Written during my final year at university, this 12,000 word research project explores the potential for judicial bias when adjudicating fiduciary breaches across four countries including Australia, Canada, United Kingdom and the United States of America.
Having kept this frankly illuminating piece to myself for the last three years, I thought perhaps it was time to share it with those interested or curious enough to view it, while for the record I was delighted to receive a first-class grade for my earnest efforts.
Conversion of seemingly abandoned property is not without the law, however there are inherent differences as to how best to remove or despatch such property, while considering the enduring proprietary rights of the original owners. In a matter concerning a number of goods of varying value, the claimants sought damages for loss, when after giving ample notice for their removal, the recent freehold purchasers took steps to enforce their rights to enjoyment of the land now owned.
Under a conveyance dated May 2 1994, the respondents purchased land from the claimant’s mother, on condition that time be given for the removal of specific items owned by her son and daughter-in law. With an express threshold of July 31 1994 for all items outstanding, the claimants removed a portion of the items listed, after which no attempts were made to recover the remainder.
Noted within the conveyance was express mention that:
“Any items remaining after deadline shall be considered abandoned and can be disposed of in discretion by the purchaser who will exercise prudent discretion.”
And so upon expiration of the agreed threshold, the respondents proceeded to both remove and where possible, sell the items either privately for profit, or by way of scrap, with the remaining few items kept under secure storage.
At the point of litigation, the claimants argued that unless stated, the items both sold and left in situ, were still under ownership, and that no acquirement of title has succeeded, despite no attempts to remove them beyond the period stated. With reference to the principle of abandonment, the court observed the academic position adopted in ‘The Abandonment and Recaption of Chattels’ (1994) by Lee Aitkin, in which it reads:
“The act of abandonment, in Pollock’s terms, confers a revocable licence which is only terminated when a subsequent possessor manifests dominion over the chattel with the intention of possessing it to the exclusion of others, including the former possessor.”
However in ‘Is Divesting Abandonment Possible at Common Law’ (1984) by A.H. Hudson, it was argued that abandonment through intention was sufficient enough to warrant acquisition by those taking new ownership, (otherwise known as ‘divesting abandonment’) which in effect, created further confusion as to how best to ascertain when property has been lawfully abandoned.
In Canada (Attorney General) v. Brock, the Canadian Supreme Court had earlier turned to American jurisprudence when adhering that once relinquished of title, such property remains abandoned until appropriated by those intending to take ownership, while ‘Black’s Law Dictionary’ (1979) clarified how:
“Abandonment includes both the intention to abandon and the external act by which the intention is carried into effect.”
With particular regard to the case in hand, McCutcheon v. Lightfoot had enabled the Supreme Court of Canada to rule how:
“[A]bandonment of a chattel may be inferred in circumstances where an owner fails to remove his or her chattels within a reasonable time after receiving notice from the proprietor demanding their removal. In such circumstances, the destruction, consumption or sale of the chattels would not constitute a conversion thereof.”
While in Addison on Torts (7th Edn), it was equally argued that:
“A man cannot be made a bailee of goods against his will; and, therefore, if things are left at his house, or upon his land, without any consent or agreement on his part to take charge of them, he is not thereby made a bailee of them.”
Thus with close examination of the rights afforded both parties, the court held that the items retained and sold or disposed of, were subject to five distinct groups, within which three were estopped from right of claim, damages for conversion were awarded at $300 for the item sold privately and the final group remained abandoned unless agreed otherwise.
As a doctrine under question, the effects of lifting the corporate veil can be far-reaching if supported through case law, and yet it appears that the judiciary are reluctant to apply it unless under extreme circumstances, and even then with some trepidation.
The primary function of ‘lifting’ or ‘piercing’ the veil of corporations is one of transparency. As is no stranger to the world of enterprise, many an entrepreneur has undoubtedly found themselves at odds with where the boundaries are with conversion of assets, or even fiduciary duties in line with corporate ownership. When matters reach a level that requires legal intervention, the venturing of the courts into financial accounts and expenditure records, is something that rests uneasily on the shoulders of judges.
It is not uncommon after all for businessmen and investors to construct fake companies to provide cover for illegal dealings, no more than shareholders to dominate the actions of their corporations under the guise of boardroom decision making. Paradoxically, it is precisely this subterfuge that beckons court intrusion, and yet for reasons that can be appreciated in their overall meaning, it does not bode well for the victims of those immoral undertakings when the rule of law refuses to fully extend.
Starting at the roots of this clearly under utilised principle, it is important to understandthat supply always creates demand, and so examination of how this doctrine has flourished reveals that the limited liability of incorporation almost invites abuse, regardless of the stakes in hand.
