Adams v Cape Industries Plc Essay

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Adams v Cape Industries plc
Adams v Cape Industries plc [1990] Ch 433 is the leading UK company law case on separate legal personality and limited liability of shareholders. The case also addressed long-standing issues under the English conflict of laws as to when a company would be resident in a foreign jurisdiction such that the English courts would recognise the foreign court's jurisdiction over the company.
Facts
The facts of the case are relatively complicated, but in brief, the main defendant was an English registered company presiding over a group of companies whose business was in the mining (in South Africa), and marketing, of asbestos. The company had become the subject of a class action lawsuit in the United States, and the company tried to avoid fighting the case in the American courts on jurisdictional grounds. The Plaintiffs obtained a judgment against the English company in the American courts, but as Cape had no assets left in the U.S., they then sought to enforce the judgment against the principal company in the group in the English courts.
Judgment
The court accepted that the purpose of the corporate group structure set up by Cape Industries had been used specifically to ensure that the legal liability of a particular subsidiary would fall only upon itself and not the parent company in England. The court held that:
"Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law. ... in our judgement Cape was in law entitled to organise the group's affairs in that manner ..."
Subsequent to the decision (which has been followed), English law on this subject is accepted to be that the court may only pierce the corporate veil in the following circumstances:
  1. when the court is construing a statute, contract or other document;
  2. when the court is satisfied that the company is a "mere fa├žade" concealing the true facts; or
  3. when it can be established that the subsidiary...

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