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A COMPARATIVE ANALYSIS of PIERCING the CORPORATE VEIL in ENGLISH LAW and SOUTH AFRICAN LAW Patson Waliwona Manda 13214633

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A COMPARATIVE ANALYSIS of PIERCING the CORPORATE VEIL in ENGLISH LAW and SOUTH AFRICAN LAW Patson Waliwona Manda 13214633 A COMPARATIVE ANALYSIS OF PIERCING THE CORPORATE VEIL IN ENGLISH LAW AND SOUTH AFRICAN LAW by Patson Waliwona Manda 13214633 Submitted in fulfilment of the requirements for the degree LL.M (Corporate Law) In the Faculty of Law, University of Pretoria 30 July 2019 Supervisor: Professor Maleka Femida Cassim Table of Contents I INTRODUCTION .......................................................................................................................... 3 a) Academic and practical reasons for this study ........................................................................ 3 b) Purpose .................................................................................................................................. 5 c) Research Methodology........................................................................................................... 5 d) Context .................................................................................................................................. 6 e) Chapter Structure ................................................................................................................... 8 f) Research question ................................................................................................................ 10 g) Conclusion ........................................................................................................................... 10 II HISTORICAL CONTEXT: SEPARATE LEGAL PERSONALITY, LIMITED LIABILITY AND PIERCING THE CORPORATE VEIL ............................................................................................ 11 a) The concept of juristic personality ........................................................................................ 11 i) The importance of Salomon v Salomon ............................................................................. 12 b) The legal consequences of separate legal personality ............................................................ 14 i) Commentary on piercing the corporate veil ...................................................................... 18 ii) Perspectives on piercing the corporate veil: contrasting common law jurisdictions ............ 21 iii) The difficulty that courts face when piercing the corporate veil ..................................... 22 c) Conclusion ........................................................................................................................... 22 III SOUTH AFRICAN APPROACH TO PIERCING THE CORPORATE VEIL ............................. 24 a) Introduction ......................................................................................................................... 24 i) General approach adopted by South African courts ........................................................... 24 b) South African Common Law: Historical landscape............................................................... 25 i) Introduction: General common law approach to piercing the veil in South African law ..... 25 ii) Fraud: Finite in nature ...................................................................................................... 26 iii) Unconscionable injustice: Gradual progression into expansion...................................... 27 iv) Fraud, dishonesty or improper use: Transition into a constitutional framework ............. 28 v) Conclusion: Piercing the corporate veil in South African courts ........................................ 42 c) Statutory law........................................................................................................................ 43 i) Supplementing the common law: Unconscionable abuse................................................... 43 ii) Gore: Valuable insight concerning the interpretation of section 20(9) ............................... 44 iii) Alternatives remedies in South African statute .............................................................. 50 iv) Conclusion: Piercing the corporate veil in South African statute ................................... 51 IV ENGLISH APPROACH TO PIERCING THE CORPORATE VEIL ........................................... 53 a) Introduction ......................................................................................................................... 53 i) General approach adopted by English Courts .................................................................... 53 b) English Common law: Historical landscape .......................................................................... 54 1 i) Introduction: A brief history of its evolution over time and its current state....................... 54 ii) Experimental period ......................................................................................................... 55 iii) Heyday era ................................................................................................................... 57 iv) From optimism to rigidness .......................................................................................... 58 v) Prest: Piercing the corporate veil is limited under English law .......................................... 65 vi) Conclusion: common law ............................................................................................. 72 c) Statutory law........................................................................................................................ 73 i) Introduction ..................................................................................................................... 73 ii) General approach followed by English statute .................................................................. 74 iii) Conclusion: statutory .................................................................................................... 76 V JUXTAPOSITION OF MINIMALIST AND MAXIMALIST APPROACHES IN LIGHT OF PIERCING THE CORPORATE VEIL ............................................................................................ 78 a) Introduction ......................................................................................................................... 78 b) Minimalist and Maximalist .................................................................................................. 79 i) Attitudes and tests: United Kingdom ................................................................................ 79 ii) Attitudes and tests: South Africa ...................................................................................... 85 iii) Remedy of last resort? .................................................................................................. 91 c) Conclusion ........................................................................................................................... 97 VI CONCLUSION AND RECOMMENDATIONS .................................................................. 98 a) Introduction: Striking differences ......................................................................................... 98 b) The way forward: How South Africa is in good standing ...................................................... 98 i) Recommendations .......................................................................................................... 102 VII BIBLIOGRAPHY ................................................................................................................... 104 Primary Sources ........................................................................................................................ 104 Constitution ........................................................................................................................... 104 Statutes .................................................................................................................................. 104 Cases ..................................................................................................................................... 104 Secondary sources ..................................................................................................................... 107 Books..................................................................................................................................... 107 Internet Sources ..................................................................................................................... 108 Journals................................................................................................................................. 108 Reports .................................................................................................................................. 110 Speeches ................................................................................................................................ 110 Theses ................................................................................................................................... 110 White Papers, etc ................................................................................................................... 110 2 I INTRODUCTION a) Academic and practical reasons for this study In modern societies, a main source of economic activity is not dominated by individuals, but by companies that own assets, enter contracts, and incur liabilities that are legally separate from those of their owners, managers and staff.1 In light of increasing and multifaceted corporate governance issues, South Africa has made great strides, particularly in company law.2 Nevertheless, an ambiguity which lingers on in the
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