Salomon v Salomon, which dates back to 1897, is considered the birthplace of limited liability, as during the liquidation of a failed business, the shareholder and company were held as separate entities, and therefore unencumbered by obligation to one another. This perhaps dangerous distinction, served well the rule of law, but consequently opened the way to defendants establishing unaccountability for the deviances behind insolvency, or the withholding of property release during matrimonial disputes, as was seen in Prest v Petrodel Resources Ltd and Others, where despite having grounds to ‘pierce’, the judges went instead with beneficial interest accrued through powers conferred under the Matrimonial Causes Act 1973. Since Prest is now considered the leading authority on the protection or exposure of corporate misdeeds, it might pay to look at overseas opinion.
Despite taking a similar vein in most U.S. courts, the small State of Delaware has become reputed as the home for around sixty-five percent of the Fortune 500 companies, and the reasons are clear. Aside from most other county-wide laws shared between States, there appears to be consolidated support for the protection of the corporate veil, under the strongly held belief that without it, the wheels of commerce simply cannot turn. A notable 2014 case Cornell Glasgow LLC. v. Nichols, is now considered the poster boy for the prevention of access to corporate transactions in middle America, however when the facts of the case are examined, there appears no justifiable reason to pierce the corporate veil, despite such clandestine and unprofessional behaviours on the part of the defendants. In fact, when taken in its proper context, the whole matter was tantamount to a classic breach of contract and nothing more.
This over complication of the argument does beg the question of whether claimants are all too quick to attack the character of those accused, in order to alleviate doubts as to a right of claim, where proper evaluation of the facts would likely reveal a swift path to justice that allows reduced costs and minimised court time.
In Canada, the controversial Chevron Corp. v. Yaiguaje has now become the watermark for corporate exposure, coming close to setting a precedent for foreign enquiry into asset liability and covert misdeeds, after the indigenous peoples of Ecuador were subject to extreme pollution through the actions of an overseas corporate subsidiary. While pursuing them through the Canadian courts, and almost becoming a pivotal argument for the extension of ‘piercing’ qualification, it was ultimately overturned in the Superior Court by Justice Hainey, who explained:
“Chevron Canadaʼs shares and assets are not exigible and available for execution and seizure by the plaintiffs in satisfaction of the Ecuadorian judgment against Chevron Corporation.”
This overruling stance (amongst other cases) also fell back on the domestic line taken in Adams v Cape Industries Plc, where it had been decided that:
“Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities.”
While this principle already poses great resistance to those seeking damages, the primary reason the courts declined to lift the corporate veil in Chevron, was simply that since the inception of the claim, no suggestions of fraudulent behaviour were levelled toward the defendants, so no matter how aggrieved the claimants felt, it was held inequitable to overstep the boundaries set by the incorporation and limited liabilities enjoyed by many firms, in order to achieve remedy for damages arising from contractual breach on the part of the actual offending party Texaco; who soon after acquiescing to the judgment bought against them in Ecuador, were taken over by Chevron California (the parent company). In fact quite why the claimants were pursuing Chevron Canada is frankly unfathomable given the background to the matter, therefore it comes as no great surprise that the ruling to ‘pierce’ was quickly dismissed.
So to summarise, it would suggest that on the strength of the cases discussed, it is not really an issue of judicial reluctance as much as a failure for the right matter to present itself. It would also pay to exercise caution when supporting foreign claims that display absolutely no logical bearing on (i) how this confused claim should ever have been initiated, and (ii) why any jurisdiction would move to lend credence to such a fruitless endeavour; while from an equitable perspective, the principle of traceability immediately springs to mind when seeking restitution from companies no longer in existence, and whose assets have long since been laundered.
With the introduction of Alternative Dispute Resolution (ADR) in 2010, the essence of divorce and family proceedings became less governed by the rigours of litigation, and one more attuned to continuous and considered discourse between parties, on provisional terms that embraced the welfare of children and respect for individual rights.
After marrying relatively young, and moving quickly into starting a family, two devout members of the Jewish faith found themselves in stark opposition to how best they could live their lives, and in turn seek to end the marriage before occupying different countries.
When the matter of how contact could be set between the father and the two small children, it soon became a matter of contention, and one that ultimately drew guidance from the Jewish community, but overall authority from the English courts. When adopting ADR strategies, the emphasis is typically placed upon expedience and reduced costs; however due to such vast geographical differences, and intrinsic religious constraints, the process of divorce ran over a period of years versus months, and was certainly not without its frustrations.
What eventually emerged however, was that through a combination of delicate communication, respect for doctrinal traditions, cohesive written agreements and the balancing of the needs of the children, it was possible to overcome the potential pitfalls of cross-jurisdictional conflict, and move matters to a much more mature and objective conclusion; an outcome that had at times, seemed unlikely given the inclination by the parties involved to build walls between them, that served only to harm the children and drain financial resources more than was necessary.
Thankfully, it all came down to a successful collaboration of the Jewish authorities, domestic courts and continued willingness of the parents to collectively work toward a resolution that now stands as testament to the transcendence of ideology, in favour of a united family, even after the dissolution of marriage.