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Courts Overruling Separation of Entities

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TheEarl View Drop Down

Joined: 31/January/2014
Location: Australia
Posts: 18
  Quote TheEarl Quote  Post ReplyReply Direct Link To This Post Topic: Courts Overruling Separation of Entities
    Posted: 16/November/2017 at 00:26
Bit of a random question, just out of interest.

Is anyone aware of cases where a Court has deemed separate companies to be effectively one and the same in the event of a compensation payout or bankruptcy, whether or not those companies formally formed parts of a consolidated group?

To illustrate my thinking:
I served on the board of a Church that was structured as an unincorporated association, had a community services arm that was a private company limited by guarantee, and its property and vehicle assets were held by a trust, administered by another private company limited by guarantee. All were registered charities, and had overlaps in operations, as well as the boards sharing most, if not all, of their members. The Senior Minister of the Church was ex officio the Chair of all of the boards.

While the structural separation of the Church and Community Services company are no surprise, it was highlighted a few times in conversation how the property assets being held in a separate trust protected them if the Church were ever sued for any reason, with the Church itself having almost no assets worth going after.

This is only one specific example of what I believe to be a fairly common practice, not only in Church structures, but in various corporate structures as well.

My question is, are there any cases that anyone is aware of where the Court has, for want of a better explanation, seen through the artificial nature of the structure and deemed the assets of one entity to be "in play" for compensation or liquidation of another, despite them being separate legal persons?

(NB: I am aware of cases where assets have been shifted from one company to another right before a bankruptcy and the Court has ordered a claw-back, that's not what I was meaning)

Edited by TheEarl - 16/November/2017 at 00:27
Winston Howard Esq
Politics, Investment and Law Enthusiast

citizen-joe View Drop Down
Senior Member
Senior Member

Joined: 09/October/2005
Location: Australia
Posts: 723
  Quote citizen-joe Quote  Post ReplyReply Direct Link To This Post Posted: 20/November/2017 at 01:25
Not aware of any cases, and I think you'll have your back to the wall trying to sue one entity and expect the other to also become involved.

I am aware of a case where an employee of a service station sued his employing company, the case failed because the owner of the business had structured the business as four companies in a convoluted ownership arrangement. Another of the companies was liable but the employee was so out of pocket for the failed case that he was unable to mount a case against the other company.

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