ARMITAGE v NURSE

Breach of duty and accusations of fraud may appear to seem related; yet, the truth is that when put before a court, the facts are both distinct and separate.

In this instance, the younger of three beneficiaries took issue with the conduct of her appointed trustees and sued for damages, despite no evidence of foul play.

Upon the death of her grandfather, the appellant was granted a trust of both land and capital subject to her coming of age at twenty-five; after which, a number of trustees were to provide interim payments to increase the life of the trust.

The trust itself, was the product of a successful farming business now run by the appellant’s mother and grandmother, while assisted by the nominated trustees of their marriage settlement under the Variation of Trusts Act 1958, while clauses 9 and 15 of the original marriage settlement provided that:

“(9) [T]he trustees … shall have power to carry on or join or assist in carrying on or directing any business of farming … with power for that purpose … to employ or engage … any managers or agents … and to delegate all or any of the powers vested in them in relation to the business … [A]nd the trustees shall be free from all responsibility and be fully indemnified out of Paula’s fund in respect of any loss arising in relation to the business.

(15) No trustee shall be liable for any loss or damage which may happen to Paula’s fund or any part thereof or the income thereof at any time or from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud…”

Variation of Trusts 1958

In the course of litigation, the appellant claimed that the trustees had wrongfully farmed her portion of land at a cost to her trust funds, yet to the benefit of her mother and grandmother; that the trustees had thus failed to manage her trust in accordance with their obligations, that the trustees had failed to establish why her portion of land was sold for less than that of her mother’s, and that the trustees failed to set a suitable interest rate when loaning trust funds to her mother.

These four incidents were collectively presented under a claim of fraudulent breach of duty at the expense of the appellant’s interests, and that clause 15 failed to protect them from such liability.

Likewise, the respondents counter-claimed that clause 15 provided exemption from liability, and that clause 9 provided similar protections when examining the variation in land valuations and loan interests granted in the course of their duties.

The respondents also contended that the appellant’s allegations were statute barred under section 21 of the Limitation Act 1980, and so unlawful.

In the first instance, the judge held that clause 15 was correctly applied, but that clause 9 did not allow for such indiscretions, and that the appellant’s claims were not subject to the statute of limitations.

After which, the judge awarded the respondents eighty percent of the costs, but held that the remaining twenty percent was to be paid directly from them, as a number of points raised and lost fell outside the scope of the trust and were therefore exempt from recovery from the trust funds.

When the matter was presented to the Court of Appeal, the Court went to considerable lengths to clarify the definition of fraud and its relationship to breach of duty; and it became evident that while allegations of gross and general negligence, honest incompetence, indolence and misapplication of trust funds were feasible, there was simply no tenable reason to suggest that the respondents had acted with anything less than honest intent

With regard to the barring under statute, it was explained how section 21(1)(a) of the Limitation Act 1980 clearly stipulated that:

“No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; …”

Limitation Act 1980

Therefore, the appellant was well within her rights to bring a claim of fraud, despite the findings of the court.

Having reconsidered the position taken by the trial judge for cost apportionment, it was also held that while relying upon RSC Ord.62 r.6(2) to deny recovery on grounds that the trustee acted for reasons of self-interest over that of the trust fund, the judge had overlooked the principle that trustees are entitled to claim from trust funds when successfully defending themselves against a claim of breach.

Hence, funds were set aside for full payment while in closing, the Court granted the appellant a right to amend her claims (the House of Lords later dismissed her right to appeal), before reminding the parties that:

“It is the duty of a trustee to manage the trust property and deal with it in the interests of the beneficiaries. If he acts in a way which he does not honestly believe is in their interests then he is acting dishonestly.”

AGIP (AFRICA) LTD V JACKSON

Knowing receipt, constructive trustees and the effectiveness of traceability through multiple recipients form the basis of this Appeal Court hearing when the chief accountant of an oil drilling company systematically defrauded his employer of over $10m during a period of just two years.

