BETH CLIFFORD & ors v LCW INVESTMENTS, LLC

Summary. The appellants in this appeal, Beth Clifford and Beltway Investment Group Inc (‘Beltway’), challenged an order of the Court of Appeal of Belize holding them jointly liable to pay damages to the respondent, LCW Investments, LLC (‘LCW’) for the breach of contract by another entity, Green Development Partners Ltd (‘GDP’). In 2017, LCW entered into a contract with GDP for the purchase of land in Belize and for the construction of a house on that land. The contract provided that within 10 days of execution, the buyer shall enter into a land purchase agreement with a third party. The contract also stipulated that LCW should wire to Beltway all payments to GDP under the contract. While neither Beth Clifford nor Beltway was a party to the contract, Beth Clifford is the sole shareholder and director of both GDP and Beltway. After LCW had paid the contract sum and experienced excessive delay in receiving title for the land and in construction of the house, it rescinded the contract and commenced proceedings in the High Court against GDP, Beth Clifford and Beltway. The High Court awarded damages to LCW against GDP only for breach of an implied contractual obligation for GDP to present LCW with the land purchase agreement within 10 days. On appeal, the Court of Appeal affirmed the High Court’s finding that GDP breached the contract. In addition, the Court of Appeal considered that the structure of the companies under Beth Clifford’s control (in ways that obscured their individual identities) combined with the nature of the transaction itself established the necessary impropriety to disregard the separate legal personality of GDP and held Beth Clifford jointly liable for the breach of contract. It also held Beltway liable for the contractual breach on the basis that it had been wired the contract sum from LCW and LCW had not received the lot title or house. GDP did not appeal the Court of Appeal’s decision. The issues before the Caribbean Court of Justice (‘CCJ’) were therefore limited to: 1. Whether the Court of Appeal erred in disregarding the separate legal personality of GDP to hold Beth Clifford personally liable for GDP’s breach of contract (‘Disregard of Separate Corporate Personality’) and 2. Whether the Court of Appeal erred in holding Beltway jointly liable for GDP’s breach of contract (‘Beltway’s Liability’). The CCJ unanimously allowed the appeal. Disregard of Separate Corporate Personality The Court found that there was no basis for holding Beth Clifford personally liable for GDP’s breach of contract. As to whether the separate legal personality of GDP should be disregarded to impute liability for the contractual breach to Beth Clifford, counsel for both parties, and the Court of Appeal, had relied on the UK Supreme Court case Prest v Petrodel Resources Ltd (‘Prest’). In that case, Lord Sumption, who delivered the leading judgment, had articulated the ‘concealment’ and ‘evasion’ principles when discussing the circumstances in which a court is entitled to pierce the corporate veil under English law. The concealment principle allows a court to look behind the veil to discover the facts the corporate structure is concealing without actually piercing the corporate veil. The evasion principle is a limited principle of English law that entitles a court to disregard the corporate veil where a company is interposed to evade or frustrate the enforcement of a pre-existing legal right against the controller. A majority of the Court (Rajnauth-Lee, Jamadar, Ononaiwu and Eboe-Osuji JJ) agreed that the CCJ should not adopt Lord Sumption’s concealment/evasion framework. Ononaiwu J (with whom Rajnauth-Lee and Eboe-Osuji JJ agreed) proposed the approach that should guide the courts’ exercise of their power at common law to disregard the separate legal personality of a company. First, the courts are entitled to disregard a company’s separate legal personality to give relief to third parties where they are satisfied that the corporate form has be