Raja v Van Hoogstraten & Ors

Control of a company, even extensive control, does not by itself justify treating the company’s assets as those of its controller or lifting the corporate veil. The court must examine why the corporate structure exists, why control is exercised and why the shareholdings have changed. The essential element is impropriety. A dishonest arrangement designed to conceal the true ownership and benefit of assets, and to minimise the individual’s liabilities, may justify going behind the corporate structure, including where anticipated liabilities are involved. A general power to disregard separate corporate personality whenever justice requires is too broad. At the pleading stage, allegations need not prove the case, but must be capable, if proved and uncontradicted, of supporting the necessary inference. A bare or resulting trust allegation requires a clear factual basis.

The claimant, representing the estate of Mohammed Safir Raja, applied to amend its Particulars of Claim in proceedings concerning whether ten companies were beneficially owned by Mr Van Hoogstraten or held assets beneficially owned by him. The proposed amendments followed directions given by Lightman J requiring separate particulars of the assets, alleged proprietary interests and supporting facts for each company.

The companies challenged the amendments insofar as they alleged that their assets were beneficially owned by Mr Van Hoogstraten, held on trust for him, or subject to a claim to lift the corporate veil. The issue was whether the amended pleadings were capable of supporting those claims.

1. The amendments were allowed in part. The allegations concerning beneficial ownership of the companies’ assets were capable of proceeding to trial. The allegations of bare trusteeship or nominee-ship were not permitted to stand.
2. Pleadings are not required to prove the facts. They must identify the facts intended to be proved. If proved and uncontradicted, those facts must be capable, at the lowest, of enabling the court to infer beneficial ownership. The supporting evidence must ultimately be admissible.
3. Extensive control by an individual over companies is not, by itself, enough to establish that their assets belong beneficially to him. The court must ask why the structure exists, why control is exercised and why the shareholdings changed.
4. The essential element in lifting the corporate veil is impropriety. A dishonest corporate arrangement designed to conceal the true ownership of assets, conceal the true beneficiary of their exploitation and minimise the individual’s liability may justify going behind the corporate structure. A broad proposition that the veil may be lifted whenever justice requires was not accepted.
5. The allegations that Mr Van Hoogstraten controlled the companies, that they lacked an independent commercial rationale, that their structures concealed the true ownership and that they operated for his benefit were sufficiently capable of supporting the inference claimed. Their ultimate strength was a matter for trial.
6. The trust allegations were different. A resulting trust or bare trusteeship would require a clear indication that the properties had been conveyed to the companies by Mr Van Hoogstraten, or that he had provided the acquisition money without receiving consideration. His direct or indirect shareholding made those allegations especially difficult to sustain.