This was carried out through a network of directors and business partners acting as authorised signatories for the sham companies, and who once a small number of deposits were made, closed the accounts, before opening new accounts that would then transfer the funds to a central account held in France.

This account belonged to a company that presented itself as a jewellery supplier, and which was owned by a French lawyer, who was the head of the fraudulent operation.

Party to this, was the manager of Lloyd’s Bank Holborn Street, whose role it was to receive funds from the chief accountant through his employer’s bank on a regular basis, before awaiting instructions as to which of the seven accounts the funds were to be transferred.

It was only after a money order destined for a shipping container firm was fraudulently altered, that the scheme became apparent and proceedings commenced.

In the first hearing, the respondent firm sued for payment under mistake of fact, and claimed that recovery was due either by the bank, or the account holders, who themselves took receipt of the funds under knowing deceit.

While relying upon the traceability of the monies paid out, it was held by the court that there had been too many displacements in both time and transactions to establish a clear path, therefore recovery under common law was too remote; however, when turning to equity the issue took an another form altogether.

While tracing through equity requires evidence of a fiduciary relationship, the chief accountant had by extension, held a fiduciary role; and so, it fell to the Court of Appeal to first explore knowing receipt and knowing assistance.

Here, it was held that while the appellants received the funds on behalf of their clients, they did so in the knowledge that the money had been obtained through fraud, and so for that reason were liable as constructive trustees for the respondent; particularly as no real effort was made to return the money once notification had been made by the issuing bank, while the court reminded the parties that:

“A person may be liable, even though he does not himself receive the trust property, if he knowingly assists in a fraudulent design on the part of a trustee (including a constructive trustee). Liability under this head is not related to the receipt of trust property by the person sought to be made liable…”

U.S. v. CAROLENE PRODUCTS CO.

Amendment rights and the need to protect against fraud, are central to a case involving a distributor of food products and the intervention by Congress in the interests of public safety when in 1938, a corporate entity was indicted under §§ 61 and 62 of the Filled Milk Act 1923.

After having shipped a number of containers of ‘Milnut’, a product that fell within the scope of the Act, and which resulted in a sentence of either imprisonment or a $1000 fine as per § 63, the now appellee was charged with illegal distribution and misrepresentation, within which § 62 clearly expressed how:

“It is declared that filled milk, as herein defined, is an adulterated article of food, injurious to the public health, and its sale constitutes a fraud upon the public. It shall be unlawful for any person to ship or deliver for shipment in interstate or foreign commerce, any filled milk.”

Whereupon the matter was taken to appeal before the U.S. Supreme Court under the Criminal Appeals Act 1907. Here, the appellee demurred that application of the 1923 Act was subject to the limitations prescribed by the Tenth Amendment to the U.S. Constitution, which states that:

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

And that seizure of the prohibited goods was a breach of the Fifth Amendment to the Constitution, which expresses how:

“No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury…nor be deprived of life, liberty, or property, without due process of law…”

Therefore, the decision by Congress to create and apply prohibitive legislation which conflicts with the aims of the Constitution, was both ultra vires and an affront to the privacy rights and freedoms of the individual citizens of the United States of America.

Contrastingly, the Court drew reference to Hebe Co. v. Shaw, in which the Supreme Court ruled that any state law forbidding the manufacture and sale of filled milk under § 6(c) of the 1923 Act, which clarified how:

“The term ‘filled milk’ means any milk, cream, or skimmed milk, whether or not condensed, evaporated, concentrated, Powdered, dried, or desiccated, to which has been added, or which has been blended or compounded with, any fat or oil other than milk fat, so that the resulting product is in imitation or semblance of milk, cream, or skimmed milk, whether or not condensed, evaporated, concentrated, powdered, dried, or desiccated.”

