the company has its own fixed place of business (a branch office) in the jurisdiction from which it has carried on its own business for more than a minimal time. Hicks Andrew & Goo S.H., Cases & Materials on Company Law, 5th ed, (2004) Oxford University Press. In this case, the claimant, Mr Chandler, was employed by a subsidiary of Cape plc for just over 18 months from 1959 to 1962. After the decision (which has been followed), English law has suggested a court cannot lift the corporate veil except when construing a statute, contract or other document; if a company is a "mere façade" concealing the true facts or when a subsidiary company was acting as an authorised agent of its parent, and apparently not so just because "justice requires" or to treat a group of companies as a single economic unit. See E McGaughey, 'Donoghue v Salomon in the High Court' (2011) 4 Journal of Personal Injury Law 249, on, VTB Capital plc v Nutritek International Corp, https://infogalactic.com/w/index.php?title=Adams_v_Cape_Industries_plc&oldid=707015891, Court of Appeal of England and Wales cases, United Kingdom corporate personality case law, Creative Commons Attribution-ShareAlike License, About Infogalactic: the planetary knowledge core, Mr. Morison submitted that the court will lift the corporate veil where a defendant by the device of a corporate structure attempts to evade (i) limitations imposed on his conduct by law; (ii) such rights of relief against him as third parties already possess; and (iii) such rights of relief as third parties may in the future acquire. This may be so. It is submitted that Denning’s approach and attitude to Salomon at least brought with it the universal advantage of flexibility, which is perhaps something that should be elevated above those considerations of certainty, predictability furthered by dogmatic adherence to principle. Cases like Holdsworth, Scottish Coop and DHN were distinguishable on the basis of particular words on the relevant statutory provisions. However, Lord Denning was perhaps one of the greatest and deepest thinking judges of the twentieth century and his jurisprudence in this field should not be dismissed out of hand. The fundamental principle established in Salomon in relation to single companies was applied in the context of a group of companies by the Court of Appeal in the case under discussion in this paper, Adams v Cape Industries plc (1990)[3]. Adams v Cape Industries plc Ch 433 is the leading UK company law case on separate legal personality and limited liability of shareholders. You should not treat any information in this essay as being authoritative. Although uncertainty still persists, Adams v Cape Industries seems to have delivered a decisive word (at least for the time being) on the argument provoked largely by Denning’s intervention in the 1970s. Disclaimer: This essay has been written by a law student and not by our expert law writers. Adams V Cape Industries Plc - Judgment. Prior to the seminal decision of Adams v Cape Industries Ltd the courts were confronted with two opposing decisions, which suggested that the Salomon principle was disposable in the interests of justice and alternatively that it was sacrosanct and deserving of almost universal application. Some people are claiming this is an attack on the separate legal personality principles, fundamental to company law. Therefore, for major food and drink parent companies or subsidiaries, the decision of the Court of Appeal last week in Chandler v Cape PLC [2011] (a case in which the parent was accused of having responsibility for the health and safety of employees of a subsidiary company) has been eagerly awaited. For example in tort in Lubbe v Cape Plc (2000), the parent company owed a duty of care to anybody injured by subsidiary company in a group and in Chandler v Cape Plc (2011) duty of … Facts. In closing it is argued that the flexible, equitable attitude expressed in DHN Food Distributors is still to be preferred over the black-letter dogma of Adams v Cape Industries and that a far stronger moral case, which should surely be the basis of all law, can be advanced for the former than for the latter. This is the first time an employee has successfully established liability to him from the parent company. However, whether its contribution to the development of the law was positive or negative or a blend of the two is contestable. 