VTB Capital Plc v Nutritek International Corp & Ors [2012] EWCA Civ
808 (20 June 2012)
The Court of Appeal has in this case reconciled the
differences between the jurisprudence from judges in the Chancery Division and
the Commercial Court. The appeal determined whether it is possible to pierce
the corporate veil in order to hold the controller of a company liable as a
party to a company’s contracts. The
Commercial Court previously had developed authority stating it would be possible
to pierce the corporate veil for such an individual to be so liable, provided certain conditions were met (Gramsci v Stepanovs [2011] EWHC 333 (Comm)). However,
Arnold J in VTB Capital Plc v Nutritek came to the opposite view in the Chancery Division
and was therefore appealed to settle the contradictory nature of these two
authorities.
The matter concerned both contractual and tortious claims by Nutritek
against the four defendants; two companies incorporated in the British Virgin
Islands, one in Russia and a further defendant who resides in Russia. The issue
at hand was whether the corporate veil could be pierced in order to determine the
exercise of the English courts over parties outside this jurisdiction;
essentially to amend the claim forms to serve the proceedings out of the jurisdiction.
A fundamental principle of company law is that the rights and
liabilities of an incorporated company are distinct from that of individuals with control of
that company. However the principle of “piercing the veil of incorporation”
involves the blurring of that distinction such that those same individuals become potentially liable for the acts of that company. Authority relied upon in this case in favour of
piercing the corporate veil states it is appropriate when the corporate structure is a “mere facade
concealing the true facts” (DHN Food Distributers Ltd v Tower Hamlets London
Borough Council [1976] 1 WLR 852 at 161).
The appeal judges decided to err on the side of caution, to hold that it was contrary to principle and authority that in circumstances where the corporate veil was pierced, a court could find that those who misused the company where then parties to that company's contracts. Accordingly the appeal was refused and the original determination of Arnold J in Nutritek affirmed.