Allied Irish Coal Supplies Limited V. Powell Duffryn International Fuels Limited Case

noneAllied Irish Coal Supplies Limited v. Powell Duffryn International Fuels Limited the plaintiff had sought, after an alleged breach of contract, to join the parent company as co-defendant in its action as it feared that the parent company was distancing itself from the subsidiary with insufficient funds to pay the debt owed if successful. To do so the plaintiff invoked the single corporate entity argument and that the assets of the holding company should be available to meet the liabilities of the subsidiary as it was dependant on the parent at all times. This was rejected in the High Court and the Supreme Court. Laffoy J in the High Court stated that "... in my view, it cannot be used to render the assets of a parent company available to meet the liabilities of a trading subsidiary, to a party with whom it has not traded. The proposition advanced by the plaintiff seems to me to be so fundamentally at variance with the principle of separate corporate legal personality laid down in Salomon v Salomon & Co. , and the concept of limited liability, that it is wholly unstateable." Barron J stated: "Of course a subsidiary company may be dependent upon its parent company as regards control, finance and operations. But none of that prevents it from being a separate legal entity....It is legitimate for individual transactions to be carried out through the medium of a limited liability company. What is not legitimate is for the person in charge to pick and choose which companies shall obtain the benefit of a transaction, only when that transaction has been completed or is under way." The Supreme Court upheld the decision of the High Court, Murphy J. stated: "While it would be impossible to say that there are no circumstances in which the members of a company, whether corporate or individual, could not conduct, or purport to conduct the business of a company in such a way as to render their assets liable to meet claims in respect of the business normally carried out by the company, I believe that this would be an altogether exceptional state of affairs and difficult to reconcile with the seminal judgment in Salomon v Salomon & Co." Murphy J distinguishing this case from Power Supermarkets in that there was a very substantial business carried on by the subsidiary and that in any event there was nothing in the judgement of Costello J to suggest that the principle of Salomon was being eroded.