardner v Parker [2004] EWCA Civ 781.

8As happened in the case of Marex v Sevilleja [2020] UKSC 31.

9See Marex v Sevilleja [2020] UKSC 31. Note it is still relevant for actions by shareholders to recover losses caused to their shareholding.

10For a case considering what constitutes a de facto director, see Secretary of State for Trade and Industry v Deverell [2001] Ch 340: there is no definitive single test and the court will have to look objectively, irrespective of the party’s motivation or belief, into the corporate governance structure and company’s business to see whether his or her acts are directorial in nature and relevant factors may include: whether others considered him to be a director and held him out as such; whether third parties considered that he was a director; whether others were accustomed to accepting his or her direction; whether they acted on an equal footing with other directors, whether they had been held out by the company as a director, or whether they were part of the corporate governing structure.

11For a case considering what constitutes a shadow director, see Secretary of State for Trade and Industry v Deverell [2001] Ch 340: a shadow director will be able to exert influence over the board of directors and bring to bear their will, for example, a chief executive of a group of companies who openly gives directions to the board of a subsidiary on which he or she does not sit as a director may be a shadow director.

12Which has been doubted by the Supreme Court in Hurstwood Properties Ltd v Rossendale Borough Council [2021] UKSC 16, see particularly paras.71-73. Lord Briggs and Lord Leggatt, with whom Lords Reed, Hodge and Kitchin agreed, questioned whether the courts even have a power to pierce the veil based on the evasion principle and they instead appeared to query whether the evasion principle was not just an incidence of piercing the veil but rather an application of other legal principles including agency law: see paras. 71 to 73.

13See Prest v Petrodel Resources Ltd [2013] UKSC 34.

14See Hurstwood Properties Ltd v Rossendale Borough Council [2021] UKSC 16, see particularly paras 71-73.

15In Prest, Lord Neuberger and Lord Clarke both suggested that the principle should only be applied where other principles are inapplicable. Whilst not expressly stating that the principle was of last resort, Lord Sumption suggested that Gilford Motor could have been decided on other grounds.

16Prest, para.35, per Lord Sumption: ‘The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil.’ See also Lord Neuberger’s suggestion at para.64 that the veil piercing cases could and should have been decided on other grounds.

Lord Neuberger even contemplated whether it was high time for the veil piercing doctrine to ‘be given its quietus’: para. 79.

17Whilst Bowstead and Reynolds on Agency, Sweet & Maxwell, 22nd Ed make provision for situations where an agent will be liable to third parties where their principal is fictitious (see article 107) or the agent shown to be the real principal (article 108), there is a scarcity of authorities involving the court holding that a company is an agent for its controller.

18For a case where the company held on trust see Gencor ACP v Dalby [2000] All ER (D) 1067. For the principles relating to constructive and resulting trusts albeit in a cohabitation context see generally Jones v Kernott [2011] UKSC 53.

19If an express declaration of trust is made, a constructive trust or proprietary estoppel relying on a prior promise will generally be incapable of surviving the declaration and would need to be set aside for fraud or mistake: see Goodman v Gallant [1986] Fam 106, CA and Bahia v Sidhu [2022] EWHC 875 (Ch) respectively. Whilst a constructive trust may survive the formality requirements of s2 of the Law of Property Miscellaneous Provisions Act 1989, once property is registered in a party’s name, it is conclusive of title unless altered for mistake or fraud: s58 Land Registration Act 2002, schedule 4, paragraph 2.

20That principle does not preclude other causes of action in tort, for example for procuring a breach of contract if bad faith and excess of authority can be shown: see Antzuzis & Others v DJ Houghton Catching Services & Others [2019] EWHC 843 (QB).

21See Article 101 of Bowstead and Reynolds on Agency, Sweet & Maxwell, 22nd Ed citing Holding v Elliott (1860) 5 H. & N. 117.

22See for example the discussion on corrective justice in Honoré, Responsibility and Fault, Hart Publishing, 1999, p68.

