Creasey V Beechwood Case Study

1374 Words 6 Pages
Creasey v Beechwood
Creasey worked as the general manager of Welwyn Pty Ltd (Welwyn), which carried on the business of selling cars on premises owned by Beechwood Motors Ltd (Motors). Welwyn and Motors had common directors and shareholders, Ford and Seaman. Creasey was summarily dismissed by Selwyn and filed a claim for damages for unfair dismissal. Welwyn’s financial records indicated it was approaching insolvency and Creasey was informed that the company would likely cease trading soon. Motors took over the business of Welwyn and repaid Welwyn’s outstanding liabilities. This takeover of Welwyn’s business was entirely informal, with no provision made for Creasey’s contingent liability. Motors argued that as Creasey’s contract of employment
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The application of the principle in both the above cases precludes the piercing of the corporate veil in favour of plaintiffs. The Ord decision reflects the principle, whilst Creasey takes a broader approach, which was subsequently criticised in Ord. The limited nature of the veil-piercing doctrine may cause unfairness in individual cases, as can be seen in Ord scenario; however, it is necessary to promote commercial certainty. Contingent liabilities do not appear on a balance sheet, and are difficult to quantify. Transactions such as acquisitions and restructures cannot be properly valued if the acquirer of a company’s assets is at risk of being held liable for that company’s contingent liabilities. A limited veil piercing doctrine ensures such transactions can proceed with certainty, and thereby promotes economic efficiency. Additionally, the exclusion of contingent liabilities as a ground for piercing the corporate veil from Lord Sumption’s discussion of the principle may be open to criticism, but I believe it is justified. Creasey and Ord were litigated for four and seven years respectively. It would be unfair the pierce the corporate veil and hold an entity accountable in these matters, seeing the extent of liability is inherently uncertain and cannot be properly provisioned for. The corporate structure is designed to facilitate the efficient conduct of economic activity. A strict and limited approach to veil piercing is essential for maintaining this

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