Was not an infringement of the Fourteenth Amendment of the Constitution, which again stipulates that:

“No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

This translated that while the rights afforded under the Constitution were exempt from the wishes of Congress, the importance of public interest and compelling evidence submitted by the House Committee on Agriculture and the Senate Committee on Agriculture and Forestry in relation to ‘doctored’ milk, justified the prevention of misrepresentation through sensitive regulation, as opposed to wanton deprivation of liberty or distortion of justice.

Hence, it was for this fundamental reason that the Court dismissed the demurrer and reversed the judgment accordingly.

HUTTO v. DAVIS

Disproportionate sentencing for non-violent offences, while not surprising in a multi-jurisdictional continent, becomes central to the hierarchical fragility of a country built upon fairness and constitutional rights, when a convicted felon receives life imprisonment for drug related offences valued at less than $200 at the time of arrest.

In 1973, Virginia state police raided and recovered nine ounces of marijuana from the home of the defendant, prior to his conviction for possession with intent to distribute. When awarding judgment, the court passed a sentence of forty years imprisonment with a fine of $10,000, after which the defendant successfully appealed under habeas corpus, while contending that such an exorbitant term was in contravention to art.VIII of the US Constitution which reads:

“Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”

And s.1 of art.XIV which reads:

“No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

Unfortunately, a US court of appeals panel reversed the decision on grounds that at no point in history had the Court been found liable for cruel and unusual punishment when sentencing under the guidance of state legislation, however when reheard in full judicial capacity, the court amended its earlier judgment back in favour of the appellant.

Through the application of Rummel v. Estelle, in which a Texan defendant had been unfairly sentenced to life imprisonment for fraudulent misrepresentation to the value of just under $121, the US Supreme Court ruled that despite the extremity of the sentences, there was nothing unconstitutional about the application of maximum penalty through approved legislative framework, and that on this occasion, when the lower courts had relied upon the four principles used in Hart v. Coiner:

  1. No element of violence and minimal, debatable danger to the person
  2. Examination of the purposes behind criminal statute and alternative mitigating remedies
  3. Evidence of excessive penalty beyond maximum recommendations
  4. Evidence of disproportionate sentencing through comparative state analysis

To allow the appeal, they had collectively failed to recognise that federal courts should be slow to review legislative sentencing mandates, and that tradition clearly showed how such instances were both rare and intrusive to the doctrine that amendments to statute were privy to Congress and not the courts.

It was for these reasons that the US Supreme Court reversed the findings of the court of appeals, with explicit instruction to dismiss the habeas corpus, despite a majority dissent from within.

R v LAMBIE

Fraudulent misrepresentation and the need for proof of inducement, may at first seem like prudent adjudication; however, when the facts are properly assembled, there is little doubt as to whether the act itself was one of corroboration through personal gain, or a simple exploitation of the contractual arrangements between credit and debtor.

In the winter of 1980, the now respondent was convicted for obtaining pecuniary advantage by deception under section 16(1) of the Theft Act 1968 after an indictment on two counts, one of which was quashed, while the second occurred during a period after the lending bank had recalled the credit card used.

Having been granted use of the card in spring 1977, the bank had, after a period of time, requested its return after the respondent had incurred a debt far in excess of the prescribed limit of £200.

On 6th December 1977, the respondent agreed to return the card; after which, she entered into a transaction in a Mothercare store on 15th December 1977, before returning the card on 19th December; at which point, the debt had increased to a princely £1005.

At the trial, the jury returned a verdict against the respondent; after which, she appealed on grounds that the store clerk had, by her application of store policy regards their relationship with the bank, allowed the transaction to proceed, not because she had been falsely induced, but rather because the credit card was within the expiration date, not on the store’s ‘stop list’ and the respondent’s signature matched that on the card.

It was also argued that the mere presentation of the card did not indicate anything more than that of a right to use it, as opposed to any representation on behalf of the bank, therefore liability for deception could not stand.

