LEGT2741 Assignment (Week 5)
Content
The legal issue concerning in this case is whether the trade union can argue to lift the
corporate veil upon the incorporated companies, Casino Ltd and Caterers Ltd, and
claim both of them were acting as one single entity so that the 60 employees can keep
their original contracts.
The fundamental subject of conflicting interest on both parties is based on the
principle in Salomon’s Case1. This case established that companies have limited
liability and a separate legal identity from its directors and shareholders once the
companies are incorporated. And, in the incorporated group’s case, each company is a
separate legal entity itself and outsiders can only enforce their rights against each
entity and not the whole group. This proposition can be further reinforced in Walker v
Wimborne2, whereby the court refused to recognise the group as one single entity and
reiterated the point that each company within a corporate group is a separate entity
with their own duties and liabilities.
Due to the absence of statutory law on this matter, the courts have been reluctant to
deviate from this principle, which has caused numerous debate and confusion in
Australian law as to when could the courts justify the lift of the corporate veil.
Therefore, it is uncertain as to when would the courts be prepared to lift the veil since
there is no “all embracing principle”3 for the judges to depart from the strict separate
entity doctrine4.
1
Salomon v Salomon & Co Ltd [1897] AC22
Walker v Wimborne (1976) 137 CLR 1
3
Austin RP and Ramsay IM, Ford’s Principles of Corporation Law (12 ed, LexisNexis Butterworths,
2005) p 126
4
Hargovan , A “ Piercing the Corporate veil on Sham Transactions and Companies” (2006) 24
Companies and Securities Law Journal 436.
2
1
With this concept in mind, the discussion below attempts to sort legal actions for the
trade union. The possible legal actions that can be examined through previous
precedents in lifting the corporate veil are:
1. Sham and avoidance of legal obligations
2. Agency relationship.
1. Sham and Avoidance of Legal Obligations
The courts are prepared to lift the corporate veil when there are sufficient reasons to
believe that a company has been used as a sham to avoid legal obligations under
contract or statute, as was laid down by Gilford Motor Co Ltd v Horne [1933] All ER
109.
Before applying this precedent to the case, more information is needed on Casino’s
intention on establishing Caterers.
Assuming Casino wants to put an end to the bad publicity due to the industrial
disputes, it is reasonable that they would give in and settle the disputes by awarding
the employees with higher-than-usual wages. However, the formation of Caterers one
month later to take over Casino’s catering and entertainment services, leading to the
redundancy of employees who were hired again on lower wage contracts has made
the intention of creating a subsidiary suspicious.
2
Due to the timing issue of the new subsidiary and the content5 of the lower wage
contracts, the union can argue that Caterers was formed as a sham to hide Casino’s
true intention. Its true intention to use Caterers as a cost minimisation vehicle to lower
the remuneration packages to their employees can be seen as a dishonest scheme used
by Casino to conceal the true facts.
On this note, this is not to say that Caterers itself is a sham as the company has
complied with the registrations and obligations. The concern here is the involvement
of transactions of creating a façade or a mask to hide Casino’s ulterior motives.6
Base on the above circumstances, there are strong grounds for the court to ignore the
Salomon principle and lift the corporate veil on the grounds of misuse of the corporate
form as a sham.
Furthermore, it is evident that Casino is using Caterers to escape from the contractual
obligations with the employees by setting up Caterers to take control of the catering
and entertainment services. This argument is more convincing when turning to
Kensington International Limited v Republic of Congo7, an England High Court
case where the corporate veil is lifted. The legal issue raised were whether the
structure of the company was placed with the aim of evading liabilities; the facade
5
Harris, “Lifting the Corporate Veil in Industrial Disputes” (2004) 22 Companies and Securities Law
Journal 69.
6
Artedomus v Del Casale [2006] NSWSC 146. It was held that a covenanter cannot evade the
covenant by carrying on a business under a title or by forming a limited company which is a mere veil
for the covenanter’s own activities.
7
Kensington International Limited v Republic of Congo [2005] EWHC 2684. It was held that the
avoidance of existing liabilities through reliance on corporate structures is sufficient to lift the veil.
3
was intended to conceal the identity of the controller and whether the structure was
dishonest8.
