[2021] CCJ 10 (AJ) BB IN THE CARIBBEAN COURT OF JUSTICE ...
Transcript of [2021] CCJ 10 (AJ) BB IN THE CARIBBEAN COURT OF JUSTICE ...
[2021] CCJ 10 (AJ) BB
IN THE CARIBBEAN COURT OF JUSTICE
Appellate Jurisdiction
ON APPEAL FROM THE COURT OF APPEAL OF BARBADOS
CCJ Appeal No. BBCR2020/004
BB Criminal Appeal No. 3 of 2018
BETWEEN
GRENVILLE RICARDO DELPEACHE APPELLANT
AND
COMMISSIONER OF POLICE RESPONDENT
Before the Honourable: Mr Justice J Wit, JCCJ
Mr Justice W Anderson, JCCJ
Mme Justice M Rajnauth Lee, JCCJ
Mr Justice D Barrow, JCCJ
Mr Justice A Burgess, JCCJ
Appearances
Mr Andrew Pilgrim QC and Ms Rashida R Edwards for the Appellant
Ms Olivia M Davis and Ms Krystal C Delaney for the Respondent
Criminal law – Intellectual Property - Trade mark – Unauthorised trade mark - Trade
Marks Act Cap 319, s 50A(1)(a)(b)(c).
Lifting corporate veil – Corporate personality – Appellant director of company –
Appellant personally committed criminal acts – Whether appellant or company to be
charged – Whether direction of the Director of Public Prosecutions needed to charge
appellant – Whether court required to pierce companies' corporate veil – Interpretation
Act Cap 1 – ss 22(2)(3) – Trade Marks Act Cap 319, s 50E(1).
The appellant was the sole director of Ouch Boutique Ltd (“the company”) in whose
store counterfeit items were sold. The appellant operated the store and was on the
premises when the counterfeit items were seized by the police. The appellant was
charged with three offences under s 50A(1)(a)(b) and (c) of the Trade Marks Act (“the
Act”). At the trial in the Magistrates Court, the appellant was found guilty and appealed
to the Court of Appeal which dismissed his appeal and affirmed his conviction and
sentence.
The appellant appealed to the CCJ and argued firstly that the Court of Appeal’s decision
was wrong as the charges which were brought against him personally should have been
brought against the company. The appellant argued that while, in certain cases, the
courts have “pierced” the corporate veil and looked behind it to see who controls the
company and, in certain circumstances, held those persons liable and not the company,
this was not a proper case to have done so. The core of the appellant’s case was that the
separate legal personality of the company protected him, the individual, from personal
criminal liability. The appellant did not appeal the Court of Appeal’s finding that he
personally performed the physical actions and possessed, at the time, the mental state
required to establish the offences. The appellant argued secondly that as he was a
director, he should have been charged for being complicit in a crime that was allegedly
committed by the company under s 22(2) of the Interpretation Act, and that the
Commissioner of Police should have obtained the direction of the Director of Public
Prosecutions before charging him pursuant to s 22(3) of the Interpretation Act. The
respondent argued that the Court of Appeal’s decision was correct and that s 50E(1) of
the Act provides that an individual may be charged for offences under s 50A(1)(a)(b)
and (c). The respondent further argued that s 50E(1) and s 22(2) and (3) of the
Interpretation Act were inapplicable as the appellant was guilty of having personally
contravened the Act regardless of whether he was liable in his capacity as a director.
The Court, in a judgment authored by Barrow JCCJ, was of the view that in respect of
the first issue the appellant was purporting to insert into the criminal law a construct
that is quintessentially a company law conception. That company law conception was
the legal separation of individuals from the company they formed. The purpose of the
legal separation was to insulate or separate the individuals from what they did, acting
through the company. The essence of that construct was that what was done was the
action of the company and not the individuals. The company law conception of separate
legal personality never operated to permit an individual who did a criminal act to say
that their actions were done in the name of the company and, therefore, it was the
company which must be prosecuted, and not the individual. There is no support either
in principle or in authority for the appellant’s thesis that there is a corporate veil in
criminal law. Where an individual, acting for and through a company, personally
performs criminal acts in conducting the company’s business, that individual may be
prosecuted. The individual gains no protection from the existence of the separate legal
personality of the company. There is no principle that a criminal offence, committed in
the name of a company, is the action of the company and not of the individual who
performed the criminal actions.
Turning to the second issue, the Court was of the view that there was no substance to
the ground that the appellant should have been charged for being complicit in a crime
that was allegedly committed by the company and that the Commissioner of Police
should have obtained the direction of the Director of Public Prosecutions before
charging him pursuant to s 22(3) of the Interpretation Act. That the appellant could have
been so charged, (under s 22(2) of the Interpretation Act), absolutely does not give rise
to the proposition that he should have been so charged.
In a concurring judgment Wit and Rajnauth-Lee JJCCJ were of the view that the judicial
“piercing of the corporate veil” doctrine has no place in criminal law proper, in any
event where statute law has been adopted to remove any uncertainty or fill any gaps by
providing specifically for criminal responsibility of certain corporate officers who
might be successful in hiding behind the corporate façade without such a statutory basis.
If criminal liability of the individual person can be attributed to the company, both the
individual person and the company may be liable. Both can be prosecuted but the
prosecutor may also choose to prosecute one of them. In this case the individual person,
who, according to the Magistrate and the Court of Appeal, personally committed the
actus reus, was prosecuted. The prosecutor simply decided that it was not necessary to
go further than that. There was nothing wrong with that decision.
Wit and Rajnauth-Lee JJCCJ also agreed with Barrow JCCJ that s 22(2) of the
Interpretation Act did not apply in this case. First, s 22(2) renders a corporate officer of
a certain category who had not personally committed an offence committed by that body
corporate nevertheless liable to prosecution as if he had personally committed that
offence. In this case, the appellant was prosecuted for offences he personally did commit
and of which he was personally found guilty. This alone excluded the application of s
22(2). Second, if the reasoning of the appellant were followed properly, s 50E of the
Act and not s 22(2) should be applied. The former provision identifies practically the
same corporate officers under similar circumstances as mentioned in s 22(2) as
personally guilty of the offence committed by the body corporate. Where s 50E squarely
provides that such an officer is guilty of the offence, no “as if” situation as contemplated
by s 22 occurs. Third, ss 22(2) and 50E do not cover the same ground at least not in the same
way, but even if they were to conclude that they did, the legal maxim generalia specialibus
non derogant, or better even, its converse generalibus specialia derogant would seem to
apply. The special later law overrides the older general law. That would be the case here.
The appeal was therefore dismissed.
Burgess JCCJ in a dissenting judgment, was of the view that the Court of Appeal was
incorrect in holding that the appellant was properly charged and convicted of
committing the charged offences in his personal capacity on the basis that he acted as
an agent of the company. The company after incorporation was in law a separate legal
person from the appellant, its incorporator and sole director. The company had “the
capacity, rights, powers and privileges of an individual”. Consequently, the company
was fully capable of operating a business; of ownership of goods; of “exposing for sale”
such goods; of having “in its possession, custody or control in the course of business”
such goods; and of “selling” such goods. The company in law criminally committed the
offences. As a general principle, a director or other similar corporate officer may be
held liable for a statutory offence where their company may also be held to have
committed that offence. However, this general principle must be read subject to s 50E(1)
of the Act and s 22 of the Interpretation Act.
Burgess JCCJ was of the view that s 50E(1) of the Act which allows for the prosecution
of directors where an offence is committed with the consent or connivance of the
director, is triggered where a company has committed an offence under the Act. Section
50E(1) applies as long as there is evidence that the company committed the offence.
Under s 50E(1), the company is liable for the commission of the offence as a principal
and the director or other corporate officer is liable to be proceeded against and punished
as an accessory or secondary party. In this way, s 50E(1) modifies the general principle
of the culpability of corporate officers for trademark offences committed by a company.
Section 50E(1) must therefore be seen as reforming the general principle and not as
merely repeating that principle.
Section 50E(1) is a veil piercing provision and must be strictly adhered to. According
to the subsection, the consent or connivance or neglect of the director or other corporate
officer in the offence committed by the company must be alleged and proved. In this
case, these things were neither alleged nor proved. Consequently, the appellant should
not have been prosecuted as a principal offender and held guilty of the offences charged
and therefore should not have been punished for them.
In analysing s 22(2) of the Interpretation Act, Burgess JCCJ was of the view that it was
undeniably a veil piercing provision as it allows (i) for the prosecution of the specified
corporate officer as a principal for an offence committed by a company and (ii) for
his/her conviction for the commission of such an offence as a principal provided
consent, connivance or neglect is proved during such prosecution. Section 22(2) opens
the veil of incorporation much wider than s 50E(1). However, respect for the Salomon
principle is maintained in the Interpretation Act by the proviso to s 22(2) in s 22(3)
which stipulates to the effect that a specified corporate officer “shall not be charged
under subsection (2) except upon the direction of the Director of Public Prosecutions”.
The s 22(3) proviso is of signal importance in the jurisprudence of separate legal
personality and corporate criminal liability. By stipulating that a corporate officer “shall
not be charged” for statutory offences committed by a company except upon the
direction of the Director of Public Prosecutions, Parliament has evinced an
unmistakable intention that corporate officers are not to be lightly charged for offences
committed by their companies. Section 22(2) permits the corporate veil to be lifted and
certain corporate officers to be prosecuted for offences committed by their companies
but, by s 22(3), such prosecution can only be pursued on the direction of the Director
of Public Prosecutions. Section 22(2) and (3) of the Interpretation Act, the general
provision, was enacted long before s 50E(1) of Cap 319, the specific provision.
Accordingly, the maxim generalia specialibus non derogant does not assist the
respondent’s argument that the general rule in s 22(2) and (3) of the Interpretation Act
has no application in this case.
There was no evidence in this case that the Director of Public Prosecutions gave any
directions that the appellant be charged. The absence of such evidence rendered the
prosecution of the appellant before the magistrate a nullity. The appellant was not
properly charged and therefore prosecuted and convicted for the charged offences. For
these reasons Justice Burgess, in whose opinion Justice Anderson joined, would have
allowed the appeal.
