ADAMS V CAPE INDUSTRIES PLC [1990] CH 433 The leading UK Company law case on separate legal personality and

limited liability of shareholders. The case also addressed long-standing issues under the English conflict of laws as to when a company would be resident in a

3. when it can be established that the subsidiary company was acting

as an authorized agent of its parent. The court cannot lift the corporate veil merely because it considers that justice requires it. Nor can it have regard to the economic reality, and regard a group of companies as a single entity. The court held that one of Cape's subsidiaries (a special purpose vehicle incorporated in Liechtenstein) was in fact a faade, but on the facts this was not a material subsidiary such as to attribute liability to Cape. The court separately had to consider whether Cape had established a presence within the United States such that the English court should recognise the jurisdiction of the United States over Cape, and enforce a U.S. judgment against it (one of the criticisms made of the decision by U.S. lawyers is that the Court of Appeal fundamentally misunderstood the nature of the Federal system in the U.S.A., but that misunderstanding does not affect the general principles laid down by the court). The Court of Appeal held that in order for a company to have a presence in the foreign jurisdiction, it must be established that: 1. the company had its own fixed place of business (a branch office) in the jurisdiction from which it has carried on its own business for more than a minimal time; and 2. the company's business is transacted from that fixed place of business. On the facts the Court of Appeal held that Cape had no fixed place of business in the United States such that recognition should not be given to the U.S. judgment awarded against it.

foreign jurisdiction such that the English courts would recognise the foreign court's jurisdiction over the company.
FACTS Cape Industries plc was a UK company, head of a group. Its subsidiaries mined asbestos in South Africa. They shipped it to Texas, where a marketing subsidiary, NAAC, supplied the asbestos to another company in Texas. The employees of that Texas Company, NAAC, became ill, with asbestosis. They sued Cape and its subsidiaries in a New York Court. Cape was joined, who argued there was no jurisdiction to hear the case. Judgment was still entered against Cape for breach of a duty of care in negligence to the employees. The tort victims tried to enforce the judgment in the UK courts. The requirement, under conflict of laws rules, was either that Cape had consented to be subject to New York jurisdiction (which was clearly not the case) or that it was present in the US. So the question was whether, through the Texas subsidiary, NAAC, Cape Industries plc was present. For that purpose the claimants had to show in the UK Court of Appeal that the veil of incorporation could be lifted and the two companies be treated as one. JUDGMENT The court accepted that the purpose of the corporate group structure set up by Cape Industries had been used specifically to ensure that the legal liability of a particular subsidiary would fall only upon itself and not the parent company in England. The court held that: "Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law. ... in our judgments Cape was in law entitled to organise the group's affairs in that manner ..." Subsequent to the decision (which has been followed), English law on this subject is accepted to be that the court may only pierce the corporate veil in the following circumstances: 1. when the court is construing a statute, contract or other document; 2. when the court is satisfied that the company is a "mere faade" concealing the true facts; or