Applying this to the case, the fact that Casino’s directors are also the directors of
Caterers highlights the masterminding and full control of Caterers. Thus, the sole
restructuring of the catering and entertainment services and to offer unfavourable
employment contracts to the redundant employees seem like a dishonest and
deliberate evasion of liability. In addition, Caterers coincidentally dealt with all
concerns with the catering and hospitality employees who received generous contracts
and with the assumption that Casino did not want to keep the promise, it is reasonable
to conclude the Casino was using Caterers to conceal from its liabilities.
Although this case is not binding in Australian law, the result is persuasive as it
provides a clear message that Salomon’s case does not necessarily give directors the
privilege to enjoy the corporate veil if the intention for the creation of corporations is
to evade contractual obligations9.
Having previous precedent as support, it is highly likely that the union’s legal course
of action against Casino and Caterers can be succeeded.
Casino Ltd could possibly defend itself by justifying the legitimate commercial
purpose for the incorporation of Caterers Ltd10. The fact that Caterers Ltd was
established for strategic planning in a view of long-term growth of the company could
not be considered as a sham. Moreover, the company could argue that it is practical
8
Kensington International Limited v Republic of Congo [2005] EWHC 2684. Justice Cooke found that
there was no separate existence.
9
Creasey v Breachwood Motors Ltd (1992) 10 ACLC 3,052
10
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204
4
for Casino to develop a subsidiary to specialize in catering and entertainment services,
as the size of the holiday resort is large together with a large number of employees.
2. Agency Relationship
A further argument the trade union could put in place to argue for the lift of the
corporate veil is on the agency ground. The union could allege that there is an implied
agency relationship between Casino Ltd and Caterers Ltd and thus the two companies
are in fact one single entity. Smith Stone & knight Ltd v Birmingham Corp.11(SKK)
sets the proposition that the corporate veil can be lifted if an agency relationship
existed between the companies in which the subsidiary can be seen as an implied
agent or an internal department of the parent company and there is no separate entity
present.
For an agency relationship to exist, the following six criteria must be satisfied.
1. Was Caterers’ profits treated as the profits of Casino
2. Was Caterers conducting the business appointed by Casino
3. Was Casino the head and brain of the trading venture
4. Did Casino govern the venture and decide what should be done and what capital
should be used
5. Did Casino make profits by its skill and direction
6. Was Casino in effectual and constant control
11
Smith Stone & Knight Ltd v Birmingham Corp. [1939] 4 All ER 116
5
Casino Ltd has explicitly stated that they will receive all of Caterers’ profit in the
form of dividend, which satisfies the first question. Moreover, Caterers was appointed
by Casino to act as a “significant operation in its own right both within and outside
the resort”, which adheres to the second question. Three of Casino’s directors are also
the directors of Caterers and that the strategic plan was devised from and has to be
approved by the managers of Casino makes it reasonable to infer that Casino is the
“brain” of Caterers and has effectual control over Caterers. At first instance, it appears
that the union can successfully take legal action under the agency ground as all
evidences also point towards that Caterers is acting as an agent for Casino and thus
there is essentially only one entity.
However, it is important to examine the nature of the six questions before any
conclusion is made. Apart from the first one, all the other five are based on “control”
that the parent company has on the subsidiary. This might not be the best approach as
parent companies often have full control over its subsidiaries. Therefore, despite
being criticised in previous case12, “control” is not a plausible test for agency
relationships. Therefore, the six questions should only be treated as a “collection of
relevant factors that may be taken into account”13 when determining whether the
corporate veil should be lifted.
A better analysis of the agency relationship can be examined using Bird Cameron’s14
ratio ruling where it relies on critical facts to deal with the agency relationship.
12
Hobart Bridge Co Ltd v FCT (1951) 82 CLR 372. Kitto J disapproved the lifting of the corporate
veil.
13
Harris. J “Lifting the Corporate Veil on the Basis of an Implied Agency: A revaluation of Smith,
Stone and Knight” (2005) 23 Companies and Securities Law Journal 7.