Cases referred to
Adams v Cape Industries plc [1990] Ch 433; ANSA McAL (Barbados) Ltd v Banks
Holding Ltd and SLU Beverages Ltd (Barbados CA, 11 December 2015); Bay Trust
Corporate Services Ltd v Longsworth [2020] CCJ 8 (AJ) BZ; Canadian Dredge and
Dock Co Ltd v The Queen [1985] 1 SCR 662; Delpeache v Commissioner of Police
(Barbados CA, 18 September 2020); Effort Shipping Co Ltd v Linden Management SA,
The Giannis NK [1998] 1 All ER 495; JH Rayner (Mincing Lane) Ltd v Department of
Trade and Industry [1990] 2 AC 22; Jones v Lipman [1962] 1 WLR 832; Macaura v
Northern Assurance Co [1925] AC 619; Moore v Bresler Ltd [1944] 2 All ER 515;
Persad v Singh [2017] UKPC 32 (TT); Prest v Petrodel Resources Ltd [2013] UKSC
34, (2013) 3 WLR 1; R v Angel [1968] 2 All ER 607; R v Boyle Transport (Northern
Ireland) Ltd [2016] 4 WLR 63; R v Fell (1981) 64 CCC (2d) 456; R v Johnstone [2003]
UKHL 28, [2003] 1 WLR 1736; R v Pearce (1981) 72 Cr App R 295; R v Powell and
Westwood [2016] EWCA Crim 1043; R v Seager & Blatch [2010] 1 Cr App R (S) 60;
R v Shamrock Chemicals Ltd (1989) 4 CELR (NS) 215; R v Zaman [2002] EWCA
Crim 1862; Salomon v Salomon & Co Ltd [1897] AC 22; Seward v The Vera Cruz
(Owners) (1884) 10 App Cas 59; Short v Treasury Commissioners [1948] AC 534;
Tesco Stores Ltd v Brent Borough Council [1993] 2 All ER 178; Tesco Supermarkets
Ltd v Nattrass [1972] AC 153.
Legislation referred to
Barbados - Interpretation Act, Rev Ed 1971, Cap 1, Companies Act, Rev Ed 1971, Cap
308, Trade Marks Act, Rev Ed 1971, Cap 319; United Kingdom - Trade Marks Act
1994, Video Recordings Act 1984.
Other Sources referred to
Allen M, Textbook on Criminal Law (8th edn, OUP 2005); Bailey D and Norbury L,
Bennion, Bailey and Norbury on Statutory Interpretation (8th edn, Lexis Nexis 2020);
Burgess A, Commonwealth Caribbean Company Law (Routledge 2013); Gillies P, The
Law of Criminal Complicity (Law Book Co 1980); Halsbury Laws of England (5th edn,
2018) vol 96; Ormerod D C and Perry D, Blackstone Criminal Practice 2021 (31st edn,
OUP 2020); Smith J C, Ormerod D C and Laird K, Smith, Hogan and Ormerod’s
Criminal Law (15th edn, OUP 2018); Williams G, Textbook of Criminal Law (Stevens
1978).
JUDGMENT
of
The Honourable Justices Wit, Rajnauth-Lee and Barrow
Delivered by
The Honourable Mr Justice Barrow
and
CONCURRING JUDGMENT
of
The Honourable Justices Wit and Rajnauth-Lee
and
DISSENTING JUDGMENT
of
The Honourable Justices Anderson and Burgess
Delivered by
The Honourable Mr Justice Burgess
on the 30th day of July 2021
JUDGMENT OF THE HONOURABLE MR JUSTICE BARROW:
[1] This appeal by Mr Grenville Ricardo Delpeache against his conviction for
offences under the Trade Marks Act1 (the Act) is brought on two grounds of pure
law, involving the separate legal personality of the company in whose store
counterfeit items were sold. In short, the appellant contends that the charges
should have been brought against the company, Ouch Boutique Limited, which is
a separate legal entity from him. He argues that to have charged him personally
was not right nor necessary and undermines fundamental company law.
1 Cap 319, Laws of Barbados.
The Facts
[2] There is no dispute as to the facts and they are easily summarised. On 13 May
2017 a customer purchased what she thought was a pair of ‘Puma’ brand slippers
from Ouch Boutique. The customer later suspected the slippers were fake and
made a police report.2 A warrant was executed at Ouch Boutique and the police
seized seventeen pairs of slippers, seven single shoes and thirty-one haversacks
which they believed to be fake Puma products.3 On 24 November 2017
Delpeache, who was the sole director of the company and operated the store, was
charged with three offences under ss 50A(1)(a)(b) and (c) of the Act. At the trial
in the Magistrates Court, Delpeache relied on defences that the company, Ouch
Boutique ought to have been charged instead of him and that he acted with a
reasonable belief that the products were genuine.4 On 20 February 2018,
Delpeache was found guilty of the three offences and sentenced to fines in the
sum of $15,000.00.5
[3] The three offences charged were two counts under s 50A(1)(b) and one count
under s 50A(1)(c) of the Act. In material parts s 50A(1) provides:
A person commits an offence who, with a view to gain for himself or
another, or with intent to cause loss to another, and without the consent of
the registered owner of a trade mark,
(a) applies to goods or their packaging a sign identical to, or likely to be
mistaken for, a registered trade mark;
(b) sells or lets for hire, offers or exposes for sale or hire, or distributes
goods which bear, or the packaging of which bears a sign referred to
in paragraph (a); or
(c) has in his possession, custody or control in the course of a business
any goods referred to in paragraph (a) with a view to the doing of
anything by himself or another, which would be an offence under
paragraph (b).
2 Delpeache v Commissioner of Police (Barbados CA, 18 September 2020) [2]-[4]. 3 ibid [7]. 4 Delpeache (n 2) [20]. 5 ibid [1] and [20].
[4] In upholding the convictions in the Court of Appeal, Belle JA delivering the
judgment observed that Delpeache “actually committed the actus reus and had
the mens rea of the offences charged”6 and “there was no need to pierce the
corporate veil7 in a case such as the appellant’s”.8 Belle JA found that Delpeache
was convicted because he “was acting as an agent of the company when he
purchased the goods, delivered them to Ouch Boutique, displayed them in the
store for sale and actually sold a pair of the counterfeit shoes”, which was
sufficient in the view of the Court of Appeal to justify his prosecution.9 These
observations were consistent with the admissions made by Delpeache before the
magistrate, as identified in the court’s judgment.10
The Foundation of the Appeal
[5] The entire foundation of the appellant’s case is the distinction the law draws
between a company and the persons who ‘own’ the company. This principle was
enshrined into company law by the English House of Lords in Salomon v Salomon
& Co Ltd11 and, as counsel submitted, is the bedrock of company law. This
separation of the legal personalities of the company and the persons who are its
shareholders is referred to as the “veil of incorporation”. The principle received
recent homage from the United Kingdom Supreme Court in Prest v Petrodel
Resources Ltd12, when Lord Sumption stated:
“Subject to very limited exceptions, most of which are statutory, a company
is a legal entity distinct from its shareholders. It has rights and liabilities of
its own which are distinct from those of its shareholders. Its property is its
own, and not that of its shareholders. In Salomon v A Salomon and Co Ltd
[1897] AC 22, the House of Lords held that these principles applied as much
to a company that was wholly owned and controlled by one man as to any
other company. In Macaura v Northern Assurance Co Ltd [1925] AC 619,
the House of Lords held that the sole owner and controller of a company
did not even have an insurable interest in property of the company, although
economically he was liable to suffer by its destruction. Lord Buckmaster
said, at pp 626–627:
6 ibid [100] - [101]. 7 For the meaning of this expression, see [5]. 8 Delpeache (n 2) [103]. 9 Delpeache (n 2) [103]. 10 ibid [7]. 11 [1897] AC 22. 12 [2013] UKSC 34, (2013) 3 WLR 1.
“no shareholder has any right to any item of property owned by the
company, for he has no legal or equitable interest therein. He is
entitled to a share in the profits while the company continues to carry
on business and a share in the distribution of the surplus assets when
the company is wound up.”
…
The separate personality and property of a company is sometimes described
as a fiction, and in a sense it is. But the fiction is the whole foundation of
English company and insolvency law.
[6] Section 17(1) of the Companies Act13 puts on legislative footing the Salomon v
Salomon principle that “A company has the capacity, and, subject to this Act, the
rights, powers and privileges of an individual.” The argument for the appellant is
that while, in certain cases, the courts have “pierced” or “lifted” the corporate veil
and looked behind it to see who controls the company and, in certain
circumstances, held those persons liable and not the company, this was not a
proper case to have done so.
The Individual and not the Company
[7] The Court of Appeal gave full reasons why it was permissible to prosecute the
appellant and not the company instead. Belle JA was clear that there had been no
need in this case to lift the corporate veil. He stated:
[100] … The answer is that Delpeache was acting as an agent of the
Company and committing the charged offences himself. There was
therefore no need under the statutory provisions of Cap. 319 to find
evidence of benefit, either by Delpeache or Ouch Boutique. There was
no need to determine whether the property belonged to Ouch
Boutique. The prosecution followed the evidence, some of which was
given by the appellant himself, to the effect that he travelled to New
York to obtain the offending goods, to place in his store. He mounted
the goods for sale and was responsible for the sale of the goods in the
store Ouch Boutique.
[101] It is not because he is a director of a one-man company that this
matters. Rather it is because he actually committed the actus reus and
the mens rea of the offences charged. There was therefore no need for
the prosecution to prove concealment, evasion, shelter or the
existence of a cloak or sham and lift the corporate veil.
13 Cap 308, Laws of Barbados.
[102] … it is very easy to presume that the acts of a company and the
property of a company, are automatically the acts and property of a
director or principal officer or the controlling mind of the company.
[103] In our view though, jurisprudence emerging from the authorities on
“piercing the corporate veil” establishes that there is no need to pierce
the corporate veil in a case such as the appellant’s. Even though we
do not agree with counsel for the Crown that the appellant should have
been prosecuted because the company Ouch Boutique was a small
company and the appellant was the directing mind, we do hold that
the appellant was clearly acting as an agent of the company when he
purchased the good, delivered them to Ouch Boutique, displayed
them in the store for sale, and actually sold a pair of the counterfeit
shoes. This was sufficient in our view to justify his prosecution.
