Company

Director controlling mind of sham company - company knowingly receiving moneys obtained in breach of duty - receipt by company also receipt by directorTrustor AB v Smallbone and another: ChD (Sir Andrew Morritt V-C): 16 March 2001In breach of his duty as the managing director of the claimant company, the first defendant transferred substantial sums belonging to the claimant to the second defendant.

The second defendant was a sham company of which the first defendant was the controlling mind.On an application for summary judgment, the second defendant was ordered to pay 166.7 million Swedish krona, 404,100 and 75.5 million Finnish marks to the claimant on the ground of knowing receipt.

On a further application for summary judgment the claimant sought an order that the first defendant pay those sums on the basis that liability was joint and several with the second defendant because receipt by the second defendant was, in the circumstances, to be treated as the receipt by the first defendant too.Stephen Smith QC (instructed by Allen & Overy) for the claimant.

The defendant in person.Held, granting the application, that the second defendant was a device or facade to conceal the true facts, thereby avoiding or concealing the liability of the first defendant; and that, accordingly, the court was permitted to 'pierce the corporate veil' and recognise receipt of the claimant's money by the second defendant as receipt by the first defendant too.