14
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204
6
In this case, despite Casino has full control of Caterers; it does not give rise to an
agency relationship as “control itself cannot be a decisive indicator of agency”.15
Moreover, there is nothing to suggest that Caterers was undercapitalised or has been
denied resources16. In fact, Casino has explicitly passed on human resources to
Caterers when it offered new employment contracts to the redundant employees,
which indicates that Caterers was actually independently existed.17
Moreover, the Bird Cameron case has placed a great emphasis on the importance of
considering the fundamental purpose of the incorporation of the subsidiary when
determining whether there is an agency relationship18 and the proposition set in the
case was that the corporate veil should not be lifted unless there is no “legitimate
commercial purpose” for the incorporation.19 From the facts, Caterers was established
by a strategic plan to specialize in catering and entertainment services which were in
the long-term interest of the company. This reason is in every sense appropriate and
would very likely be accepted as a legitimate commercial purpose.
Base on the above discussion, it is likely that the Salomon’s principle can be upheld.
Therefore, there is little probability that the union would succeed in alleging that
Casino Ltd and Caterers are one single entity.
15
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204
Hargovan, A and Harris, J “ The Relevance of Control in Establishing an Implied Agency
Relationship between a Company and its Owners” (2005) 23 Companies and Securities Law Journal
459.
17
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204. Besanko J suggested (at
[112]) that overwhelming control maybe relevant in lifting the corporate veil where the controller has
not provided any resources to the company.
18
Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254. Besanko J in Bird Cameron
relied on this view.
19
Hargovan, A and Harris, J “ The Relevance of Control in Establishing an Implied Agency
Relationship between a Company and its Owners” (2005) 23 Companies and Securities Law Journal
463
16
7
In light of this case, the union can suggest the Australian court to explore the
jurisdiction in Canada, in which the judges there have developed a more relaxed
ruling from the SSK case. The Canadian corporation law may acknowledge an agency
relationship and to lift the corporate veil if the parent company places excessive
control over the subsidiary and that the subsidiary has no independent function.20
Hence, excessive controls by parents upon their subsidiaries are legitimate grounds to
lift the corporate veil when the parent’s control demonstrates a lack of identity on the
subsidiary.21
However, with respect to Caterers’ case, it seems that this ruling could not applied
due to the fact that Caterers does not seem to have lost its identity as it has significant
operations of catering and entertainment services for Casino.
Another possible ground that the Canadian court may use to lift the corporate veil is
““when failure to do so would be unfair and lead to a result “flagrantly opposed to
justice””.22 Nevertheless, it is arguable whether the Australian courts would attempt to
use this ruling as the courts of Australia are only concerned with the legality of the
perpetrator’s actions and would not consider the morality issues of the case.
The supporting case for the issues of morality is the James Hardie23 case. In the case,
the court had not lift the corporate veil upon asbestos related injury and death claims
on the defendant’s medical subsidiary. 24 This reflects how rigid the courts stand are
20
Aluminum Co of Canada v Toronto (City) [1944] 3 D.L.R 609. Rand J. stated that the corporate veil
may be pierced when “it can be said that the company is in fact the puppet of the [parent] when the
directing mind and will of the [parent] reaches into and through the corporate façade of the [subsidiary]
and becomes, itself, the manifesting agency”.
21
Hargovan, A and Harris, J “Piercing the Corporate Veil in Canada: A Comparative Analysis” (2007)
28 The Company Lawyer (UK) 58, 59
22
Approach of Justice Murphy Le Car GmbH v Dusty Roads Holdings Ltd 2004 CarswellNS 138 (SC).
23
Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549
24
P. Prince , J Davidson, S. Dudley, “In the shadow of the corporate veil: James Hardie and Asbestos
compensation.” (2004)
http://www.aph.gov.au/library
8
in adhering to the Salomon rule and simply ignore the morality of the case and relies
solely on the legality of the law.
In conclusion, I am of opinion that the union should not take legal action against the
company under the grounds of agency due to the fact that there is lack of consistent
precedents in Australian courts related to this matter. Thus, it is uncertain as to when
would the courts be willing to lift the corporate veil under the agency relationship.
Rather, it is advised that the union should take action on the grounds of sham and
avoidance of legal obligations and allege that the company has created the subsidiary
to mask the ulterior intention in order to evade the obligations to the employees, as the
chance of success in this course may be higher when compared to the other one.