When to Pierce the Corporate Veil
[8] The statement by Belle JA, in [101] quoted above, that there was no need for the
prosecution to prove concealment, evasion, shelter or the existence of a cloak or
sham and lift the corporate veil, was his response to the submission of counsel for
the appellant as to the limited circumstances in which a court should expose an
individual to liability, rather than a company. The appellant renews before this
Court his contention that it is only in a case of concealment or evasion, which was
not the situation in this case, that a court should allow a claim or prosecution
against an individual. The relevant ground of appeal is that ‘The Justices of
Appeal erred when they found that the Appellant was acting as an agent for Ouch
Boutique and there was no need to pierce the corporate veil in order to charge the
Appellant.’
[9] The concealment and evasion principles were discussed by Lord Sumption in
Prest v Petrodel Resources Ltd14 beginning with the observation:
[16] I should first of all draw attention to the limited sense in which this
issue arises at all. “Piercing the corporate veil” is an expression rather
indiscriminately used to describe a number of different things.
Properly speaking, it means disregarding the separate personality of
the company. There is a range of situations in which the law attributes
the acts or property of a company to those who control it, without
disregarding its separate legal personality. The controller may be
personally liable, generally in addition to the company, for something
that he has done as its agent or as a joint actor….
14 See (n 12).
[10] Counsel relied on the judgment of Lord Sumption15 to summarise the two
principles under which, alone, as he submitted, the corporate veil could be
pierced. He identified the evasion principle, which was applicable to the situation
when an individual is under an existing obligation that they seek to avoid by
interposing a company under their control to shield them from a claim or
enforcement of a claim, which pre-dated the involvement of the company.
Counsel cited Jones v Lipman16 as demonstrating the situation in which an
individual, seeking to avoid an order for specific performance, sold the property
at stake to a company he had bought, intending to put it beyond the reach of the
claimant. Where there was such an attempt at evasion, the corporate veil could be
pierced, and the remedy could be ordered against the individual as well as the
company. This, counsel submitted, was not the situation in Mr Delpeache’s case.
[11] Counsel identified as the second of the two principles, the concealment principle
which referred to the situation where corporate personality is simply being used
to hide the true position. In certain circumstances, involving impropriety and
dishonesty and not simply because it may be thought just, a court may look at the
true relationship between a company and an individual and decide on the
substance and not just the form of the relationship. In a case ‘where an offender
does acts in the name of a company which (with the necessary mens rea)
constitute a criminal offence which leads to the offender’s conviction, then “the
veil of incorporation is not so much pierced as rudely torn away” …’, as was
stated in R v Seager & Blatch.17 Against this legal back drop, counsel submitted
there was no evidence the appellant used Ouch Boutique to evade a pre-existing
liability or to conceal the true facts using the company as his agent or nominee. It
followed, counsel submitted, that since Delpeache was not concealing what he
was doing, by doing it in the name of the company, there was no legal basis for
disregarding the separate, corporate personality of Ouch Boutique and piercing
the corporate veil.
No Need to Pierce
[12] The core of the appellant’s case is his insistence that the separate legal personality
15 ibid [28]. 16 [1962] 1 WLR 832. 17 [2010] 1 Cr App R (S) 60.
of the company protected him, the individual, from personal criminal liability.
His case was that it was only if the court pierced the veil of incorporation that he,
the individual, as distinct from the company, could be liable. In my view, that
thesis rests on an existential misconception that is the singular creation of the
appellant.
[13] The appellant purports to insert into the criminal law a construct that is
quintessentially a company law conception. That company law conception was
the legal separation of individuals from the company they formed. The purpose
of the legal separation was to insulate or separate the individuals from what they
did, acting through the company. The essence of that construct was that what was
done was the action of the company and not the individuals. In the words of Lord
Sumption in Prest18 this was a fiction, that became established by law. But the
fiction was never intended, and it never operated, to permit an individual who did
a criminal act to say that their actions were done in the name of the company and,
therefore, it is the company with its separate legal personality which must be
prosecuted, and not me.
[14] A review of the cases cited by the appellant reveals there is no support either in
principle or in authority for the appellant’s thesis that there is a corporate veil in
criminal law. All the cases on which the appellant relied concerned attempts to
get at assets held by a relevant company by piercing the corporate veil and treating
its assets as those of the individual, and not accepting that they were the separate
assets of the company. The obverse holds true: in none of the cases that counsel
cited was there an issue that it was the company, and not the individual, that was
liable to prosecution for criminal conduct. In no case was there an issue of needing
to pierce the corporate veil to make the individual rather than the company liable
for the crime the individual committed. There was no need. There was no veil to
pierce in any criminal law case.
[15] The following brief statements of what each case cited by counsel was about
confirm that none of them suggests the existence of any principle that the separate
legal personality or corporate veil operates in criminal law to protect against
18 ibid (n 12) [8].
personal liability for crime. Salomon v Salomon & Co Ltd was an insolvency case
concerning whether the personal assets of a trader who had sold his business to a
company that he formed, and which became insolvent, could be accessed to
satisfy the debts of the company. Prest19 was a family law case in which a
divorced wife went after properties held by various companies by asserting that
the properties belonged to the husband and that the corporate veil should be
pierced. Jones v Lipman was a contract case concerning whether the court could
make an order for specific performance where the defendant had sold the subject
property to a company to put it beyond the reach of the court’s order. Boyle
involved recovering assets owned by a company by lifting the corporate veil to
treat the assets as belonging to two convicted directors. Seager & Blatch
concerned piercing the corporate veil in confiscation proceedings where the
company was a legitimate business and the directors acted as directors despite
being disqualified. R v Powell and Westwood20 also involved the question of
piercing the corporate veil in the context of criminal confiscation proceedings.
No Veil to Pierce in Criminal Cases
[16] A notable feature in R v Boyle Transport (Northern Ireland) Ltd21 was that the
two convicted directors did all the criminal acts over some years as part of the
operation of the company’s legitimate business. The greater income that was
earned from their criminal conduct went directly to the company and not to them.
Despite that fact, the two individuals were charged and not the company.22
Interestingly, the court observed that ‘it seems not to be the usual practice for the
prosecution to charge the company involved …’23 (Emphasis added).
[17] Boyle, therefore, demonstrates that where an individual, acting for and through a
company, personally performs criminal acts in conducting the company’s
business, that individual may be prosecuted. The individual gains no protection
from the existence of the separate legal personality of the company. There is no
need to elevate this proposition that emerges in Boyle to the level of principle: it
19 ibid (n 12). 20 [2016] EWCA Crim 1043. 21 [2016] 4 WLR 63. 22 ibid [120]. 23 ibid.
was simply the fact of that case. And, as gathered from the statement of the Court
of Appeal, it is what usually is done.
[18] No doubt, it is what is usually done because it works. And it works because the
veil that exists in company law cases is “rudely torn away” in criminal cases, as
it was expressed in Seager & Blatch. More accurately, perhaps, the criminal law
does not recognise the existence of the veil in criminal law. Or the criminal law
simply regards it as inapplicable or inoperable.
[19] It is clear that the appellant did the acts and the fact that he did them as agent for
the company simply confirms that he did them. The appellant never appealed the
finding that he personally performed the physical action and possessed, at the
time, the mental state required to establish the offences. Therefore, he has no basis
to complain – and his submissions contained more than a trace of complaint of
unfairness – that basic company law principle was undermined by the prosecution
charging him and not the company. The principle of separate legal personality he
invokes applies to company law and not to criminal law. There is no principle that
a criminal offence, committed in the name of a company, is the action of the
company and not of the individual who performed the criminal actions. In the
result, I would dismiss the ground of appeal relating to piercing the corporate veil.
Section 22 - Interpretation Act24
[20] The other ground of appeal is that ‘The Justices of Appeal erred when they found
s 22 of the Interpretation Act … was not applicable to the Appellant’s case.’ I
would also summarily dismiss this other ground of appeal because, even if it could
succeed, and it certainly cannot, it would make no difference to the decision of
the Court of Appeal upholding the convictions. The convictions would still stand.
[21] Section 22 provides:
(1) …
(2) Where an offence under any enactment ... has been committed by a
body corporate the liability of whose members is limited, then
notwithstanding and without prejudice to the liability of that body,
any person who at the time of such commission was a director, general
manager, secretary or other like officer of that body or was purporting
24 Cap 1, Laws of Barbados.
to act in any such capacity shall, subject to subsection (3), be liable to
be prosecuted as if he had personally committed that offence and
shall, if on such prosecution it is proved to the satisfaction of the court
that he consented to, or connived at, or did not exercise all such
reasonable diligence as he ought in the circumstances to have
exercised to have prevented the offence, having regard to the nature
of his function in that capacity and to all the circumstances, be liable
to the like conviction and punishment as if he had personally been
guilty of that offence.
(3) A person shall not be charged under subsection (2) except upon the
direction of the Director of Public Prosecutions.
[22] The appellant’s argument is that he should have been charged for being complicit
in a crime that was allegedly committed by the company, which s 22(2) enables.
On such a charge, he argued, s 22(3) states the mandatory precondition that “a
person shall not be charged under subsection (2) except upon the direction of the
Director of Public Prosecutions.” Therefore, the appellant contended, it would
have required the decision of the DPP to charge him. He could not have been
prosecuted upon the decision of the Commissioner of Police, as actually happened
in this case.
[23] It is an invidious submission. Implicit in the submission is that if it had been left
to the DPP, he would not have been personally prosecuted. The imputation seems
to be that the DPP would have been more advertent to the sanctity of separate
corporate personality and the deference due to the principle. Therefore, the DPP
would have known better than to charge him. So reduced to its essence, the
submission is utterly fanciful and calls for no profound discussion. It flies in the
face of the reality that the appellant was properly convicted for personally
committing the trademark offences. It is irrelevant whether he could have been
charged for complicity and not directly as the perpetrator. That he could have
been so charged, absolutely does not give rise to the proposition that he should
have been so charged.
[24] It was basic good sense to charge the appellant, as was done, for having personally
committed the offences. The last clause in s 22(2) renders an officer who was
complicit in an offence committed by a company liable ‘to the like conviction and
punishment as if he had personally been guilty of that offence.’ In this case the
appellant, as the Magistrate’s decision established, was personally guilty of the
offence. It would have been a mystery, at its kindest, why a prosecutor would
have charged the appellant as if he had been personally guilty, when he could
simply have been charged for being personally guilty.
[25] The appellant’s creativity in advancing this ground prompts the final observation.
Counsel aptly abstained from asserting any consequence as flowing from the
Court of Appeal’s decision that s 22 of the Interpretation Act was not applicable.
