Piercing of the Corporate Veil for Evasion of Tort Obligations

Abstract

This article analyses the common law doctrine of piercing of the corporate veil in the context of tort liabilities of a company. It is generally accepted that the veil-piercing doctrine can be applied where a company is used to evade existing legal obligations but not where a company is used to avoid future legal obligations. In the tort context, the prevailing view is that it is permissible to establish a company to carry on activities to enable the controllers of the company to escape personal tort liabilities arising from the activities. However, it is argued in this article that such a situation potentially involves the use (mis-use) of a company to evade existing tort obligations and that there is greater scope than traditionally understood for piercing of the corporate veil to impose a company’s tort liabilities on its controllers.

Keywords: Company law, corporate veil, shareholders, tort liability