Adams v Cape Industries Plc [1990]

Adams v Cape Industries Plc [1990]

Adams v Cape Industries Plc [1990] Ch 433 is a notable UK company law case that delves into the concepts of separate legal personality and limited liability of shareholders. It addresses key issues related to piercing the corporate veil and the recognition of foreign court jurisdiction over a company. The case has been subject to subsequent developments, particularly in Lungowe v Vedanta Resources Plc [2019] and Chandler v Cape Plc [2012].

Cape Industries plc, a UK company, was the head of a group engaged in asbestos mining. Its subsidiaries operated in South Africa, shipping asbestos to the US, where a marketing subsidiary supplied it to another company in Texas. Employees of the Texas subsidiary developed asbestosis, leading to legal action in a Texas court. Although Cape contested the jurisdiction, a judgment was entered against it for breach of duty in negligence. The question arose when the tort victims sought to enforce the judgment in the UK courts.

The case involved determining whether Cape Industries plc was present in the US through its subsidiary, NAAC, for the purpose of recognising the Texas court's jurisdiction. To establish presence, the claimants needed to lift the corporate veil and treat Cape and its subsidiaries as one entity. The court had to assess whether the veil could be lifted and if the companies could be treated as a single economic unit.

Scott J held that Cape Industries plc could not be considered present in the US. The Court of Appeal unanimously rejected the allegations that Cape should be treated as part of a single economic unit or that its subsidiaries were a facade. The court emphasised the principle of Salomon v A Salomon & Co Ltd [1896], stating that the corporate veil could not be lifted merely because justice might demand it.

On the issue of presence, the Court of Appeal outlined criteria for a company to be considered present in a foreign jurisdiction. It required a fixed place of business from which the company transacted its own business for more than a minimal time. On these grounds, Cape had no such fixed place of business in the US.

Adams v Cape Industries Plc is significant for setting principles related to piercing the corporate veil and recognising foreign court jurisdiction. Subsequent developments, including Lungowe v Vedanta Resources Plc and Chandler v Cape Plc, have further shaped the understanding of these issues in English law. The case highlights the limitations on lifting the corporate veil and the importance of adhering to legal principles even in complex corporate structures.
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