The Legal Measures against the Abuse of Separate Corporate Personality and Limited Liability by Corporate Groups: The Scopes of Chandler v Cape Plc and Thompson v Renwick Group Plc

Daisuke Ikuta

Abstract


While the scope of “veil lifting” has been strictly restricted in UK case law, two recent notable judgements, Chandler and Thompson, held that a parent company could owe direct tortious liability for the health and safety of the employees of its subsidiary. This paper contends that the legal principle recognised in Chandler and Thompson could prevent most corporate groups’ abuses of separate corporate personality and limited liability when in combination with “veil lifting” and protection against misrepresentation in UK law. With reference to the theoretical justification of limited liability, there are three categories where limited liability should be ignored: “ex ante opportunism”, “ex post opportunism” and “involuntary creditors”. Most cases in the former two categories can be dealt with by applying existing UK legislation and case law concerning misrepresentation and “veil piercing”, and the final category can be dealt with by Chandler’s direct tortious liability regime if it is appropriately refined. This paper proposes an integrated understanding of Caparo’s three requirements for recognition of a duty of care, namely “foreseeability”, “proximity” and “fairness”, and four-group categorisation, namely “reliance on superior knowledge”, “confusing representation”, “business integration” and “fairness for other reasons”, in which the parent’s direct tortious liability should be recognised.

 

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