Piercing the Corporate Veil: illusion reality or alternative remedy? part 2

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Author Elaine Obika

Date July 2023

INTRODUCTION

The second part of this analysis continues the examination of whether “piercing the corporate veil” exists as a genuine doctrine or merely as a rhetorical label masking the use of alternative legal mechanisms. By revisiting Jones v Lipman, Tjaskemolen, and Stone & Rolls, this section explores how courts have repeatedly achieved veil‑piercing outcomes through trusts, equitable remedies, and attribution principles — raising further doubts about whether the doctrine has ever operated independently of these established routes.

In Jones v Lipman, what Lord Sumption later described as piercing the corporate veil can be more accurately understood as the court granting a specific performance order. The same outcome could have been achieved through the law of trusts, given that Mr Lipman controlled the company and was in a position to procure completion of the contract. On this view, the court did not pierce the veil because no alternative remedy existed; rather, the trust analysis provided a sufficient doctrinal basis. Jones may therefore be better characterised as a trust‑based decision that has been retrospectively labelled as veil‑piercing.

In Prest, Lord Neuberger referred to Tjaskemolen as an example of the lack of coherent principle underpinning veil‑piercing. The case involved an evasion of existing liability, and although the court stated that the veil could be pierced because the defendant retained beneficial ownership despite the transferee company holding legal title, a closer reading suggests that the reasoning is grounded in trust principles. This supports Lord Walker’s view that veil‑piercing is simply a label, particularly given that in Yukong the corporate entity was effectively substituted for a natural person without invoking any true veil‑piercing doctrine.

Halpern similarly critiques the reasoning in Stone & Rolls, arguing that Lord Phillips oscillated between the rule of attribution and veil‑lifting in a way that risks conflating distinct concepts. Maintaining the separation between attribution and veil‑piercing is essential to preserving the integrity of the separate legal entity principle. Halpern concludes that although the correct outcome was reached, the reasoning was tortuous — further evidence of the doctrinal instability surrounding veil‑piercing.

CONCLUSION

The long‑standing fascination with piercing the corporate veil rests less on doctrinal substance and more on the dramatic language that has surrounded it for over a century. Although courts have repeatedly invoked the metaphor of “lifting” or “piercing” the veil, a close reading of the authorities reveals that the outcomes in these cases were achieved through established legal mechanisms — trusts, agency, tort, equitable remedies, attribution, or statutory provisions — rather than through any freestanding veil‑piercing doctrine.

Prest exposed this reality with unusual clarity. Lord Sumption’s insistence that veil‑piercing should only be used where no other remedy exists, Lord Walker’s characterisation of the doctrine as a mere label, and Lord Neuberger’s doubt as to whether it has ever been successfully invoked all point to the same conclusion: veil‑piercing is more rhetorical than real. The classic cases — Gilford Motor, Jones v Lipman, Tjaskemolen, Stone & Rolls — can all be explained without resorting to any exceptional judicial power to disregard corporate personality.

The “hullabaloo” surrounding veil‑piercing therefore reflects a doctrinal myth sustained by dramatic terminology rather than consistent legal principle. The courts have never possessed a general discretion to ignore the separate legal entity established in Salomon, and the rare situations in which liability reaches controllers do so through alternative, orthodox routes.

In this light, veil‑piercing is best understood not as a coherent doctrine but as a convenient label applied to outcomes reached by other means. Its continued prominence in academic and judicial discourse reveals more about the allure of the metaphor than about the true structure of company law. The real work is done elsewhere — in equity, in trusts, in attribution, and in statutory exceptions — leaving veil‑piercing as an illusion that persists largely because of its rhetorical power rather than its doctrinal necessity.

References  

1.Jones v Lipman [1962] 1 WLR 832. 

2. Prest v Petrodel Resources Ltd v Others [2013] UKSC 34 [30]. 

3.Susan McLaughlin Unlocking Company Law (Third edition, Routledge 2015) 100. 

3.Ko Tsun Kiu and Lam Wan Shu ‘Piercing the Corporate Veil? A Critical Analysis on Prest v Petrodel and Others' Vol 5(1+2) No 3 Dundee Student Law Review. 

4. John Birds and Others Boyle & Birds' Company Law (Ninth edition, Jordan Publishing 2014) 63. 

5. Prest v Petrodel Resources Ltd v Others [2013] UKSC 34 [26]. 

6. Jones v Lipman [1962] 1 WLR 832. 

7. Prest v Petrodel Resources Ltd v Others [2013] UKSC 34. 

8.The Tjaskemolen [1997] CLC 521. 

9.ibid. 

10. The Tjaskemolen [1997] CLC 521 [553]. 

11. Prest v Petrodel Resources Ltd v Others [2013] UKSC 34 [31] - [32]. 

12.Yukong Lines Ltd v Rendsburg Investments Corporation and Others (No 2) [1998]1 WLR 294 [308].

13. David Halpern ‘Stone & Rolls Ltd v Moore Stephens: An Unnecessary Tangle’ (May 2010) Vol 73 The Modern Law Review 487. 

14.Stone & Rolls Ltd v Moore Stephens [2009] 1 AC 1391 [139] - [143]. 

15.Ernest Lim ‘Attribution in Company Law’ (September 2014) Vol 77 The Modern Law Review 794. 

16. David Halpern ‘Stone & Rolls Ltd v Moore Stephens: An Unnecessary Tangle’ (May 2010) Vol 73 The Modern Law Review 487. 

BIBLIOGRAPHY 

Primary sources 

Cases 

Jones v Lipman [1962] 1 WLR 832 

Prest v Petrodel Resources Ltd v Others [2013] UKSC 34 

Stone & Rolls Ltd v Moore Stephens [2009] 1 AC 1391 

The Tjaskemolen [1997] CLC 521 

Yukong Lines Ltd v Rendsburg Investments Corporation and Others (No 2) [1998]1 WLR 294 

Secondary sources 

Birds J and Others Boyle & Bird’s Company Law (Ninth edition, Jordan Publishing 2014) 

Halpern D ‘Stone & Rolls Ltd v Moore Stephens: An Unnecessary Tangle’ (May 2010) Vol 73 The Modern LawReview 487 

Kiu K T and Shu L W ‘Piercing the Corporate Veil? A Critical Analysis on Prest v Petrodel and Others' Vol 5(1+2) No 3 Dundee Student Law Review

McLaughlin S Unlocking Company Law (Third edition, Routledge 2015) 

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