9
corporate veil upon the incorporated companies, Casino Ltd and Caterers Ltd, and
claim both of them were acting as one single entity so that the 60 employees can keep
their original contracts.
The fundamental subject of conflicting interest on both parties is based on the
principle in Salomon’s Case1. This case established that companies have limited
liability and a separate legal identity from its directors and shareholders once the
companies are incorporated. And, in the incorporated group’s case, each company is a
separate legal entity itself and outsiders can only enforce their rights against each
entity and not the whole group. This proposition can be further reinforced in Walker v
Wimborne2, whereby the court refused to recognise the group as one single entity and
reiterated the point that each company within a corporate group is a separate entity
with their own duties and liabilities.
Due to the absence of statutory law on this matter, the courts have been reluctant to
deviate from this principle, which has caused numerous debate and confusion in
Australian law as to when could the courts justify the lift of the corporate veil.
Therefore, it is uncertain as to when would the courts be prepared to lift the veil since
there is no “all embracing principle”3 for the judges to depart from the strict separate
entity doctrine4.
1
Salomon v Salomon & Co Ltd [1897] AC22
Walker v Wimborne (1976) 137 CLR 1
3
Austin RP and Ramsay IM, Ford’s Principles of Corporation Law (12 ed, LexisNexis Butterworths,
2005) p 126
4
Hargovan , A “ Piercing the Corporate veil on Sham Transactions and Companies” (2006) 24
Companies and Securities Law Journal 436.
2
1
With this concept in mind, the discussion below attempts to sort legal actions for the
trade union. The possible legal actions that can be examined through previous
precedents in lifting the corporate veil are:
1. Sham and avoidance of legal obligations
2. Agency relationship.
1. Sham and Avoidance of Legal Obligations
The courts are prepared to lift the corporate veil when there are sufficient reasons to
believe that a company has been used as a sham to avoid legal obligations under
contract or statute, as was laid down by Gilford Motor Co Ltd v Horne [1933] All ER
109.
Before applying this precedent to the case, more information is needed on Casino’s
intention on establishing Caterers.
Assuming Casino wants to put an end to the bad publicity due to the industrial
disputes, it is reasonable that they would give in and settle the disputes by awarding
the employees with higher-than-usual wages. However, the formation of Caterers one
month later to take over Casino’s catering and entertainment services, leading to the
redundancy of employees who were hired again on lower wage contracts has made
the intention of creating a subsidiary suspicious.
2
Due to the timing issue of the new subsidiary and the content5 of the lower wage
contracts, the union can argue that Caterers was formed as a sham to hide Casino’s
true intention. Its true intention to use Caterers as a cost minimisation vehicle to lower
the remuneration packages to their employees can be seen as a dishonest scheme used
by Casino to conceal the true facts.
On this note, this is not to say that Caterers itself is a sham as the company has
complied with the registrations and obligations. The concern here is the involvement
of transactions of creating a façade or a mask to hide Casino’s ulterior motives.6
Base on the above circumstances, there are strong grounds for the court to ignore the
Salomon principle and lift the corporate veil on the grounds of misuse of the corporate
form as a sham.
Furthermore, it is evident that Casino is using Caterers to escape from the contractual
obligations with the employees by setting up Caterers to take control of the catering
and entertainment services. This argument is more convincing when turning to
Kensington International Limited v Republic of Congo7, an England High Court
case where the corporate veil is lifted. The legal issue raised were whether the
structure of the company was placed with the aim of evading liabilities; the facade
5
Harris, “Lifting the Corporate Veil in Industrial Disputes” (2004) 22 Companies and Securities Law
Journal 69.
6
Artedomus v Del Casale [2006] NSWSC 146. It was held that a covenanter cannot evade the
covenant by carrying on a business under a title or by forming a limited company which is a mere veil
for the covenanter’s own activities.
7
Kensington International Limited v Republic of Congo [2005] EWHC 2684. It was held that the
avoidance of existing liabilities through reliance on corporate structures is sufficient to lift the veil.
3
was intended to conceal the identity of the controller and whether the structure was
dishonest8.
