Commercial Disputes Update - Summer 2011

CASE LAW UPDATES

The court will in limited circumstances pierce the corporate veil

Antonio Gramsci Shipping Corp and others v Stepanovs [2011] EWHC 333 (Comm) (25 February 2011)

It is well established that a company has a separate legal personality from those who own and control it. However, in certain circumstances the court may hold those who control the company liable for the acts of the company, which is known as piercing the corporate veil.

Antonio Gramsci Shipping Corporation were 30 "one ship" companies incorporated in a number of off-shore jurisdictions and the ultimate beneficiary of these companies was the Latvian Shipping Company. In previous litigation Antonio Gramsci Shipping Corporation had obtained judgment against five corporate defendants on the basis that they had been used dishonestly to siphon off substantial profits. It was said that the senior executives of the Latvian Shipping Company including Stepanovs, were the beneficial owners of the corporate defendants who had acted fraudulently.

Antonio Gramsci Shipping Corporation sought to pierce the corporate veil and hold Stepanovs jointly and severally liable with each of the corporate defendants for its losses of $100 million resulting from the dishonest scheme.

The court held that there was a good arguable case that the veil of incorporation should be pierced in order to permit Antonio Gramsci Shipping Corporation to seek to enforce the contract against Stepanovs. On the facts, the corporate defendants had no independent or non-fraudulent existence. The companies had been set up for the purpose of the alleged fraud, in order to abuse the company structure.

It did not have to be shown that Stepanovs was in sole control of the corporate defendants. If there were a number of wrongdoers, with a common purpose, in control of the company, then they could all be said to be in material control and the veil of incorporation could be lifted as against one or all of them.

The court held that a victim of fraud is entitled to enforce a contract entered into by a company against both the company and those who control it.

Industry standard terms will generally be upheld even if they mean that parties to a contract have a very tight time limit in which to bring a claim

Rohlig (UK) Limited v Rock Unique Ltd [2011] EWCA Civ 18

The relationship between Rohlig and Rock Unique Ltd's was governed by the British International Freight Association standard trading conditions. These provided that any claims had to be brought within 9 months of the alleged breach The Court of Appeal held that as both parties were experienced companies the clause

would not be unreasonable under the Unfair Contract Terms Act 1977. Therefore the 9 month clause might extinguish causes of action which were and were not discovered before the time bar expired. The court also noted that if standard terms were negotiated between representatives of suppliers and customers they would be likely to represent a fair balance of competing interests.

A contract confirmation accepting an offer but stating that a "full contract" would follow is binding

Immingham Storage Co Ltd v Clear Plc [2011] EWCA Civ 89

Immingham and Clear entered into negotiations regarding the storage of diesel for Clear. On 19 December 2008, Immingham sent a quotation to Clear stating that it was "subject to board approval and tankage availability". All key contractual terms were included and there was a statement that other terms would be "as per our General Storage Conditions", a copy of which was attached. The final sentence of the quotation was "A formal contract will then follow in due course".

On 5 January 2009, Clear faxed a copy of the quotation countersigned by Clear to Immingham. Immingham subsequently accepted the quotation countersigned by Clear and sent out formal contracts. Clear did not return a signed copy of the Contract as it had been unable to source the appropriate fuel.

Immingham issued proceedings for non-payment of invoices on the basis that the return of the countersigned quotation was an offer capable of acceptance. Clear rejected this and argued that it was not an offer capable of acceptance, as it had been stated that a formal contact would follow. Clear also argued that if it was considered to be an offer, Immingham had not accepted the offer as it stated that a full contract would follow. The Court of Appeal held that a contract had come into existence, as the quotation contained all relevant terms and the only conditions to which the quotation was said to be subject to required no further negotiation, namely board approval and confirmation of tank availability. The intention was that once Immingham had communicated its acceptance and the conditions were satisfied, a contract would exist.

The court noted that the absence of the words "subject to contract" was relevant. Therefore the reference to "a formal contract" in the...