View/Open - Research Commons - The University of Waikato

one entity. Instead of lifting the veil, the court in this case referred to the doctrine of
estoppel in order to do justice to the parties.
These decisions, however, should not be seen as an abrogation of the principle of
separate legal entity by the court. This is because in both cases it was never
challenged that the subsidiary and the holding company were one entity and were
controlled by the holding company. In Sunrise, the plaintiff made an application for
interlocutory injunction to prevent the holding company from disposing of the assets
belonging to the subsidiary. The court found that the fear was not without basis since
there was an agreement between the holding company and the plaintiff which was
purportedly for the acquisition of land belonging to the subsidiary by the plaintiff.
The holding company, however, terminated the contract three days before the cutoff
date mentioned in the agreement. In Kwan Chew Holdings, it was undisputed that the
defendant had always treated the companies in the group as one entity when dealing
with them. Therefore, the defendant could not have relied on the separate legal entity
in order to avoid liability.
From the facts of both cases, it is clear that the issue of who has control over the
subsidiary and the extent of subsidiary‟s capacity to make decisions had already been
determined without having to lift the corporate veil. Hence, the courts had only to
decide whether the holding companies in these cases had breached the contract.
From the cases discussed above, it is clear that the courts are reluctant to lift the
corporate veil in groups of companies. In situations where the veil is lifted, the courts
have insisted on evidence of control exercised by the parent over the subsidiary, or
whether the subsidiary is independent in making decisions or taking orders from the
parent. It would seem that the courts were of the view that total control of the parent
over the subsidiary is essential. In a partly owned subsidiary, the court will be
reluctant to lift the veil for lack of the control element and will only do so if justice
so demands. However, in the light of recent decisions, judges have demanded that
116