Creativity did not extend to submitting that because the appellant should have
been charged (which has been rejected) in reliance on s 22, the failure to do so
vitiated or in any way affected the validity of the convictions. In the end, there
was never any substance to this ground.
[26] Accordingly, I would dismiss the appeal.
CONCURRING JUDGMENT OF THE HONOURABLE MR JUSTICE WIT
AND MME JUSTICE RAJNAUTH-LEE:
[27] We agree grosso modo with the reasoning of Justice Barrow’s judgment and we
entirely agree with the conclusion he has reached. We believe that the judicial
“piercing of the corporate veil” doctrine as such has no place in criminal law
proper, in any event where statute law has been adopted to remove any uncertainty
or fill any gaps by providing specifically for criminal responsibility of certain
corporate officers who might be successful in hiding behind the corporate façade
without such a statutory basis. The doctrine may be useful, though, in criminal
confiscation proceedings. Clearly, the doctrine has been developed and is
necessary in the context of corporate civil liability which, in contradistinction to
corporate criminal liability, is still rather uncontroversial.
[28] Corporate civil liability and corporate criminal liability cannot be and surely have
never been dealt with in the same way. The philosophy and history of those
liabilities differ substantially. The corporation as a separate person with limited
liability was created to encourage investment and facilitate economic growth by
ensuring its shareholders a minimum of risk in the endeavours of their enterprise.
The concept was clearly not created and was never meant to encourage or
facilitate crime.
[29] In criminal law, personal or individual liability is the norm and usually the starting
point of attributing liability to a company. Corporate criminal liability requires in
most cases a construction of the acts and intentions of individual actors within the
corporation. English law, which is followed in Barbados, tends to be rather
hesitant to attribute criminal liabilities to the corporation as a whole. The English
courts have taken a restraint and relatively simple approach to imposing criminal
liability on corporations. Usually, the focus is on the actions of a person who is
considered to be a vital organ of the company and virtually its directing mind and
will, and who is acting in the sphere of duty assigned to that person (the
identification principle as developed in Tesco Supermarkets Ltd v Nattrass25).
This approach works relatively well in the case of small companies, but it may
create problems especially in cases where the corporation is large, its
organisational structure is complex and where the offences require a substantive
mental element, mens rea. For strict liability offences, however, it mostly suffices
that the acting person was an ordinary agent of the corporation acting in the sphere
of his or her duties.
[30] If criminal liability of the individual person can be thus attributed to the company,
both the individual person and the company may be liable. Both can be prosecuted
but the prosecutor may also choose to prosecute one of them. In this case the
individual person, who, according to the Magistrate and the Court of Appeal,
personally committed the actus reus, was prosecuted. The prosecutor simply
decided that it was not necessary to go further than that. There is in our view
nothing wrong with that decision.
[31] Although we uphold the outcome of the case as decided by the Court of Appeal,
we cannot endorse all their findings.
[32] Delpeache is individually liable not because, as the Court of Appeal stated, he
“was acting as an agent of the Company”. That determination is only necessary
25 [1972] AC 153.
in cases where the company is to be held vicariously or otherwise liable for the
acts of an individual connected to the company. Delpeache is criminally liable as
a person simply because he personally acted in violation of s 50A of the Act. As
would follow from the lower courts’ findings (which were not appealed to us):
the appellant himself exposed for sale and had in his possession, custody or
control the counterfeit goods, and he sold some of them, all “with a view to gain
for himself or another [the company] and without the consent of the registered
owner of the Puma trademark.” Whether or not he was an agent of the company
is of no relevance in this context. What was relevant, though, was that he acted
“in the course of a business.”
[33] The Court of Appeal not only stated that Delpeache “actually committed” the
actus reus but also that he had the mens rea of the offences charged. The latter
part of that statement is in our view incorrect because these offences do not require
mens rea as this is usually understood. The element “with a view to gain for
himself or another” does in any event not include an element of mens rea (R v
Zaman26). These offences are in fact strict liability offences, albeit with a
“hardship” or “due diligence” clause: s 50A(5). See, for example, Lord Nicholls
of Birkenhead in R v Johnstone27, dealing with s 92 of the Trade Marks Act 1994
(which is quite similar to s 50A of the Barbados Act): “The offences created by s
92 have rightly been described as offences of ‘near absolute liability’.”
[34] As Burgess JCCJ states in [80] of his judgment: mens rea offences are the
traditional criminal offences for which an accused may be convicted only if the
requisite mens rea is demonstrated by the prosecution. As already indicated, in
the case of these trademark offences the prosecution does not have to prove or
demonstrate mens rea in any form. On the contrary, s 50(5), like s 92(5) of the
English Act, “should be interpreted as imposing on the accused person the burden
of proving the relevant facts on the balance of probability.” (R v
Johnstone28). The Court of Appeal was therefore clearly wrong when it stated in
[37] of its judgment that the prosecution would have to prove “that the appellant
26 [2002] EWCA Crim 1862. 27 [2003] UKHL 28, [2003] 1 WLR 1736. 28 ibid.
did not have reasonable grounds to believe that the use of the sign in this manner
was not an infringement of the registered trade mark”.
[35] We agree with Barrow JCCJ that s 22(2) of the Interpretation Act does not apply
in this case. It does not apply for several reasons.
[36] First, s 22(2) renders a corporate officer of a certain category who had not
personally committed an offence committed by that body corporate nevertheless
liable to prosecution as if he had personally committed that offence. It further
renders him, despite not having committed (and therefore without more not being
guilty of) that offence, under certain circumstances, still liable to conviction and
punishment as if he had personally been guilty of that offence. It is understandable
that the legal acrobatics required by this provision should not take place without
the direction of the Director of Public Prosecutions, as stipulated by s 22(3). In
this case, Delpeache was prosecuted for offences he personally did commit and
of which he is personally found guilty. This alone excludes the application of s
22(2).
[37] Second, if the reasoning of the appellant were followed properly, s 50E of the Act
and not s 22(2) should be applied. The former provision identifies practically the
same corporate officers under similar circumstances as mentioned in s 22(2) as
personally guilty of the offence committed by the body corporate. Where s 50E
squarely provides that such an officer is guilty of the offence, no “as if” situation
as contemplated by s 22 occurs.
[38] Third, ss 22(2) and 50E do not cover the same ground at least not in the same
way, but even if we were to conclude that they did, the legal maxim generalia
specialibus non derogant, or better even, its converse
generalibus specialia derogant would seem to apply.29 Although the application
of that maxim is most remarkable and impacting when the general provision is of
a later date than the special one (and the legal maxim therefore clashes with and
defeats another one (lex posterior derogat legi priori, ie the later law overrides
the older one), it does not mean that the maxim does not apply when, as is the
29 This maxim ''… is not a technical rule peculiar to English statutory interpretation. Rather it represents simple common sense
and ordinary usage.'' Lord Cooke of Thorndon in Effort Shipping Co Ltd v Linden Management SA, The Giannis NK [1998] 1 All
ER 495 at 513.
case here, the special provision (50E) is of a later date than the general one (s
22(2)). On the contrary, it is then that both legal maxims point in the same
direction: the special later law overrides the older general law. That would be the
case here.
[39] We note in passing that both s 50 E and s 22(2) provide that both the corporation
and the corporate officer will be equally considered guilty and equally liable.
Importantly, both provisions seek to expand corporate criminal liability or, put
another way, to facilitate getting to those individuals behind the corporate façade
who may be responsible or co-responsible for a criminal act but whose criminal
liability cannot be established by using the traditional concepts of perpetration or
complicity. Although the “consent or connivance” component covers most of the
complicity variants that are already known in criminal law, the “attributable to
any neglect” component clearly expands existing forms of complicity. See, for
example, Michael Allen30, who describes a similarly worded provision: “While
this largely duplicates the liability imposed by the criminal law on perpetrators or
accomplices, it does extend it and it may also make the task of the prosecution
easier where proving liability under the normal principles would be difficult.” See
further Smith and Hogan31, where the authors state: “As far as ‘consent’ and
‘connivance are concerned, these provisions probably effect only a slight
extension of the law; because the officer who expressly consents or connives in
the commission of the offence will be liable as a secondary party under the
principles considered under Ch 6. There may, however, be a case of consent which
does not amount to counseling or abetting; and the words ‘attributable to any
neglect on the part of’ clearly impose a wider liability in making the officer liable
for his negligence in failing to prevent the offence.”
[40] Therefore, as a matter of principle, corporate officers and their company may be
equally held liable for the same statutory offence. Justice Burgess has suggested
that this principle must be read subject to s 50E(1) of the Act, thereby narrowing
the scope of the culpability of corporate officers. We strongly disagree. As
demonstrated above, s 50E broadens that scope of culpability. It may, as
Blackstone put it, “have the effect of casting the net of individual responsibility
30 Textbook on Criminal Law (8th edn, OUP 2005)at 234. 31 J C Smith, D C Ormerod and K Laird, Smith, Hogan and Ormerod’s Criminal Law, (15th edn, OUP 2018) at 257.
more widely.”32 As explained by Smith and Hogan33, there are many ways to
prosecute criminal behaviour of corporations or their principal officers and the
first way to do that is to prosecute individuals in a corporation “for their personal
wrongdoing just as any other human being.” Where this and other methods fail, s
50 E may provide an additional path. This section statutorily determines how the
corporate veil should be pierced but only as far as that would be necessary. As
stated before, the jurisprudential doctrine of piercing that veil has no role to play
here.
[41] In conclusion we would make a few practical comments. When writing reasons
for a decision in a criminal matter, it would be best practice to set out the charges
in full, whereafter it should be indicated with precision to what extent these
charges have been proved, to be followed by an exposé of the relevant evidence.
For example, setting out in this case both the charges and the statement of what
exactly of those charges had been proved would have revealed that the first
offence was not one contrary to s 50A (1) (a) as Delpeache was not accused of
applying the PUMA sign to the goods but only of exposing them for sale, contrary
to s 50A (1) (b). It would also have revealed that the third charge was incomplete
as it failed to state that the possession, custody, or control of the goods was “with
a view to the doing of anything, by himself or another, which would be an offence
under paragraph (b)”, which is an element of the offence under s 50A (1) (c).