23See Bowstead and Reynolds on Agency, Sweet & Maxwell, 22nd Ed, article 113.

24See the dictum of Cairns LJ in Ferguson v Wilson (1866) LR 2 Ch App 77, pp89-90. See also Chapter 9 of Bowstead and Reynolds on Agency, Sweet & Maxwell, 22nd Ed.

25See the observations of Dillon LJ in Welsh Development Agency v Export Finance Co Ltd [1992] B.C.C. 270 at p288, where the limits of the Said v Butt rule were discussed. See also Standard Chartered Bank v Pakistan Shipping Corporation [2003] 1 A.C. 959 where the House of Lord clarified that a director’s agency would not insulate a director from liability for deceit where they had backdated documents to obtain payment under a letter of credit.

26Liability as a joint tortfeasor can itself arise in two way: where two or more persons participate in some ‘joint enterprise’ or share some ‘common design’ to commit or commission a tort (see Credit Lyonnais Bank Nederland NV v Export Credit Guarantee Department [2000] 1 A.C. 486 HL); and/or where one instigates the commission of the tort by instructing, soliciting or inciting another or others to commit it (per Hobhouse LJ in the Court of Appeal in Credit Lyonnais Bank Nederland NV v Export Credit Guarantee Department [1998] 1 Lloyd’s Rep.19 CA (Civ Div) which was affirmed on appeal by the House of Lords: [2000] 1 A.C. 486 HL). See also Clerk & Lindsell on Torts, Sweet & Maxwell, 32nd Ed, 4-04. In a company context, instigating the commission can be said to arise where a person ‘intends and procures and shares a common design that the infringement takes place’ they will be liable, per Lord Templemann, CBS Songs v Amstrad [1988] 2 All ER 484 at p496. Similar wording was adopted in C Evans & Sons Ltd v Spritebrand ltd [1985] 2 All ER 415 in which the court refused to strike out a claim against directors where there was evidence they might have procured or commissioned an infringement of copyright; and also MCA Records Inc v Charly Records Ltd [2001] EWCA Civ 1441 where it was held that a director would be jointly liable if he participated in the tort by directing infringement as that went beyond normal governance functions. For a case where a director was found not to have been sufficiently involved to procure a company’s copyright infringement, see Wirex Ltd v Cryptocarbon Global Ltd [2021] EWHC 617 (IPEC).

27See Chadwick LJ MCA Records Inc v Charly Records Ltd [2001] EWCA Civ 1441 paras.49-50.

28See Fish & Fish Ltd v Sea Shepherd UK, the Steve Irwin [2015] UKSC 10, paras 20-24, 37-44, 55-61, 90-91.

29See Antzuzis & Others v DJ Houghton Catching Services & Others [2019] EWHC 843 (QB). 

30See Williams v Natural Life Health Foods Ltd [1998] 1W.L.R. 830 HL; Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465. But different principles apply if the negligence causes damage to property or to the person of if the alleged negligence really involves fraud or some economic tort including the tort of deceit: see for example Noel v Poland [2001] 2 B.C.L.C. 645 per Toulson J.

31Per Lord Sumption in Playboy Club London Ltd v Banca Nazionale del Lavoro S.p.A. [2018] UKSC 43 at [6]. And also Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145.

32See for example Partco Group Ltd v Wragg [2002] 2 B.C.L.C. 323 where making of statements relating to a takeover bid without any personal assurances was not enough to give rise to assumption of responsibility. But see Fairline Shipping Corp v Adamson [1975] 1 Q.B. 180. where assumption of responsibility has been successfully argued in a case where director of a warehousing company was considered to have assumed personal responsibility to customers where he wrote a letter on his personal notepaper in the first person singular offering to store the Claimant’s goods in his own premises in circumstances where the director wanted the storage to be his own venture and not that of the company; and see also Morgan Crucible Co Plc v Hill Samuel Bank ltd [1991] 1 All ER 148 where the Court of Appeal allowed an amended plea to be advanced against directors who allegedly made misrepresentations intended to be relied upon to a party making a takeover bid.