Applying this to the case, the fact that Casino’s directors are also the directors of
Caterers highlights the masterminding and full control of Caterers. Thus, the sole
restructuring of the catering and entertainment services and to offer unfavourable
employment contracts to the redundant employees seem like a dishonest and
deliberate evasion of liability. In addition, Caterers coincidentally dealt with all
concerns with the catering and hospitality employees who received generous contracts
and with the assumption that Casino did not want to keep the promise, it is reasonable
to conclude the Casino was using Caterers to conceal from its liabilities.
Although this case is not binding in Australian law, the result is persuasive as it
provides a clear message that Salomon’s case does not necessarily give directors the
privilege to enjoy the corporate veil if the intention for the creation of corporations is
to evade contractual obligations9.
Having previous precedent as support, it is highly likely that the union’s legal course
of action against Casino and Caterers can be succeeded.
Casino Ltd could possibly defend itself by justifying the legitimate commercial
purpose for the incorporation of Caterers Ltd10. The fact that Caterers Ltd was
established for strategic planning in a view of long-term growth of the company could
not be considered as a sham. Moreover, the company could argue that it is practical
8
Kensington International Limited v Republic of Congo [2005] EWHC 2684. Justice Cooke found that
there was no separate existence.
9
Creasey v Breachwood Motors Ltd (1992) 10 ACLC 3,052
10
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204
4
for Casino to develop a subsidiary to specialize in catering and entertainment services,
as the size of the holiday resort is large together with a large number of employees.
2. Agency Relationship
A further argument the trade union could put in place to argue for the lift of the
corporate veil is on the agency ground. The union could allege that there is an implied
agency relationship between Casino Ltd and Caterers Ltd and thus the two companies
are in fact one single entity. Smith Stone & knight Ltd v Birmingham Corp.11(SKK)
sets the proposition that the corporate veil can be lifted if an agency relationship
existed between the companies in which the subsidiary can be seen as an implied
agent or an internal department of the parent company and there is no separate entity
present.
For an agency relationship to exist, the following six criteria must be satisfied.
1. Was Caterers’ profits treated as the profits of Casino
2. Was Caterers conducting the business appointed by Casino
3. Was Casino the head and brain of the trading venture
4. Did Casino govern the venture and decide what should be done and what capital
should be used
5. Did Casino make profits by its skill and direction
6. Was Casino in effectual and constant control
11
Smith Stone & Knight Ltd v Birmingham Corp. [1939] 4 All ER 116
5
Casino Ltd has explicitly stated that they will receive all of Caterers’ profit in the
form of dividend, which satisfies the first question. Moreover, Caterers was appointed
by Casino to act as a “significant operation in its own right both within and outside
the resort”, which adheres to the second question. Three of Casino’s directors are also
the directors of Caterers and that the strategic plan was devised from and has to be
approved by the managers of Casino makes it reasonable to infer that Casino is the
“brain” of Caterers and has effectual control over Caterers. At first instance, it appears
that the union can successfully take legal action under the agency ground as all
evidences also point towards that Caterers is acting as an agent for Casino and thus
there is essentially only one entity.
However, it is important to examine the nature of the six questions before any
conclusion is made. Apart from the first one, all the other five are based on “control”
that the parent company has on the subsidiary. This might not be the best approach as
parent companies often have full control over its subsidiaries. Therefore, despite
being criticised in previous case12, “control” is not a plausible test for agency
relationships. Therefore, the six questions should only be treated as a “collection of
relevant factors that may be taken into account”13 when determining whether the
corporate veil should be lifted.
A better analysis of the agency relationship can be examined using Bird Cameron’s14
ratio ruling where it relies on critical facts to deal with the agency relationship.
12
Hobart Bridge Co Ltd v FCT (1951) 82 CLR 372. Kitto J disapproved the lifting of the corporate
veil.
13
Harris. J “Lifting the Corporate Veil on the Basis of an Implied Agency: A revaluation of Smith,
Stone and Knight” (2005) 23 Companies and Securities Law Journal 7.