Further, the reasons of the Magistrate do not reveal if he found proved that all the
goods mentioned in the first (and second) charge had been exposed for sale or just
some of them. Nor is it clear if he found proved that all these goods were in the
possession, custody or control of the accused (with a view to sell them). If it was
proved that a part of these goods had been exposed for sale and another part kept
in stock with a view to sell them at some point in time, then imposing a fine for
each of these offences can be considered appropriate. However, if the Magistrate
found that all these goods had been exposed for sale by the accused who
necessarily also had possession, custody or control of these goods, then, as two
separate offences would have arisen from the same facts, the imposition of one
fine would have been the proper thing to do. For Delpeache this may all be water
32 D C Ormerod and D Perry, Blackstone Criminal Practice 2021(31st edn, OUP 2020) at 136. 33 ibid.
under the bridge as the appeal was not made on these grounds but one hopes that
these remarks may provide some guidance in future cases.
DISSENTING JUDGMENT OF THE HONOURABLE MR JUSTICE
BURGESS:
Introduction
[42] The House of Lords decision in Salomon v Salomon & Co Ltd,34 which
established for the first time that the incorporated company has a legal personality
of its own separate from its incorporators, shareholders, and directors, is now
treated as a hallowed principle across the Commonwealth and in the United
States. Unsurprisingly then, the Salomon principle, as that principle is
affectionally known, is the foundation stone upon which company law in
Barbados has been erected.
[43] The dispositive question in this appeal concerns the implication of this
foundational principle for the criminal liability of a corporate director for statutory
offences committed in the corporate context. More specifically, that question is
this: To what the extent can the Salomon principle be ignored by the respondent,
the Commissioner of Police, in the prosecution of the appellant, the sole director
of a one-person company, Ouch Boutique Inc, for offences pursuant to s
50A(1)(b) and (c) of the Trade Marks Act Cap 319 (Cap 319)?
[44] Local economists tell us that one-person incorporated small businesses are
responsible for a substantial portion of the macroeconomic business activity in
Barbados and are also especially important in the diversification of business
ownership in that country. The answer to the question raised in this appeal,
therefore, will undoubtedly have monumental implications for these incorporated
small businesses.
Factual Background
[45] The facts giving rise to this appeal are tolerably uncomplicated.
34 ibid (n11) at [57].
[46] The appellant is the sole director of Ouch Boutique Ltd (Ouch Boutique), a limited
liability company incorporated in Barbados under the Companies Act Cap 308
(Cap 308). Ouch Boutique was incorporated in 2012 to take over the appellant’s
business which he had operated as a sole trader since 2006. After the incorporation
of Ouch Boutique, the appellant entered the employment, and became an
employee, of the company.
[47] At all material times, Ouch Boutique operated its business from an upstairs and
down-stairs premise situated in Swan Street, Bridgetown. Upstairs was a
storeroom which was not open to the public. Downstairs was the store where
specialised “non-brand” and “elite brand” clothing including Adidas, Nike and
Puma were sold to the public.
[48] On Saturday 13 May 2017, Ms Monee Hope went to Ouch Boutique’s store to
purchase a pair of Puma slippers. She saw slippers on display in the store on top
of one of the clothes racks in the store. She entered the store and asked the store
attendant if the store had Puma shoes. Having been assured by the store attendant
that a pair of slippers were Puma slippers, she purchased them from the store.
[49] Ms Hope went to the cashier to pay for the slippers and was told by the cashier
that the price of the slippers was $100.00 instead of $200.00 which she saw
displayed on the slippers. She paid by debit card and was given a machine receipt.
However, she asked for a store receipt, and she was given one which had Ouch
Boutique’s address on it. She put the slippers in her bag and left the store.
[50] On reaching home, Ms Hope realised that the quality of the pair of slippers she
had bought did not match the quality of another pair she had at home which she
had bought in New York for US$150.00. She contacted her father, Mr Mark Hope,
who coincidentally was Puma’s representative in Barbados. He advised her to
contact the police.
[51] Ms Hope attended the Fraud Investigation Unit of the Royal Barbados Police
Force and gave a statement in which she explained that at the time she purchased
the slippers she believed them to be genuine Puma products, but that in fact they
were not. Ms Hope handed over the pair of slippers to the police.
[52] Subsequently, a warrant was executed at Ouch Boutique and the police seized
seventeen pairs of slippers, seven single shoes and thirty-one haversacks which
they believed to be fake Puma products.
[53] On 24 November 2017, the appellant was arrested and charged with three offences
pursuant to Cap 319 as follows:
i. that he, with a view to gain for himself or another or with intent to
cause loss to another, and without the registered owner of a trademark,
to wit Puma, did expose for sale goods namely, seventeen pairs of
slippers, seven single shoes and thirty -one haversacks which bear a
sign identical to or likely to be mistaken for a registered trademark of
Puma contrary to s 50A (1) (a) and (b) of Cap 319;
ii. that he, with a view to gain for himself or another or with intent to
cause loss to another, and without the registered owner of a trade
mark, to wit Puma, did have in his possession, custody or control in
the course of business, goods to wit: seventeen pairs of slippers, seven
single shoes and thirty -one haversacks which bear a sign identical to
or likely to be mistaken for a registered trade mark of Puma contrary
to s 50A(1) (c) of Cap 319;
iii. that he, with a view to gain for himself or another or with intent to
cause loss to another, and without the registered owner of a trademark,
to wit puma, did sell goods to wit: one pair of PUMA Fenty by
Rihanna slippers which bore a sign identical or likely to be mistaken
for a registered trademark of Puma contrary to s 50A of Cap 319.
These charges are sometimes referred to by me as the charged offences.
[54] The appellant was tried on these charges before His Worship, Magistrate
Graveney Bannister, in the Magistrate’s Court of District “A” (Criminal Division)
on 14 and 24 January 2018 and 14 and 19 February 2018.
[55] At the end of the hearing of the evidence on 19 February 2018, Mr Kissoon, the
then counsel for the appellant, made his submissions to the court. Referring to s
50E(1) of Cap 319, he argued, inter alia, that it was the company, Ouch Boutique,
which should have been charged and not the appellant. The magistrate rejected
this argument and convicted the appellant on all three charges.
[56] Being dissatisfied with the decision of the magistrate, the appellant appealed to
the Court of Appeal on the grounds, inter alia, that the magistrate erred in holding
that the appellant, and not Ouch Boutique, was properly charged. The Court of
Appeal (Narine, Belle and Cumberbatch JJA) dismissed the appeal on all grounds.
On the only ground now before us, Belle JA, who delivered the judgment of the
court, held as follows:
“[100] The question arises then, what bearing this exposition of the law
have (sic) on Delpeache’s case? The answer is that Delpeache was
acting as an agent of the Company and committing the charged
offences himself. There was no need therefore under the statutory
provisions of Cap 319 to find evidence of benefit, either by
Delpeache or Ouch Boutique. There was no need to determine
whether the property belonged to Ouch Boutique. The prosecution
followed the evidence, some of which was given by the appellant
himself, to the effect that he travelled to New York to obtain the
offending goods, to place in his store. He mounted the goods for
sale and was responsible for the sale of the goods in the store Ouch
Boutique.
[101] It is not because he is the director of a one man company that
matters. Rather it is because he actually committed the actus reus
and had the mens rea of the offences charged. There was therefore
no need for the prosecution to prove concealment, evasion, shelter
or the existence of a cloak or sham and lift the corporate veil.
[103] In our view…jurisprudence emerging from the authorities on
“piercing the corporate veil” establishes that there is no need to
pierce the corporate veil in a case such as the appellant’s. Even
though we do not agree with counsel for the Crown that the
appellant should have been prosecuted because the company Ouch
Boutique was a small company and the appellant was the directing
mind, we do hold that the appellant clearly acting as an agent of
the company when he purchased the goods, delivered them to
Ouch Boutique, displayed them in the store for sale, and actually
sold a pair of the counterfeit shoes. This was sufficient in our view
to justify his prosecution.”
Issue In This Appeal
[57] The appeal before us raises a single issue. It is whether the Court of Appeal was
correct in holding that the appellant was properly charged and convicted of
committing the charged offences in his personal capacity on the basis that he acted
as an agent of Ouch Boutique.
[58] As already intimated, that issue is of surpassing importance to incorporated small
businesses in Barbados. Consequently, I consider it advantageous to revisit some
basic principles which have direct implications for the specific issue before us. In
my judgment, the first such set of principles relate to the right to incorporate in
Barbados and the effect of such incorporation.
Analysis and Conclusions
1. Ouch Boutique Ltd was a Separate Legal Personality from the Appellant
[59] The jumping-off point in approaching this case is s 4 (1) of Cap 308 which
provides that “…one or more persons may incorporate a company by signing and
sending articles to the Registrar…” The undoubted effect of this provisions is to
confer a right on a person or persons to incorporate a company. In Commonwealth
Caribbean Company Law35, this right has been described as ample and subject
only the limitation that the company must not be formed for a purpose contrary
to law or for an illegal purpose.
[60] It is this right to incorporate which the appellant exercised in 2012 when he
incorporated Ouch Boutique to take over the business which he was conducting
as a sole trader. The appellant, like so many small businessmen in Barbados, no
doubt incorporated Ouch Boutique to take advantage of one of the most
consequential principles of Barbadian company law; the rule that a company
incorporated under the Cap 308 is a legal entity separate and distinct from its
shareholders or its incorporators.
[61] The Salomon principle is not a mere technical rule. In practical business terms,
this principle means that a company, once incorporated, enjoys rights and is
subject to liabilities (civil and criminal) different from those enjoyed or borne by
its incorporators or shareholders.36 The principle is captured in company law
theory by the metaphor that a company has a separate legal personality.37 Indeed,
the metaphor continues that on incorporation, a veil, called the “veil of
incorporation”, is drawn between the company’s personality and that of its
incorporators or its shareholders or its directors.38
35 (Routledge 2013) at 42. 36 Macaura v Northern Assurance Co [1925] AC 619, 626; Short v Treasury Commissioners [1948] AC 534, 545; JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 22. 37 Salomon (n 11). 38 See Persad v Singh [2017] UKPC 32 (TT) at [20].
[62] In Salomon v Salomon & Co Ltd, Lord Macnaughten, whose judgment is widely
regarded as a legal classic, described the principle as follows:39
i. “The company is at law a different person altogether from the
subscribers…and though it may be that after the incorporation the
business is precisely the same as it was before, and the same hands
receive the profits, the company is not in law the agent of the
subscribers or trustee for them. Nor are the subscribers, as members
liable, in any shape or form, except to the extent and in the manner
provided by the Act.”