With doubts as to the exactness of related precedent, the Court of Appeal reluctantly overturned the conviction; during which, Cumming-Bruce LJ remarked:

“By their contract with the bank, Mothercare had bought from the bank the right to sell goods to Barclaycard holders without regard to the question whether the customer was complying with the terms of the contract between the customer and the bank.”

At which point, the County Chief Constable appealed under section 33(2) of the Criminal Appeal Act 1968, and the matter was again presented before the House of Lords.

Here, the facts of R v Charles were given deliberate consideration, in particular the commentary by Diplock LJ who had explained:

“By exhibiting to the payee a cheque card containing the undertaking by the bank to honour cheques drawn in compliance with the conditions endorsed on the back, and drawing the cheque accordingly, the drawer represents to the payee that he has actual authority from the bank to make a contract with the payee on the bank’s behalf that it will honour the cheque on presentment for payment.

What creates ostensible authority in a person who purports to enter into a contract as agent for a principal is a representation made to the other party that he has the actual authority of the principal for whom he claims to be acting to enter into the contract on that person’s behalf.

[T]hen, is he bound by the contract purportedly made on his behalf. The whole foundation of liability under the doctrine of ostensible authority is a representation, believed by the person to whom it is made, that the person claiming to contract as agent for a principal has the actual authority of the principal to enter into the contract on his behalf.”

R v Charles

Which meant that despite the protestations of exemption from the transaction, the respondent was inevitably liable for deception when using the card in the knowledge that it was the property of the issuing bank; and that the period for its used had since expired.

It was also noted by the House that when introducing the concept of inducement into any act of fraud, the words of Humphrey J in R v Sullivan reminded the judiciary that:

“[I]t is patent that there was only one reason which anybody could suggest for the person alleged to have been defrauded parting with his money, and that is the false pretence, if it was a false pretence.”

R v Sullivan

At which point, the House unanimously reversed the decision of the Court of Appeal and awarded due judgment for the Crown, while holding that:

“[W]here the direct evidence of the witness is not and cannot reasonably be expected to be available, reliance upon a dishonest representation cannot be sufficiently established by proof of facts from where an irresistible inference of such reliance can be drawn.”

HEALEY v BROWN

As can often result from mutual wills, the overlapping fields of contract law and equity become central to the resolution of this property dispute, after a claimant intervenes in the immoral acquisition of sole title to the matrimonial home of a son’s parents.

The drafting of mutual individual wills reflected that upon death, the surviving spouse became under law, the sole beneficiary of that person’s equitable and legal interest in the property occupied at the time of death.

Where neither party were survivable, the individual wills stated that the wife’s niece was to become the beneficiary of the equally held share of the leasehold, and that the father’s son would inherit the remainder of the estate.

Following the death of the wife, the husband took the liberty of transferring his now sole title to that of a shared (or joint) title to the property with his son; an act that in and of itself, contravened the earlier agreement within their final (and irrevocable by declaration) wills.

This transgression had remained unaddressed until the death of the father, preceding a naturally vehement claim by the niece that the transfer of title constituted fraud, and that under those circumstances, the son now held both parents’ share of the property upon trust for her, and that despite any contractual arrangements made between the father and son, the binding nature of the mutual wills superseded any administrative effects constructed under the laws of property.

Despite drawing argument against mutual testation under the property doctrine of survivorship, it remained evident that the father was acting within a fiduciary capacity when surviving his wife’s death, and so by avoiding the duties prescribed him, he breached that obligation in favour of his son’s expectation to benefit.

Again, as with the rules of equity and proscription of contract law, there appeared to be a lack of clarity surrounding the written intentions of the testator and testatrix, while the basis for this opposition relied upon section 2 of the Law Reform (Miscellaneous Provisions) Act 1989, where the disposition of land requires a single co-signed document containing the terms of the arrangement (or at the very least an exchange of those documents) as proof of intention; yet as the mutual wills were never signed by their respective partners, any desire to enforce their bequests became invalid under the Act itself.