14
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204
6
In this case, despite Casino has full control of Caterers; it does not give rise to an
agency relationship as “control itself cannot be a decisive indicator of agency”.15
Moreover, there is nothing to suggest that Caterers was undercapitalised or has been
denied resources16. In fact, Casino has explicitly passed on human resources to
Caterers when it offered new employment contracts to the redundant employees,
which indicates that Caterers was actually independently existed.17
Moreover, the Bird Cameron case has placed a great emphasis on the importance of
considering the fundamental purpose of the incorporation of the subsidiary when
determining whether there is an agency relationship18 and the proposition set in the
case was that the corporate veil should not be lifted unless there is no “legitimate
commercial purpose” for the incorporation.19 From the facts, Caterers was established
by a strategic plan to specialize in catering and entertainment services which were in
the long-term interest of the company. This reason is in every sense appropriate and
would very likely be accepted as a legitimate commercial purpose.
Base on the above discussion, it is likely that the Salomon’s principle can be upheld.
Therefore, there is little probability that the union would succeed in alleging that
Casino Ltd and Caterers are one single entity.
15
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204
Hargovan, A and Harris, J “ The Relevance of Control in Establishing an Implied Agency
Relationship between a Company and its Owners” (2005) 23 Companies and Securities Law Journal
459.
17
ACN 007 528 207 Pty Ltd (In Liq) v Bird Cameron [2005] SASC 204. Besanko J suggested (at
[112]) that overwhelming control maybe relevant in lifting the corporate veil where the controller has
not provided any resources to the company.
18
Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254. Besanko J in Bird Cameron
relied on this view.
19
Hargovan, A and Harris, J “ The Relevance of Control in Establishing an Implied Agency
Relationship between a Company and its Owners” (2005) 23 Companies and Securities Law Journal
463
16
7
In light of this case, the union can suggest the Australian court to explore the
jurisdiction in Canada, in which the judges there have developed a more relaxed
ruling from the SSK case. The Canadian corporation law may acknowledge an agency
relationship and to lift the corporate veil if the parent company places excessive
control over the subsidiary and that the subsidiary has no independent function.20
Hence, excessive controls by parents upon their subsidiaries are legitimate grounds to
lift the corporate veil when the parent’s control demonstrates a lack of identity on the
subsidiary.21
However, with respect to Caterers’ case, it seems that this ruling could not applied
due to the fact that Caterers does not seem to have lost its identity as it has significant
operations of catering and entertainment services for Casino.
Another possible ground that the Canadian court may use to lift the corporate veil is
““when failure to do so would be unfair and lead to a result “flagrantly opposed to
justice””.22 Nevertheless, it is arguable whether the Australian courts would attempt to
use this ruling as the courts of Australia are only concerned with the legality of the
perpetrator’s actions and would not consider the morality issues of the case.
The supporting case for the issues of morality is the James Hardie23 case. In the case,
the court had not lift the corporate veil upon asbestos related injury and death claims
on the defendant’s medical subsidiary. 24 This reflects how rigid the courts stand are
20
Aluminum Co of Canada v Toronto (City) [1944] 3 D.L.R 609. Rand J. stated that the corporate veil
may be pierced when “it can be said that the company is in fact the puppet of the [parent] when the
directing mind and will of the [parent] reaches into and through the corporate façade of the [subsidiary]
and becomes, itself, the manifesting agency”.
21
Hargovan, A and Harris, J “Piercing the Corporate Veil in Canada: A Comparative Analysis” (2007)
28 The Company Lawyer (UK) 58, 59
22
Approach of Justice Murphy Le Car GmbH v Dusty Roads Holdings Ltd 2004 CarswellNS 138 (SC).
23
Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549
24
P. Prince , J Davidson, S. Dudley, “In the shadow of the corporate veil: James Hardie and Asbestos
compensation.” (2004)
http://www.aph.gov.au/library
8
in adhering to the Salomon rule and simply ignore the morality of the case and relies
solely on the legality of the law.
In conclusion, I am of opinion that the union should not take legal action against the
company under the grounds of agency due to the fact that there is lack of consistent
precedents in Australian courts related to this matter. Thus, it is uncertain as to when
would the courts be willing to lift the corporate veil under the agency relationship.
Rather, it is advised that the union should take action on the grounds of sham and
avoidance of legal obligations and allege that the company has created the subsidiary
to mask the ulterior intention in order to evade the obligations to the employees, as the
chance of success in this course may be higher when compared to the other one.
9