[63] The Salomon principle was recently applied in the Barbados Court of Appeal in
ANSA McAL (Barbados) Ltd v Banks Holding Ltd and SLU Beverages Ltd.40 In
that case, AMCDV was a wholly owned subsidiary of ANSA McAL incorporated
by ANSA McAL for the special purpose of making competing bids for the take-
over of Banks Holding Ltd. A question arose as to whether ANSA McAL could be
treated as the bidder. Burgess JA answered at para [110]:
“In law, AMCDV was a separate legal personality and so was therefore the
“bidder”. The fact that AMCDV was the wholly owned subsidiary of Ansa
did not in any way subsume AMCDV within Ansa thereby transmogrifying
Ansa into a bidder…There can be no dispute that, in law, Ansa always
enjoyed a separate legal personality distinct and separate from AMCDV…”
[64] I would add here, in giving context, that Salomon case itself is early authority that
the corporate personality principle applies equally in the case of a one-person
company, as here, where the beneficial owner of the company may be in fact
indistinguishable from the company.41 In any event, the legal position of such a
company is now governed legislatively in Barbados by express provision in s 4
(1) of Cap 308 that “…one or more persons may incorporate a company”.
[65] Given the foregoing, there can be no doubt that Ouch Boutique after incorporation
was in law a separate legal person from the appellant, its incorporator and sole
director. Indeed, by s 17 of Cap 308, Ouch Boutique had “the capacity, rights,
powers and privileges of an individual”. Consequently, Ouch Boutique was fully
capable of operating a business; of ownership of goods; of “exposing for sale”
39 ibid (n 11) 51. 40 (Barbados CA, 11 December 2015). 41 Persad v Singh [2017] UKPC 32 (TT) at [20].
such goods; of having “in its possession, custody or control in the course of
business” such goods; and of “selling” such goods. In fact, the undisputed
evidence is that Ouch Boutique did all these things as a matter of course in the
conduct of its business. Given this, the question then becomes: Did Ouch
Boutique do these things in relation to the offences for which the appellant was
charged and thereby commit those offences?
2. Whether Ouch Boutique Committed the Charged Offences
[66] In my judgment, in answering this question, six things stand out in the evidence
given by the prosecution.
[67] First, Ouch Boutique operated its business from an upstairs and down-stairs
premise situated in Swan Street, Bridgetown. Those premises were the premises
of Ouch Boutique.
[68] Second, upstairs was a storeroom for goods which were not being sold and it was
not open to the public. It is here, according to the Police’s evidence, that the goods
for which the appellant was charged as having “in his possession, custody or
control in the course of business” were found.
[69] Third, downstairs was the store where goods were sold to the public. As already
intimated, the evidence of the prosecution was that this was the premises of Ouch
Boutique.
[70] Fourth, according to Ms Monee Hope, she went to Ouch Boutique’s store to
purchase the goods in question. There was no evidence that she contemplated
purchasing or purchased the goods from the appellant.
[71] Fifth, according to Ms Monee Hope also, the goods were on display in Ouch
Boutique’s store.
[72] Sixth, Ms Monee Hope’s further testimony was that the sale was conducted by an
employee of Ouch Boutique and that she asked for a store receipt which she was
given by a cashier, and which had Ouch Boutique’s address on it.
[73] Notwithstanding those facts, the Court of Appeal did not give any consideration
whatsoever as to whether Ouch Boutique could be criminally liable in respect of
the offences with which the appellant was charged. Instead, that Court baldly
stated that the appellant was properly convicted because he “was acting as an
agent of the company when he purchased the goods, delivered them to Ouch
Boutique, displayed them in the store for sale and actually sold a pair of the
counterfeit shoes”. I digress here to note that the appellant was never charged with
purchasing the goods and delivering them to Ouch Boutique, even though there
may have been evidence that he did these things.
[74] I must confess significant difficulty with the failure of the Court of Appeal to
consider whether there was evidence that Ouch Boutique committed the charged
offences. This is because s 50A (1) of Cap 319, the section under which the
appellant was charged, imposes criminal liability on “a person who commits an
offence” created by that section. S 36 of the Interpretation Act Cap 1 (Cap 1)
stipulates that “person” includes a company with the consequence that a company
is fully capable of committing an offence under s 50A(1).
[75] But even more importantly, s 50E(1) of Cap 319 makes provision for the
prosecution of a director, secretary, or similar officer “where an offence under
this Act…has been committed by a body corporate…” That provision only makes
sense if it imposes a requirement that as a pre-condition to the prosecution of a
relevant corporate officer it must be determined that the evidence reveals that their
company has committed a s 50A(1) trademark offence. I would stress here that
the requirement is not that the company has been prosecuted for, or has been
convicted of, committing. The requirement is that the company has committed a
trademark offence.
[76] I must express a further difficulty with the Court of Appeal’s view that the
appellant was properly convicted because he “was acting as an agent of the
company” when he committed the charged offences. As Rajnauth-Lee and
Burgess JJCCJ in delivering the judgment of this Court in Bay Trust Corporate
Services Ltd v Longsworth42 observed, a company is a persona ficta deemed to
42 [2020] CCJ 8 (AJ) BZ [28].
exist and to have the powers, rights, and the liabilities of a natural person. As a
fictional person, it is axiomatic that a company must act through its servants and
agents and can only commit criminal offences through those servants and agents.
If, therefore, a company were able to disown corporate criminal liability on the
footing that, as held by the Court of Appeal, a person “was acting as an agent of
the company and committing the charged offences himself” any notion that a
company could ever be held criminally liable would be entirely at risk.
[77] To the contrary, however, the very well settled law is that a company may incur
criminal culpability for the unlawful acts of its servants and agents.43 In mapping
such culpability, it may be well to recall that there has developed a system of
classification which segregates statutory offences into absolute offences, strict
liability offences and mens rea offences, according to the degree of intent, if any,
required to create culpability. The amenability of companies to criminal liability for
statutory offences depends upon this classification.
[78] Absolute liability offences are offences where, by the clearest intendment, liability
arises instantly upon the breach of a statutory prohibition. No specific state of mind
is a prerequisite to guilt. With such offences, corporate and individual culpability
arises on the basis of automatic primary responsibility.
[79] Strict liability offences are offences where guilt is not predicated upon the automatic
breach of the statute but rather upon the establishment of the actus reus, subject to
the defence of mistake of fact. As in the case of an absolute liability offence, it
matters not whether the accused is a company or an individual, because the liability
is primary and arises in the accused according to the terms of the statute. As with
absolute liability offences, the culpability of the company is not dependent upon the
attribution to the accused of the misconduct of others. This is evident in the case of
Tesco Stores Ltd v Brent Borough Council44 where the guilty knowledge of a
checkout girl was enough to ensure the conviction of a company for breach of a
provision in the Video Recordings Act 1984 (UK).
43 See Moore v Bresler Ltd [1944] 2 All ER 515; Tesco Supermarkets Ltd v Natrass [1972] AC 153 44 [1993] 2 All ER 178.
[80] Mens rea offences are the traditional criminal offences for which an accused may
be convicted only if the requisite mens rea is demonstrated by the prosecution. It is
now firmly established law that, even in the case of a mens rea offence, a company
may be affixed with criminal liability for the actions of its servants or agents. As
explained by Estey J in the Supreme Court of Canada in the case of Canadian
Dredge and Dock Co Ltd v The Queen,45 that law is based on the operation of the
identification theory. The underlying premise of this theory is that if the servant or
agent who committed the offence is found to be a vital organ of the company and
virtually its directing mind and will in the sphere of duty assigned him/her so that
his/her actions and intent are the actions and intent of the company itself, the
company can be held criminally liable. The wrongful action of the servant or agent,
the primary representative, by attribution to the corporation, creates primary rather
than vicarious liability. The identification doctrine merges the company and the
actions and intent of the servant or agent to whom was delegated the governing
authority of the company and criminal responsibility is thereby attributed to the
company.
[81] To be clear, the Court of Appeal did not hold that Ouch Boutique was the agent
of the appellant. In that regard, the case of Salomon46 makes it plain that a
company is not automatically an agent of its members. However, the House of
Lords in that case did not deny the possibility of a company being in fact an agent
of its members. In Adams v Cape Industries plc,47 the English Court of Appeal
accepted to be settled law that if it can be shown by clear evidence that the
company acted as an agent of its members or a subsidiary as agent of its parent,
then, on ordinary agency principles liability will attach to all or any of its
individual members and not the company or to the principal parent and not to the
subsidiary. I feel bound to underline here that this is not the principle which the
Court of Appeal was seeking to invoke and so is not at issue in this appeal.
[82] What is at issue before us is whether there was evidence that Ouch Boutique was
criminally liable for the charged offences committed through the agency of the
appellant. As it appears to me, Ouch Boutique was so liable even if the charged
45 [1985] 1 SCR 662. 46 (n 11). 47 [1990] Ch 433.
offences required mens rea. This is so because the appellant was not just an
ordinary agent of Ouch Boutique: he was the sole shareholder and director of that
company. As such, he was undeniably a vital organ of that company and was its
“directing mind and will”. In those circumstances, the settled law is that the
criminal conduct of the appellant would be attributed to Ouch Boutique thereby
rendering that company liable for committing the charged offences. In sum, it
matters not whether the charged offences were, absolute offences, strict liability
offences or mens rea offences, Ouch Boutique was criminally liable for the
commission of those offences.
3. Whether the Appellant could be Prosecuted for the Charged Offences
[83] The question now becomes whether the appellant can be prosecuted for the
charged offences notwithstanding that it is Ouch Boutique which in law
criminally committed those offences. In my judgment this question is best
answered under three heads, namely, (i) general principles, (ii) s 50E(1) of Cap
319 and (iii) s 22(2) and (3) of Cap 1.
(i) The General Principle
[84] As a general principle, even if the acts of the directing mind and will were in law
those of the company does not prevent the prosecution and conviction of the
servant or agent as a principal or aider and abettor where the company may be
held to have also committed the offence: R v Fell (1981) 64 CCC (2d) 456 (Ont
CA). Further, convictions of both the agent and the company for the same offence
is permissible even where the agent is the sole director and shareholder and
directing mind of the company: R v Shamrock Chemicals Ltd (1989) 4 CELR (NS)
215 (Ont Dist Ct).