This essentially meant that:

“No disposition of land can be challenged unless done so with a written and signed document contrary to the one drafted by the person charged.”

Sadly, the nature of the wills were such that neither party co-signed the others wills prior to their deaths, which thereby prevented a contract of sorts to exist.

So, on this occasion the judges decided that instead of the property becoming the sole title to the claimant (as was the design of the mutually drafted wills) the home was now held in equal shares for both parties to enjoy, albeit through the framework of a constructive trust, while reminding the parties that:

“Constructive or other trusts may arise or be imposed as a remedy in many circumstances where a contract is absent.”

FRAUD

When finding effect through the inception of the Fraud Act 2006, there are three ways fraud can occur: fraud by false representation, failure to disclose information and abuse of position, which we shall look at here and support each one with suitable cases where applicable.

Fraud by False Representation

S.2(1) of the Fraud Act clearly states that a person is guilty of fraud by false representation when it is proven that they did so to (i) cause gain for themselves or another party or (ii) cause or expose another person to loss or a risk of loss (this can be achieved in a number of ways and so oral and written methodology equally apply), as demonstrated in R v Lambie, when a consumer continued to use her credit card, despite exceeding her credit limit and after being asked by the bank to return it.

When carrying out a purchase in a Mothercare store, the appellant in the appeal case was accused by the defendant of knowingly encouraging a transaction in the knowledge that the bank had no longer given the respondent authority to continue using the card.

This argument was stringently dismissed, while emphasis was placed squarely upon the intention of the respondent to knowingly defraud the store.

An illustration of fraud by false representation was summed up by Lord Roskill, who explained:

“[I]t is in my view clear that the representation arising from the presentation of a credit card has nothing to do with the respondent’s credit standing at the bank but is a representation of actual authority to make the contract with, in this case, Mothercare on the bank’s behalf that the bank will honour the voucher upon presentation.”

R v Lambie

This ethos was also outlined in Rex v Sullivan, where Humphreys J stressed:

“[T]he facts are such that it is patent that there was only one reason which anybody could suggest for the person alleged to have been defrauded parting with his money, and that is the false pretence, if it was a false pretence.”

Rex v Sullivan

Fraud by Failure to Disclose Information

Subject to s.3 of the Fraud Act, a person dishonestly failing to disclose information when (i) under a legal duty to so and (ii) by intention gains for themselves or another or causes or exposes another to a loss or risk of loss is thus guilty (where proven) of fraud.

As this relates more to those in public body roles or parties to contract, the establishment of guilt falls to the judicial interpretation of civil law and statute as opposed to the collective opinion of a jury.

An example of this R v Padellec in which a man accused of harbouring indecent images on his computer refused to disclose the encryption password as required under s.53 of the Regulation of Investigatory Powers Act 2000.

After being summarily convicted, the appellant appealed under plea in order to reduce his sentence; at which point, Singh J exclaimed:

“The whole point of requiring access is so that it can be seen what was in fact there. We express the hope that in a situation such as arose in this case, and in the context of an offence under the Regulation of Investigatory Powers Act (section 53), there will never again be a basis of plea accepted which is based upon keeping the contents secret and the defendant saying, to his advantage, what was or was not contained.”

R v Padellec

Fraud by Abuse of Position

S.4(1) of the Fraud Act convicts those (again where proven) for gainful abuse of a position held to safeguard and preserve the financial interests of another, while the gain can be both personal or on behalf of third party(s) and such profits must cause (or expose those assigned protection) loss or risk of loss.

Given the nature of the breach, it is typically applied to fiduciary or professional relationships where trust has been given under express conditions; however, it could just as easily apply to family matters depending upon the relationship shared and the declarations made.

As with fraud by failure to disclose information, the judgments are typically free from jury persuasion and will benefit from equitable principles as much as civil laws for guidance.

An example of this was found in R v Conway (Catherine); in which, a domestic care worker abused the trust placed in her by her client by obtaining and then keeping the victim’s debit card, before defrauding her of £27,000 over a period of three years.

