Corporate Veil and Liability in Law

This assignment delves into the legal concept of corporate liability, examining how a corporation is treated as a separate legal entity. It discusses the 'directing mind and will' test used to determine liability for the acts of agents, referencing key cases like Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd and HL Bolton (Engineering) Co Ltd v TJ Graham and Sons Ltd. The assignment further explores the doctrine of piercing the corporate veil, highlighting its limited application in exceptional circumstances where fraud or dishonesty is involved. It cites relevant case law, including AGC (Investments) Limited v Commissioner of Taxation (Cth) and Gorton v Federal Commissioner of Taxation.

Running Head: Law 1
Law

Law 2
Part A
Corporation Law introduce fundamental rule which states, company is considered as separate
legal entity. In other words, company is distinct natural person in the eyes of law which is
completely distinct from its members and directors. This legal entity has similar rights and duties
which any other natural person has. It must be noted that in actual company is legal entity and
not a natural person which means it is not possible for company to conduct its operations itself. It
is the corporation which employs peoples and authorized them to perform some particular acts.
Therefore, it becomes necessary to impose primary or equivalent liability on the corporation also
for the acts committed by its accused employees (Gurunnay, n.d.).
For this purpose, Court develops identification principle in case Lennard's Carrying Co Ltd v
Asiatic Petroleum Co Ltd [1915] AC 705. In this case, Viscount Haldane LC stated:
Company does not have its own mind, and its directing will was imposed in the person acting on
behalf of the company known as its agent, but in actual its real directing mind was the person
who was the center of the personality of the corporation.
Lord Denning sated in case H.L. Bolton Company v. T.J. Graham & Sons that, company can be
equated with the body of human. He further stated that, directors and mangers of the company
who can be considered as directing mind and will was the brain and nervous system of the
company.

Law 3
After considering above facts, it is clear that company is also liable for the acts of its agents if
such agents are the directing mind and will of the company.
Part B
Piercing the corporate veil is considered as legal decision, and in this Court determines the rights
and liabilities of the corporation as the rights and liabilities of its members. There is fundamental
rule that organization is separate legal entity which is distinct from its members and only
responsible for the debts incur by the company. Countries adopted common law usually follows
this principle but in exceptional cases lift the corporate veil to make the actual person liable.
Usually, in very rare and exceptional cases Court pierce the corporate veil. In case AGC
(Investments) Limited v Commissioner of Taxation (Cth), Hill J stated that situations in which
Court pierce the corporate veil are very circumscribed.
This doctrine was criticized as sacrifice elements for form. In case Gorton v Federal
Commissioner of Taxation, Windeyer stated that this doctrine result the law in unreality and
formalism. Usually it was argued that decision stated in case of Salomon that was principle of
separate legal entity was considered as fundamental problem because House of Lords fail to
provide the exact details about the situations in which Court must apply the principle of separate
legal entity, situations in which this principle of separate legal entity was not applied and also
those situations in which person refused to enforce the contract related to the corporate.
After considering above facts, it is clear those situations in which Court lift the corporate veil are
very rare and usually includes cases in which dishonest intension of person is involved.

Law 4
References:
Gurunay, P. The Directing Mind and Will Test in Corporate Criminal
Liability. International Journal of Legal Insight. Volume 1(3). Pp- 105-109.
Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705.
HL Bolton (Engineering) Co Ltd v TJ Graham and Sons Ltd: CA 1957.
AGC (Investments) Limited v Commissioner of Taxation (Cth) (Unreported, Federal Court, Hill
J, 22, February 1991).
Gorton v Federal Commissioner of Taxation (1965) 113 CLR 604 (Barwick CJ, Taylor and
Windeyer JJ).