[85] Thus, in Professor Glanville Williams’, Textbook of Criminal Law (1978), the
learned author writes at 946-47 as follows:
ii. The device of incorporation does not protect people who commit
offences. A company can act only through human beings, and a
human being who commits an offence on account of or for the benefit
of a company will be responsible for that offence himself just as any
employee committing an offence for a human employer is liable.
iii. . . . . .
iv. Where a company is liable under the identification doctrine, the
director or other controlling officer will almost always be a co-
perpetrator of or accessory in the offence or commit a statutory
offence.
[86] A similar view is to be found in the very useful work by Professor Peter Gillies,
The Law of Criminal Complicity (1980), where the author writes at 151:
v. [W]here the criminal act is committed by a senior officer who is
capable of so representing the company as to make his act his own,
and the offence is such that either the company or the officer is
capable of committing it as a principal offender, the classification of
each party may be arbitrary. They may be viewed as being principal
and accessory (so that the officer aids or counsels the company or
vice-versa), or alternatively, as being joint principals.
[87] On the authorities, then, there is little or no doubt that, as a general principle, a
director or other similar corporate officer may be held liable for a statutory
offence where their company may also be held to have committed that offence. In
my view, however, in the appeal before us, this general principle must be read
subject to s 50E(1) of Cap 319 and s 22(2) and (3) of Cap 1 in this case.
(ii) Section 50E(1) of Cap 319
[88] To fully understand the operation of this general principle in the context of the
prosecution of the trade mark offences in Cap 319, it is necessary to go back to
some first principles. In this regard, it is well to recall the basic principle that a
person may only become particeps criminis in one of two ways. The first is by
physically perpetrating the crime as the principal offender. Such an offender is
usually called a principal in the crime. The second way is by a derivative form of
accessorial liability in the sense that the person instigates, encourages, or assists
the principal offender in the commission of the crime. Such a person is an
accessory, or secondary party.
[89] Against that backdrop, it is easy to see that the general principle that the servant
or agent may be prosecuted as a principal or aider and abettor for an offence
committed by his company is significantly modified by s 50E(1) of Cap 319 in
relation to the trademark offences under s 50A of that Act. Section 50E(1)
provides as follows:
i. Where an offence under this Act which has been committed by a body
corporate is proved to have been committed with the consent or
connivance of, or to be attributable to any neglect on the part of, a
director, manager, secretary or other similar officer of the body
corporate, or any person who was purporting to act in any such
capacity, he as well as the body corporate, shall be guilty of that
offence and shall be liable to be proceeded against and punished
accordingly.
[90] The language of this subsection is crystal clear. The subsection is triggered where
a company has committed an offence under Cap 319. In such an eventuality, a
director or other corporate officer is liable to be proceeded against criminally only
where the offence “is proved to have been committed with the consent or
connivance of, or to be attributable to any neglect on the part of such officer”.
Simply put, s 50E(1) applies as long as there is evidence that the company is the
person who committed the offence and as such the criminal liability of the
company is that of the principal offender. By requiring that the consent,
connivance or neglect of the director or other corporate officer to the commission
of the offence be proved, the director or other corporate officer, the criminal
liability of a director or other corporate officer is as an accessory or secondary
party.
[91] It bears emphasising that, under this subsection, the company is liable for the
commission of the offence as a principal and that the director or other corporate
officer is liable to be proceeded against and punished as an accessory or secondary
party. In this way, s 50E(1) modifies the general principle of the culpability of
corporate officers for trademark offences committed by a company. Section
50E(1) must therefore be seen as reforming the general principle and not as
merely repeating that principle.
[92] Au fond, s 50E(1) is a statutory recognition of the business and economic
importance of the separate legal personality principle and the necessity to preserve
the ‘corporate veil’ which is drawn by Cap 308 in the case of companies
incorporated under that Act. In furtherance of this objective, s 50E(1) allows for
the corporate veil to be withdrawn or pierced in cases of trademark offences
committed by the company and for specified corporate officers to be held liable
but only as secondary parties and in those circumstances specified in that
subsection.
[93] In my further judgment, as s 50E(1) is a veil piercing provision, it must be strictly
adhered to. According to the subsection, the consent or connivance or neglect of
the director or other corporate officer in the offence committed by the company
must be alleged and proved. In this case, these things were neither alleged nor
proved. Consequently, as argued by counsel for the appellant before Magistrate
Bannister and by counsel before this Court, the appellant should not have been
prosecuted as a principal offender and held guilty of the offences charged and
therefore should not have been punished for them.
(iii) Section 22(2) and (3) of Cap 1
[94] Section 22(2) and (3) of Cap 1 legislates generally for the prosecution of corporate
officers in respect of offences under any enactment committed by a company.
Section 22(2) and (3) of Cap 1 provides as follows:
“(2) Where an offence under any enactment…has been committed by a
body corporate the liability of whose members is limited, then
notwithstanding and without prejudice to the liability of that body,
any person who at the time of such commission was a director, general
manager, secretary or other like officer of that body or was purporting
to act in any such capacity shall, subject to subsection (3), be liable to
be prosecuted as if he had personally committed that offence and
shall, if on such prosecution it is proved to the satisfaction of the court
that he consented to, or connived at, or did not exercise all such
reasonable diligence as he ought in the circumstances to have
exercised to prevent the offence, having regard to the nature of his
functions in that capacity and to all the circumstances, be liable to the
like conviction and punishment as if he had personally been guilty of
that offence.
(3) A person shall not be charged under subsection (2) except upon the
direction of the Director of Public Prosecutions.”
[95] On its plain words, s 22(2) deals with the criminal liability of “a director, general
manager, secretary or other like officer of that body” (a specified corporate
officer) in two stages. The first stage deals with the “prosecution” of a specified
corporate officer. In this regard, the subsection allows a specified corporate
officer, without more, “to be prosecuted as if he had personally committed” a
statutory offence committed by his/her company. The second stage deals with the
“conviction and punishment” of a specified corporate officer. Here, the subsection
provides that a specified corporate officer, may only be convicted if on
prosecution it is proved that that officer “consented to, or connived at, or did not
exercise reasonable diligence in”, the commission of the offence by the company.
It is important to note here that s 22(2) imposes criminal liability on a specified
corporate officer as a principal and not as an accessory like s 50E(1).
[96] Section 22(2) is undeniably a veil piercing provision as it allows (i) for the
prosecution of the specified corporate officer as a principal for an offence
committed by a company and (ii) for his/her conviction for the commission of
such an offence as a principal provided consent, connivance or neglect is proved
during such prosecution. It is patent that s 22(2) opens the veil of incorporation
much wider than s 50E(1) of Cap 319. However, respect for the Salomon principle
is maintained in Cap 1 by the proviso to s 22(2) in s 22(3) which stipulates to the
effect that a specified corporate officer “shall not be charged under subsection (2)
except upon the direction of the Director of Public Prosecutions”.
[97] The s 22(3) proviso is of signal importance in the jurisprudence of separate legal
personality and corporate criminal liability. By stipulating that a corporate officer
“shall not be charged” for statutory offences committed by a company except
upon the direction of the Director of Public Prosecutions, Parliament has evinced
an unmistakable intention that corporate officers are not to be lightly charged for
offences committed by their companies. Simply put, s 22(2) permits the corporate
veil to be lifted and certain corporate officers to be prosecuted for offences
committed by their companies but, by s 22(3), such prosecution can only be
pursued on the direction of the Director of Public Prosecutions.
[98] There is no evidence in this case that the Director of Public Prosecutions gave any
directions that the appellant be charged. The settled law is that the absence of such
evidence rendered the prosecution of the appellant before the magistrate a nullity:
R v Angel48 and R v Pearce49. That being so, I agree with counsel for the appellant
48 [1968] 2 All ER 607. 49 (1981) 72 Cr App R 295.
that the appellant was not properly charged and therefore prosecuted and
convicted for the charged offences.
(iv) Remarks on s 50E(1) and s 22(2) and (3)
[99] I feel compelled to make three observations on the operation of s 50E(1) and s
22(2) and (3). The first is that these sections do not differentiate between absolute
liability offences, strict liability offences and mens rea offences. In my judgment,
the need for strict adherence to the stipulations in those provisions must therefore
be complied with in the prosecution of a specified corporate officer for any
category of trademark offence committed by the company.
[100] The second is provoked by an argument by counsel for the respondent that s 22(2)
and (3) of Cap 1 cover the same subject area as s 50E(1) of Cap 319 and that the
legal maxim generalia specialibus non derogant applies so that the general rule
in s 22(2) and (3) of Cap 1 has no application in this case as it cannot derogate
from the special rule in s 50E(1) of Cap 319. To accept this argument would
involve turning that legal maxim on its head.
[101] The legal maxim generalia specialibus non derogant has long been understood to
mean that general words in a later statute cannot exclude the specific provisions
of the earlier statute. Accordingly, Halsbury Laws of England Statutes and
Legislative Process50 states as follows:
It is difficult to imply a repeal where the earlier enactment is particular, and
the later general. In such a case the maxim generalia specialibus non
derogant (general things do not derogate from special things) applies. If
Parliament has considered all the circumstances of, and made special
provision for, a particular case, the presumption is that a subsequent
enactment of a purely general character would not have been intended to
interfere with that provision; and therefore, if such an enactment, although
inconsistent in substance, is capable of reasonable and sensible application
without extending to the case in question, it is prima facie to be construed
as not so extending. The special provision stands as an exceptional
provision upon the general. If, however, it appears from a consideration of
the general enactment in light of the admissible circumstances that
Parliament’s true intention was to establish thereby a rule of universal
application, then the special provision must give way to the general.
50(5th edn, 2018) vol 96.
[102] The learned authors of Bennion on Statutory Interpretation51 describe the
operation of the maxim as follows:
i. General and specific enactments in different Acts
ii. Where the literal meaning of a general enactment covers a situation
for which specific provision is made by another enactment contained
in an earlier Act, it is presumed that the situation was intended to
continue to be dealt with by the specific provision rather than the later
general one. Accordingly, the earlier specific provision is not treated
as impliedly repealed.
iii. The presumption in this context is sometimes expressed in terms of
the maxim generalia specialibus non derogant (a general provision
does not derogate from a special one), which is in Jenkins’ Exchequer
Reports.
iv. The explanation of the rule by Lord Selbourne LC in Seward v The
Vera Cruz (Owners), The Vera Cruz52 is often cited
“…where there are general words in a later Act capable of
reasonable and sensible application without extending them to
subjects specifically dealt with by earlier legislation, you are not
to hold that earlier and special legislation indirectly repealed,
altered or derogated from merely by force of such general
words, without any indication of a particular intention to do so.”