33See Caparo Industries Plc v Dickman [1990] 2 A.C. 605 at 638C-E.

34Per Viscount Haldane in Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] A.C. 705.

35See Lewis v Boutilier (1919) 52 D.L.R. 383; Berger v Willowdale AMC (1983) 145 D.L.R. (3d) 247.

36See Fairline Shipping Corp v Adamson [1975] Q.B. 180 QBD.

37See Microsoft v Auschina Polaris (1996) 71 F.C.R. 231 at 242.

38See Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] A.C. 705.

39See Chandler v Cape Plc [2012] EWCA Civ 525. Such duty can be imposed where there is a similarity of business, some actual or expected superiority of knowledge on the part of the parent company, actual or constructive foresight on the parent company’s part of risk and harm and actual or constructive knowledge of reliance by the subsidiary on the intervention of the parent company. See also Okpabi v Royal Dutch Shell [2021] UKSC 3 and also Vedanta Resources plc v Lungowe [2019] UKSC 20 the Supreme Court was willing to uphold parent company liability or so-called ‘value chain’ liability and to impose duties of care on parent company controllers without involving any piercing of the corporate veil.

40See Thunder Air Ltd v Hilmarsson [2008] EWHC 355 (Ch).

41See for example Caparo Industries Plc v Dickman [1990] 2 A.C. 605 at 638C-E.

42See Article 114, Bowstead and Reynolds on Agency, Sweet & Maxwell, 22nd Ed.

43See C Evans & Sons Ltd v Spritebrand ltd [1985] 2 All ER 415; also MCA Records Inc v Charly Records Ltd [2001] EWCA Civ 1441.

44See for example Global Crossing Ltd v Global Crossing Ltd [2006] EWHC 2043 (Ch).

45See Standard Chartered Bank v Pakistan National Shipping Corp [2003] 1 B.C.L.C. 244 where it was held that a director who acted on behalf of his company and made fraudulent misrepresentations to a bank to obtain payment would be liable along with his company for that misrepresentation.

46See Lindsay v O’Loughlane [2010] EWHC 529 (QB), but see also the formality requirements for representations relating to character as discussed in that case and arising under s6, the Statute of Frauds Amendment Act 1828.

47See Context Drouzha Ltd Wiseman [2007] EWCA Civ 1201.

48See Edgington v Fitzmaurice (1885) 29 ChD 459.

49See Cargill v Bower (1878) 10 ChD 502. But they may be liable if they participate as joint tortfeasors or as a part of a conspiracy.

50See Palmer Birch (A Partnership) v Lloyd [2018] EWHC 2316 (TCC), where two individuals conspired to liquidate a company to avoid the company having to pay the claimants under a contract and were liable for unlawful means conspiracy (the unlawful means being inducing breach of contract by the company without justification).

51See Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250; Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (No 2) [1998] 1 W.L.R. 294. But see R v McDonnell [1966] 1 Q.B. 233 for the principles arising under the common law for the crime of conspiracy. But note the fact that liability is attributable to the company does not exonerate the director as co-conspirators, although an ignorant fellow director acting in good faith and not colluding will not be liable in conspiracy solely for doing something which might procure a breach of contract by his company (just as any agent would not be liable for procuring a breach by his principal: Said v Butt [1920] 3 K.B. 497) save perhaps with the exception that liability may potentially arise where equitable interests have already been acquired in property by third parties: see : Telemetrix plc v Modern Engineers of Bristol (Holdings) plc [1985] B.C.L.C. 213.

52See Allen v Flood [1898] A.C. 1 at 108.

53See Chapter 6 regarding asset-stripping and Marex v Savilleja [2020] UKSC 31 or for guidance on the tort: OBG Ltd v Allan [2007] UKHL 21; [2008] A.C. 1 and also Clerk & Lindsell on Torts, Sweet & Maxwell, 22nd Ed, 24-72.

