Peeking around the corporate veil

Author: Simon Hough

The recent decision of the Technology and Construction Court in Palmer Birch (A Partnership) v Lloyd & Anor [2018] EWHC 2316 (TCC) (24 September 2018) will make for interesting reading both for those who seek to hide behind the corporate veil provided by a limited company and those who find themselves out of pocket as a result of that protection. 

The circumstances in which the protection offered by a limited company will be removed and the corporate veil lifted were considered by the Supreme Court a few years ago in Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34. In that case, the Supreme Court decided that the veil should only be lifted where a private individual had an existing liability that he or she sought to avoid by subsequently making use of a limited company. However, there is more than one way to fix a private individual with liability for the debts of his company, as the TCC has now clarified.

Facts

Mr Michael Lloyd had a variety of business interests, including the development of a stately home called Hillersdon House, which he hoped would become both his lavish personal residence and a business, offering a taste of a luxury countryside lifestyle to willing punters. He engaged a contractor, Palmer Birch, to carry out significant works at the property with a contract value in the millions of pounds. The parties to the contract were Palmer Birch and Hillersdon House Limited ("HHL"), a special purpose vehicle ("SPV") company incorporated solely for the purpose of the works. Mr Lloyd did not provide any form of personal guarantee.

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