[103] The upshot of the foregoing is that for the maxim to apply the specific Act must
have been enacted before the general Act. This is not the case in this appeal.
Section 22(2) and (3) of Cap 1, the general provision, was enacted long before s
50E(1) of Cap 319, the specific provision. Accordingly, the maxim generalia
specialibus non derogant does not assist the respondent’s argument that the
general rule in s 22(2) and (3) of Cap 1 has no application in this case.
[104] The third observation relates to mens rea offences committed by a company. As
seen above, the liability for the commission of such offences depends upon the
identification doctrine, namely, that the company may only be affixed with
liability for the actions of its servant or agent where the individual is a vital organ
of the company and its “directing mind and will”. It is to be noted that the
identification principle was developed in cases where the corporate defendant was
51 D Bailey and L Norbury, Bennion, Bailey and Norbury on Statutory Interpretation (8th edn, Lexis Nexis 2020). 52 (1884) 10 App Cas 59 at 68.
a large company with many shareholders, employees, and directors. The principle
works very well in respect of such companies because there is unlikely to be
significant overlap between identity of the corporate owners and the company
itself.
[105] The position is very different where, on the other hand, the company is a small,
closely held company. In such a case, the individual owner is invariably the
directing mind and will of the company and as such liable to be prosecuted for
offences committed by the company. Thus, if the right to incorporate a one-person
company conferred by Cap 308 is to have meaning, courts much be particularly
vigilant in mens rea offences in insisting on the strict observance by the
prosecutor of any stipulated conditions in a provision which grant statutory
permission to pierce the corporate veil and to prosecute a corporate officer for an
offence committed by a company. One-person companies in Barbados must not
be treated as though there are mischievous stratagems but must be seen as critical
tools of small business and macroeconomic policy.
The Prest v Petrodel Argument
[106] In their written submissions to this Court, counsel for the appellant advanced an
elaborate argument that the appellant could not be prosecuted because the lifting
of the veil test, as it was recently considered and reformulated in the UK Supreme
Court case of Prest v Petrodel Resources Ltd, was not satisfied. In my view, s
50E(1) of Cap 319 and 22(2) and (3) of Cap 1 render this argument otiose.
Nevertheless, in light of counsel’s extensive submissions, I feel constrained to say
a few words on the Prest v Petrodel test.
[107] Prest v Petrodel concerned an application for ancillary relief in matrimonial
proceedings, in which the issue was whether the Court had the power to order the
transfer to the wife several properties which were legally owned by the three
respondent offshore companies, which were themselves solely owned and
controlled by the husband. The Supreme Court unanimously upheld the decision
of the Court of Appeal not to pierce the corporate veil and to treat the company’s
property as the husband’s property for the purposes of the statutory provisions
governing the distribution of assets on divorce.
Lord Sumption’s Evasion/Concealment Test
[108] Lord Sumption delivered the leading judgment on the issue of veil piercing. After
an exhaustive review of English case law, Lord Sumption purported to
reformulate the piercing the veil test. Two interconnected tenets of his
reformulation are especially important.
[109] The first is that veil piercing is a remedy limited to where there is no other
available traditionally accepted private law remedy (such as, for instance, in tort,
agency or trust). On this, Lord Sumption stated as follows:
“The principle is properly described as a limited one, because in almost
every case where the test is satisfied, the facts will in practice disclose a
legal relationship between the company and its controller which will make
it unnecessary to pierce the corporate veil. Like Munby J in Ben Hashem, I
consider that if it is not necessary to pierce the corporate veil, it is not
appropriate to do so, because on that footing there is no public policy
imperative which justifies that course. I therefore disagree with the Court
of Appeal in VTB Capital who suggested otherwise...”
[110] The second is predicated on a distinction to be drawn between the two distinct
principles of “concealment” and “evasion”. Lord Sumpton rationalised this
distinction by theorising that the veil piercing by the court may be only justified
on the well-recognised principle of “fraud unravels everything” if a company’s
separate legal personality is being abused for the purpose of some relevant wrong
doing.53 The difficulty, he opined, was to identify what is relevant wrongdoing.
In this regard, he posited that “[r]eferences to a “façade” or “sham” beg too many
questions to provide a satisfactory answer”54and that “two distinct principles lie
behind these protean terms”55. According to him, these can conveniently be called
“the concealment principle” and “the evasion principle”56.
[111] The concealment principle is applicable where a corporate structure is interposed
so as to conceal the identity of the real actors. In such a case, and assuming their
identity is relevant, the court may look behind the veil to ascertain the facts which
the corporate structure is concealing without actually disregarding the corporate
structure altogether.
53 Prest (n12) [27]. 54 ibid [28]. 55 ibid. 56 ibid.
[112] The evasion principle is different. It applies if there is a legal right against the
person in control of the company which exists independently of the company’s
involvement, and a company is interposed so that the separate legal personality
of the company will defeat the right or frustrate its enforcement. In such a case,
the court may actually disregard the company’s separate legal personality by
piercing the corporate veil.
Opinions of the Other Supreme Court Justices
[113] Most of Lord Neuberger’s judgment was spent explaining his initially strong
attraction to the view that the veil-piercing doctrine should be given its quietus.
He expressed the view that the doctrine has never been applied in any case and
disagreed with Lord Sumption that it was applied in the cases cited by Lord
Sumption as examples of application of the doctrine. In the end, however, Lord
Neuberger affirmed Lord Sumption’s veil-piercing test in so far as it is based on
the well-established principle of “fraud unravels everything”.
[114] Lady Hale doubted the possibility of “neatly” classifying all cases in which courts
disregard separate legal personality into the two categories of concealment and
evasion. She opined that veil-piercing cases may simply be examples of the
exercise by courts of their “power to prevent the statutes under which limited
liability companies may be established as separate legal persons…being used as
an engine of fraud”57 with the object of not allowing companies to be used to
“take unconscionable advantage of the people with whom they do business.58
[115] Lord Mance59 and Lord Clarke60 expressed a similar doubt to Lady Hale. While
accepting that veil-piercing outside of Lord Sumptions evasion principle will be
rare and difficult to establish, they thought that it would be, in the words of Lord
Mance, “dangerous to seek to foreclose all possible future situations which may
arise”61 outside of that principle.
[116] Finally, Lord Walker did not endorse Lord Sumption’s veil-piercing evasion test.
His opinion was that veil-piercing is not a doctrine in the sense of a coherent
57 Prest (n 12) [89]. 58 ibid [92]. 59 Prest (n12) [100]-[103]. 60 ibid [103]. 61 ibid [100].
principle or rule of law. To him, it is simply a label “to describe the disparate
occasions on which some rule of law produces apparent exceptions to the
principle of separate of a body corporate”. Outside of these exceptions, there is
no residual category in which veil-piercing operates independently.
[117] Despite the considerable doubts of the other Justices of the UK Supreme Court,
counsel presented Lord Sumption’s concealment/evasion test as representing
settled law which should be accepted by this Court. For my part, I have serious
reservations on the correctness, as well as the practical usefulness, of that test and
so I do not agree that this Court should accept it. Of course, this is not the occasion
for interrogating that test. However, I wish to make a quick observation on it.
[118] The veil of incorporation is undoubtedly bestowed legislatively by the relevant
Companies Act. In Prest v Petrodel, Lord Neuberger regarded as self-evident that
the veil of incorporation may be pierced with “statutory authority”62. Indeed, it
seems to me that, consistent with its statutory basis, the corporate veil may only
be removed or pierced or lifted, (whichever expression be used), to the extent that
the Companies Act, or some other statute, provides for such removal or piercing
or lifting. Put simply, the corporate veil may only be lifted or pierced on statutory
authority.
[119] As seen in para [114] above, Lady Hale came very close to supporting this view
when she suggested that general veil piercing may be grounded in the rule of
statutory interpretation that a statute, the Companies Act, must not be allowed to
be used as an engine of fraud. As it appears to me, however, there may be an even
firmer basis for the view that general veil piercing emanates from the Companies
Acts and not, as asserted by Lord Sumption, from the “the well-recognised
principle that “fraud unravels everything”.
[120] Successive English Companies Acts have provided expressly that a company may
only be incorporated for a “lawful purpose”. Inspired by this, s 410 (1) (a) of Cap
308 is to the effect that a company cannot be formed for a purpose “contrary to
the law”. If a company cannot by these Acts be formed for an unlawful purpose
62 ibid [63].
or a purpose contrary to the law, then, it follows naturally that the Acts must be
interpreted as forbidding the use of a company for an unlawful purpose or a
purpose contrary to law. Where a company is sought to be so used, the courts are
entitled to pierce the corporate veil to prevent that unlawful purpose or purpose
contrary to law.
[121] As I have already said, this is not a proper case for this Court to pursue a close
analysis of the Prest v Petrodel evasion/concealment test. For my part, I wish only
to indicate that my view is that this Court should not adopt that test as argued by
counsel for the appellant without a searching examination of the principles that
underlie that test as well as to its practical utility.
Conclusion
[122] My conclusion on this appeal is that there is no doubt that the appellant, as a
director of Ouch Boutique, could have been prosecuted in his personal capacity
either as an accessory under s 50E(1) of Cap 319 or as a principal under s 22(2)
and (3) of Cap 1. However, both those provisions contain elements which must
be satisfied in pursuing such prosecution. The respondent did not satisfy either
the elements in s 50E(1) of Cap 319 or those in s 22(2) and (3) of Cap 1. For these
reasons I would allow the appeal.
Order of the Court
[123] The Court orders that the appeal is hereby dismissed.
/s/ J Wit _______________________________
The Hon Mr Justice J Wit
/s/ W Anderson /s/ M Rajnauth-Lee _____________________________ __________________________________ The Hon Mr Justice W Anderson The Hon Mme Justice M Rajnauth-Lee
/s/ D Barrow /s/ A Burgess
_____________________________ _____________________________
The Hon Mr Justice D Barrow The Hon Mr Justice A Burgess