54See Fiona Trust & Holding Corporation v Privalov [2010] EWHC 3199 (Comm).

55But nothing less than dishonesty will do: Ivey v Genting Casinos UK Ltd (t/a Crockfords Club) [2017] UKSC 67, [2018] A.C. 391, [2017] 10 WLUK 580 applied. But the dishonesty need not involve obvious, large transfers but might include a gradual erosion of trust assets by dissipation: Trustor AB Ltd (Swedish Company) v Smallbone [1968] 1 W.L.R. 1555.

56See Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 A.C. 378.

58See Shell International Trading Co Ltd v Tikhonov [2010] EWHC 1770 (QB) in which Jack J held the corporate veil could not prevent a defendant, a senior employee of Shell, from being held liable to account in respect of bribes received directly by a company he controlled. See also Agip (Africa) Ltd v Jackson [1991] 3 W.L.R. 116 (CA). In any case, the controller of a one-man company that arranges for a transfer to that company of assets in breach of trust will be liable personally for his company’s knowing receipt on an action in dishonest assistance: see also Trustor AB v Smallbone [2001] W.L.R. 1177.

59See s21 Limitation Act 1980 and JJ Harrison (Properties) Ltd v Harrison [2002] 1 B.C.L.C. 162 and First Subsea Ltd v Balltec Ltd [2017] Civ 187). The time period for fraudulent breach of trust in knowing receipt is different to that for dishonest assistance. Absent fraud or concealment being discovered or reasonably discoverable under s32, by analogy to s21, limitation on an action for dishonest assistance will be 6 years: see Gwembe Valley Development Co Ltd v Kosby [1998] 2 B.C.L.C. 613.

60See Shell International Trading Co Ltd v Tikhonov [2010] EWHC 1770 (QB). Jack J also held the that corporate veil could not prevent a defendant, a senior employee of Shell, from being held liable to account in respect of bribes received directly by a company he controlled. Here an impeachable bribe has been paid, a claimant is entitled not only to that bribe but can also rescind any transaction arising out of it as of right, and an impeachable bribe may include a secret commission: see Wood v Commercial First Business Ltd [2021] EWCA Civ 471. The Court of Appeal provided clarity on secret commission cases by replacing the need for any agency arrangement with a test concerned only with some obligation or expectation that the intermediary would give disinterested and impartial advice, information or recommendations. The Court of Appeal cast some doubt on the distinction between fully secret and half secret commissions by finding there was an entitlement to rescission in a case where information had been provided to suggest a commission may be payable when one had in fact been paid.

61In Palmer Birch (A Partnership) v Lloyd [2018] EWHC 2316 (TCC), two individuals conspired to liquidate a company to avoid the company having to pay the claimants under a contract and were liable for unlawful means conspiracy (the unlawful means being inducing breach of contract by the company without justification).

62See Marex v Sevilleja [2020] UKSC 31.

63See s423 Insolvency Act 1986.

64See s217, Insolvency Act 1986.

65See the judgment of Lord Brown in Dymocks Franchise Systems (NSW) v Todd [2004] 1 W.L.R. 2807 (PC) (costs) at paras. 24-25.

66See SARPD Oil International Ltd v Addax Energy SA [2016] EWCA Civ 120.

67See Brampton Manor (Leisure) v McLean [2007] EWHC 3340 (Ch). See also Secretary of State for Trade and Industry v Aurum Marketing Ltd [2002] B.C.C. 31.

68See Goodwood Recoveries Ltd v Breen [2006] 1 W.L.R. 2723.

69See Secretary of State for Trade and Industry v Aurum Marketing Ltd [2002] B.C.C. 31.

70See Attorney General v Punch Ltd [2003] 1 A.C. 1046.

71See Article 114, Bowstead and Reynolds on Agency, Sweet & Maxwell, 22nd Ed and Thunder Air Ltd v Hilmarsson [2008] EWHC 355 (Ch) and Caparo Industries Plc v Dickman [1990] 2 A.C. 605 at 638C-E.