Once caught and convicted, the defendant then accused the victim’s family members of conspiring to the fraud before admitting full liability, and when passing sentence, Weir LJ illustrated the gravity of the abuse, when he said:

“This was the calculated and systematic theft over years of a vulnerable lady’s life savings by the very person employed to assist and befriend her at a time in her life when she was at a low ebb and grateful for the help which this appellant cynically pretended to be giving her by buying her a few necessaries using her post office savings card.”

R v Conway (Catherine)

SCRIVEN BROS & CO. v HINDLEY & CO.

Negligence and mistake, are two elements of contract law which conflict as between vendor and purchaser, particularly when the former is unreasonably applied to the buyer.

In this very brief but notable case, the issue in hand turns upon the overpayment for a product at auction.

Typical of the period, many agricultural products were imported for domestic use as the temperate weather of foreign countries provided for larger tonnage and lower prices; and so, on this occasion the subject matter was Russian industrial grade hemp, which while grown widely across the UK, remained their largest export at the time, and was a much sought after commodity.

Contrastingly, tow is a by-product of hemp, and thus sold at a much lower price, often for use as upholstery stuffing and other secondary purposes.

However, when a dockside auctioneer put out large bales of both hemp and tow, the samples shown to potential bidders were easily confusable.

To make matters worse, the two consignments were given similar lot names, therefore the possibility of bidding in error was high.

On this occasion, the purchaser had recruited a manager to bid on his behalf; at which point, he had placed similar bids on both items on the assumption that he was buying hemp.

To his further detriment, the auction programmes failed to distinguish the lots; and so, only those who had the foresight to inspect them beforehand were spared the embarrassment of overpaying for items of lower market value.

When the purchaser discovered his managers error, he sued the auctioneers for misrepresentation upon the principle of ‘ad idem’ (which is parties not in agreement to the nature of a contract); who themselves counter-sued for negligence on the part of the manager.

In the original trial, it was found that there could be no evidence of a contract as per the principle of disagreement, and that no grounds of negligence existed in the absence of any duty of care by the manager to examine the lots prior to bidding.

When brought before the Court of the Kings Bench, it became apparent despite a number of opposing facts, that the auctioneers had been recent victims of fraud, thus were simply looking to pass on the loss to another unsuspecting buyer.

And so, irrespective of any argument that the onus of inspection fell to the buyer’s representative, it was found that a contract could not be found to exist where no agreement had been settled between the vendor and the purchaser

Hence, the court awarded for the defendants, while reminding the parties that:

“A buyer when he examines a sample does so for his own benefit and not in the discharge of any duty to the seller.”

LIFTING THE CORPORATE VEIL

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, as the primary function of ‘lifting’ or ‘piercing’ the veil of corporations is one of transparency.

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 understand  that 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.

Dating back to 1897, Salomon v Salomon 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; although 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.

The notable Cornell Glasgow LLC. v. Nichols is now considered the poster boy for the prevention of access to corporate transactions in middle America, however when examined, there appears no justifiable reason to pierce the corporate veil despite such clandestine and unprofessional behaviours on the part of the defendants; rather the whole matter appears tantamount to little more than a classic breach of contract.

This over complication of the argument begs the question of whether claimants are all too quick to attack the character of the accused in order to alleviate doubts as to a right of claim, whereas proper evaluation of the facts would likely reveal a swift path to justice with reduced costs and minimal court time.

In Canada, the controversial Chevron Corp. v. Yaiguaje has 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 that:

“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.”

Chevron Corp. v. Yaiguaje

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.”

Adams v Cape Industries Plc

While this principle 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.

This translated that 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 were taken over by Chevron California (the parent company), soon after acquiescing to the judgment bought against them in Ecuador.

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.

To summarise, it would suggest that on the strength of the cases discussed here, 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 displaying absolutely no logical bearing on how this confused claim should ever have been initiated and 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.

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