Inner House backs reviving of companies sued in Texas

A decision to allow two dissolved Scottish companies to be restored to the register so that they could be sued in proceedings in Texas has been upheld by the Inner House of the Court of Session, despite an argument that the claim was bound to fail as it involved an attempt to pierce the corporate veil.

Lord President Carloway, Lord Brodie and Lord Woolman refused an appeal by members of the SPEX group of companies against a decision by Lord Clark to allow two former companies in the group to be restored to the register in order that MCR Oil Tools could pursue proceedings in the Texas courts alleging an attempt to elide the terms of licence agreements. The dissolved companies had been the licensees and MCR regarded it as essential to join them in the case.

The application was opposed on the basis that the licensees had no assets, and any attempt to fix liability on other companies in the group was bound to fail as involving a piercing of the corporate veil. The Lord Ordinary, applying the test in the case law of considering whether the claim was "merely shadowy", decided on the basis of affidavits from Texan attorneys that the case was not bound to fail and in any event the test had been met. (Click here for a Journal commentary.)

On appeal the SPEX companies accepted that the court had a wide discretion and that it should deal with matters simply, without going into the merits of the claim, but argued that it was self evident that any attempt to pierce the veil would be bound to fail, and the claim as set out in the Texan pleadings lacked coherence and their own affidavit evidence should be preferred.

Lord Woolman, delivering the opinion of the court, said that to examine the law, the pleadings and the affidavits as requested by the reclaimers would require a level of analysis that was inappropriate in these proceedings. "It is precisely the type of exercise that the authorities warn against."

Not being schooled in Texan jurisprudence, the court was not confident that it could properly evaluate the pleadings, and there was no reason to go behind the affidavits for MCR, which had been lodged responsibly.

He continued: "More generally, we see nothing in the circumstances to warrant this case being placed into the exceptional category. We are therefore satisfied that the test is met. MCR’s claims are more than merely shadowy."

The court would express no view on the issues which would be determined by the Texan court, but the Lord Ordinary had correctly exercised his discretion to allow restoration for the companies to be sued there.

Click here to view the opinion of the court.