6 Adams v Cape Industries Plc [1990] Ch 433 (CA). Therefore it is submitted that the fact that one shareholder wholly controls a company in practice is not at law a sufficient reason for ignoring the legal personality of the company. Lord Denning’s approach may now have fallen out of vogue in the courts, but it is submitted by this commentator that it is indeed appropriate to the strive for the development of the principle of piercing the corporate veil where justice demands it. Adams v Cape Industries plc. A company must be set up to avoid existing obligations, not future and hypothetical obligations not yet arisen. Its subsidiaries mined asbestos in South Africa. Judgment was still entered against Cape for breach of a duty of care in negligence to the employees. He was not the kind of man to let strict legal principle get in the way of the ‘right’ decision in a particular case. In Chandler v Cape plc, it was held that the corporate veil was not relevant in tort cases, thus effectively circumventing Adams. Cape was joined, who argued there was no jurisdiction to hear the case. As discussed by Hicks and Goo, the first of these was a single economic unit argument contending that Cape and its subsidiaries were in reality one economic unit which should be treated by law as such. For that purpose, the claimants had to show in the UK courts that the veil of incorporation could be lifted and the two companies be treated as one. The Court of Appeal found that, on grounds of pure legal doctrine, it was not entitled to lift the corporate veil against a defendant company, which was a member of a corporate group, simply on the grounds that the corporate structure had been used so as to ensure that legal liability in regards to the particular future activities of the group would fall on another member of the group rather than on the defendant company. The opposing decision to DHN Food Distributors was the ruling of the House of Lords in the case of Woolfson v Strathclyde Regional Council[7]. In VTB Capital plc v Nutritek International Corp, Lord Neuberger remarked, "In addition, there are other cases, notably Adams v Cape Industries plc Ch 433, where the principle was held to exist." The Court of Appeal unanimously rejected that Cape should be part of a single economic unit, that the subsidiaries were a façade and that any agency relationship existed on the facts. They shipped it to Texas, where a marketing subsidiary, NAAC, supplied the asbestos to another company in Texas. It is not suggested that the arrangements involved any actual or potential illegality or were intended to deprive anyone of their existing rights. In taking a stand against Lord Denning’s more proactive and pragmatic line of authority, as best evidenced in the case DHN Food Distributors, and restating the purist policy of upholding the Salmon principle Adams is certainly a decision that can be celebrated by so-called ‘black letter’ lawyers. 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. View all articles and reports associated with Adams v Cape Industries plc [1990] Ch 433. Cape Industries Plc was a UK registered company and head of Cape Industries group. 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. Woolfson was distinguished from DHN Food Distributors by the Law Lords on the grounds that the company owning the property was only partially, rather than wholly, owned by the claimant company. The Court of Appeal unanimously rejected (1) that Cape should be part of a single economic unit (2) that the subsidiaries were a façade (3) any agency relationship existed on the facts. In Macaura v Northern. The fundamental principle established in Salomon in relation to single companies was applied in the context of a group of companies by the Court of Appeal in the case under discussion in this paper, Adams v Cape Industries plc (1990) [3]. Mr. Morison urged on us that the purpose of the operation was in substance that Cape would have the practical benefit of the group's asbestos trade in the United States of America without the risks of tortious liability. The third submission was an agency based argument (that the subsidiaries were merely agencies making contracts for their principal, the holding company).[5]. By way of personal observation and to address the title directly Adams v Cape Industries was good for business in precisely the same way that chocolate is good for children. “‘Adams v Cape Industries’ was an excellent decision from a business perspective”. The employees of that Texas company, NAAC, became ill, with asbestosis. VAT Registration No: 842417633. Business Law. View examples of our professional work here. 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. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on LawTeacher.net then please: Our academic writing and marking services can help you! Slade LJ (for Mustill LJ and Ralph Gibson LJ) began by noting that to ‘the layman at least the distinction between the case where a company itself trades in a foreign country and the case where it trades in a foreign country through a subsidiary, whose activities it has full power to control, may seem a slender one….’ He approved Sir Godfray’s argument ‘save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon… merely because it considers that justice so requires.’ On the test of the ‘mere façade’, it was emphasised that the motive was relevant whenever such a sham or cloak is alleged, as in Jones v Lipman. Any opinions, findings, conclusions, or recommendations expressed in this material are those of the authors and do not reflect the views of LawTeacher.net. Adams v Cape Industries Plc [1990] Ch 433 (CA) The Albazero [1977] AC 774 (HL) Chandler v Cape Plc [2012] 1 WLR 3111 (CA) Conway v Ratiu [2005] EWCA Civ 1302 (CA) Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain) Ltd [1916] 2 AC 307 (HL) DHN Food Distributors Ltd v Tower Hamlets LBC [1976] 1 WLR 852 (CA) Adams v Cape Industries. What is fundamentally wrong with the notion of adopting such a rule on a case-by-case basis and allowing justice to succeed in each individual case? Since Adams the Court has lifted the veil of incorporation in various state of affairs. 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. But could they be enforced in England? In the case of tort victims, the House of Lords suggested a remedy would, in fact, be available. The requirement, under conflict of laws rules, was either that Cape had consented to be subject to Texas jurisdiction (which was clearly not the case) or that it was present in the US. BACKGROUND - THE LAW PRE- CHANDLER Cape pic (Cape), an industrial services provider and previous manufacturer of asbestos products, has the dubious honour of being an integral player in the law of parent company liability for tort victims. Three arguments were raised (all unsuccessfully) in an effort to establish that Cape had been present in the United States. Like DHN before it, Woolfson involved the compulsory acquisition of trading premises by a local authority and a claim for the loss of business by the trading company, notwithstanding the fact that the company did not own the premises itself. They shipped asbestos from south Africa to the US where they also had subsidiary company. The court separately had to consider whether Cape had established a presence within the United States, such that the English court should recognise the jurisdiction of the United States over Cape, and enforce a US judgment against it (one of the criticisms made of the decision by US lawyers is that the Court of Appeal fundamentally misunderstood the nature of the federal system in the US, but that misunderstanding does not affect the general principles laid down by the court). to which special considerations apply) to expect that the court would apply the principle of. It was a case on all fours with DHN Food Distributors on its facts. In Chandler v Cape plc, the Court of Appeal considered whether a parent company was liable for the exposure of its subsidiary company's employee to asbestos dust.Applying the common law principles established by the House of Lords in Caparo v Dickman [1990] 2 AC 605 (foreseeability; proximity; and whether it was fair, just and reasonable to impose a duty) the Court of … Cape was joined and argued there was no jurisdiction to hear the case. Lord Denning was an influential and gifted judge. Once registration has been successfully completed a new legal person is created: its legal liabilities are totally separate from those of its members. The principles of the single economic entity and agency, notwithstanding the fact that they have been narrowly defined and limited in scope, in theory allow the court to circumvent the Salomon principle of the separate corporate entity, irrespective of the absence of mala fides or bad faith. Adams v Cape Industries Plc [1990] Ch. Cape Products was dissolved some time ago and, in any event, its insurance policy contained a very broad exclusion that would have prevented recovery for this illness against its insurer. Adams v Cape Industries plc [1990] Ch 433 is a UK company law case on separate legal personality and limited liability of shareholders. In that specific regard it is submitted that the ruling was highly beneficial to companies with a certain agenda, but whether that was the original intention of the Salomon court is dubious. Issue. Salomon will not be set aside simply because justice demands it. The principle of separate corporate personality is long established and a central pillar of modern company law. v Cape Industries Plc & Capasco Ltd. Assurance Co.(1925) [2] recognition of the separate corporate personality caused the company’s director and major shareholder to suffer huge losses after he insured company property erroneously in his own name. A recent Court of Appeal in Chandler v Cape plc [2012] EWCA Civ 525 decision has found that a parent company owed a duty of care to its subsidiary employees. Jimmy Wayne Adams & Ors. The Court of Appeal held that for a company to have a presence in the foreign jurisdiction, both of the following must be established: On the facts, the Court of Appeal held that Cape had no fixed place of business in the US such that recognition should not be given to the US judgment awarded against it. However, given that the premises in question were owned by a wholly owned subsidiary of the company, the local authority employed the Salomon principle to contend that the business of the owner had not been disrupted. In practical effect, the Court of Appeal dismissed the contention that a corporate veil should be pierced merely because a group of companies operated as a single economic entity in terms of business reality. 27 July 1989. 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