Ernest Lim

Formalism and Companies

This article critically analyses two of the arguably most significant English corporate law cases in the last decade through the lens of two distinct conceptions of formalism. Deploying the first conception of formalism, this article assails the prevailing view that the House of Lords decision in Stone & Rolls v Moore Stephens was correctly decided because the fraud of the directing mind and will was also the companys fraud. It will be argued that the courts language of syllogistic and precedential inexorability is misleading: not only do the cases fail to lend support to the majoritys reasoning, it is contradicted by contrary authorities and policy arguments. Deploying another conception of formalism, this article challenges the view that the result in the Supreme Court case of In re Paycheck Services 3 Ltd was correct because the defendant was not a de facto director as he did not assume responsibility; this article advances a new justifi cation for the majoritys decision. It will be argued that the key to understanding the courts decision is whether a court should have the jurisdiction to determine whether and when the rule of separate legal personality should be followed or departed. This article concludes by observing how formalism can explain the signifi cance of and similarities in both cases.

Controlling shareholders and fiduciary duties in Asia

ABSTRACT The company laws of the common law jurisdictions in Asia are based on or inspired by English common law. Yet, the ownership structure of the listed companies in these jurisdictions – concentrated – is marked differently from that in the UK, which is dispersed. Although different ownership structures give rise to different agency problems which warrant different regulatory strategies, the common law jurisdictions in Asia and the UK share the same strategy in one critical respect: fiduciary duties are imposed on directors not shareholders. Given that the central agency problem in common law systems in Asia is the conflict between controlling shareholders and minority shareholders, the question is whether these jurisdictions should still adhere to the English position or they should consider subjecting controlling shareholders to fiduciary duties. This article critically analyses whether, and in particular, how controlling shareholders in common law jurisdictions in Asia can and ought to be subject to fiduciary duties.

Ex Turpi Causa: Reformation Not Revolution

Seldom has an area of law been so afflicted with uncertainties and contradictions as the illegality defence and rarely have judicial opinions been so sharply divided as in the Supreme Court decision in Patel v Mirza where nine Justices examined the issue of the correct approach to the illegality defence. Six of them endorsed the ‘range of factors’ approach, whereas three condemned it. This paper defends the majoritys approach against the minoritys criticisms but argues that refinements should be made to it in order to address the uncertainty that may arise from its application.

Attribution and the Illegality Defence

In Jetivia SA v Bilta (UK) Ltd (in liquidation) all seven judges of the Supreme Court affirmed the decision of the Court of Appeal by holding that the illegality defence could not be raised as a defence against the claim made by the company because the wrongdoing of the directors and shareholder cannot be attributed to the company. Although all the judges unanimously agreed on the outcome of the case, their reasoning concerning the approach to attribution and the different circumstances under which attribution should or should not take place differed. Further, the Supreme Court was divided on the issue of the correct approach to the illegality defence.

Contracting Out of Fiduciary Duties

A significant implication arising out of an increasingly influential view that fiduciary duties are terms expressed or implied into voluntary undertakings is that all express or implied fiduciary duties can be excluded. This article critiques this implication by advancing the argument that this implication is doctrinally unjustified and normatively questionable through an analysis of the circumstances in which directors’ fiduciary duties have been contracted out under English law.

Attribution in Company Law

In Bilta (UK) Ltd (in liquidation) v Nazir (No 2), the Court of Appeal held that the ex turpi causa defence was inapplicable by refusing to attribute the fraud of the directors and the sole shareholder to the company in connection with the company’s claim against them and third party co-conspirators. It is significant that the court has not only clarified the law in relation to attribution, but it did so by rejecting the majority’s reasoning and endorsing the dissenting judgment in the House of Lords decision in Stone & Rolls (in liquidation) v Moore Stephens (a firm). This article evaluates the decision in Bilta by critically examining the fundamental principles and policies that apply to the three distinct circumstances under which corporate attribution should or should not take place.

The Illegality Defence and Company Law

This article critically examines how the illegality defence should be applied to companies. It is argued that the distinctive considerations pertaining to company law meant that the policy rationales underlying the illegality defence that are applicable to cases involving individuals as claimants cannot be so easily transposed to cases involving the company as a claimant without careful attention to those considerations.