The Impact of the Corporate Form on Corporate Liability for ...

actions in Australia for harm caused overseas, based on a direct negligence-type
approach. 116
(c)
Process liability – conclusions
174. <strong>The</strong> process liability cases brought in <strong>the</strong> UK have not created any authorities to be relied
upon, but present new approach to liability in response to <strong>the</strong> limitations thrown up by <strong>the</strong>
difficulty in piercing <strong>the</strong> corporate veil. This may represent a trend for <strong>the</strong> future in <strong>the</strong>
litigation <strong>of</strong> mass torts. Although 'process liability' per se has not been run in Australia,
similar cases, involving <strong>the</strong> direct negligence <strong>of</strong> parent companies, have been run
successfully by claimants against parent companies.
11.2 Piercing <strong>the</strong> corporate veil and separate legal entity – statutory change?
175. As stated above, <strong>the</strong> current status <strong>of</strong> <strong>the</strong> law in relation to lifting <strong>the</strong> corporate veil may, at
times, create a disjuncture between <strong>the</strong> legal approach <strong>of</strong> separate legal entity and <strong>the</strong>
commercial reality <strong>of</strong> effective control by parent companies. Leaving <strong>the</strong> doctrine
unaddressed by legislative reform has been criticised as leaving <strong>the</strong> deliberate misuse <strong>of</strong>
corporate entities unresolved. 117
176. Fur<strong>the</strong>r, <strong>the</strong>re have been calls for a redefinition <strong>of</strong> corporate personality to accommodate a
more principled approach to liability, for instance in <strong>the</strong> context <strong>of</strong> tort law. Parker argues
that if only humans have morality and a company is merely a nexus for contractual players,
<strong>the</strong>n surely it follows – even on a contractarian view – that <strong>the</strong> individual players should
ultimately be held liable for <strong>the</strong>ir actions. 118 He quotes D Fischel: 119
'Those who argue <strong>the</strong> corporations have a social responsibility and <strong>the</strong>refore that managers
have <strong>the</strong> right, and perhaps <strong>the</strong> duty, to consider <strong>the</strong> impact <strong>of</strong> <strong>the</strong>ir decisions on <strong>the</strong> public
interest assumed that corporations are capable <strong>of</strong> having social or moral obligations. This is
a fundamental error, a corporation, as discussed above, is nothing more than a legal fiction
that serves as a nexus for a mass <strong>of</strong> contracts which various individuals have voluntarily
entered into for <strong>the</strong>ir mutual benefit. Since it is a legal fiction, a corporation is incapable <strong>of</strong>
having social or moral obligations much in <strong>the</strong> same way that inanimate objects are
incapable <strong>of</strong> having <strong>the</strong>se obligations. Only people can have moral obligations or social
responsibilities, and only people bear <strong>the</strong> costs <strong>of</strong> <strong>the</strong> non-wealth maximising behaviour.'
177. <strong>The</strong> need for statutory guidance in order to avoid spasmodic and random piercing, and to
guide <strong>the</strong> development and application <strong>of</strong> <strong>the</strong> doctrine, has also been recognised by <strong>the</strong>
courts (Qintex at 266). However, legislative reform looks increasingly unlikely.
116
117
118
119
See R Meeran 'Corporations, Human Rights and Transnational Litigation', paper delivered at Monash University,
29 January 2004 (see www.law.monash.edu.au/castancentre/events/2003/meeranpaper.html)
See also Parker at 50-51, who stresses <strong>the</strong> need for <strong>the</strong> development <strong>of</strong> sound principles for piercing <strong>the</strong>
corporate veil.
Parker, D page 52.
Fischel, D '<strong>The</strong> corporate governance movement' (1982) 35 Van derbilt Law Review 1259 at 1273.
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