of three wholly owned industrial subsidiaries. Dent at 124-25. (It would thus appear that Spiro's repeated assertions that this was done after Dent stepped down as managing director of Cape in January of 1971 may be erroneous. See Spiro at 15-16.) And, notwithstanding Spiro's statement that Dent's service in this role was only "a very short-lived experience" (Spiro at 35), Dent testified that he served in this capacity for three years and then stepped down voluntarily (Dent at 125).
As noted above, Dent remained on the Charter Board until he retired as chairman of Cape in 1979. One year later, Higham assumed that role (he was still managing director of Cape) and was appointed to the Charter Board. That same year, Higham was "seconded" by Charter, the result being that he spent half his time with Cape and half with Charter. In so doing, he relinquished his role as managing director of Cape but retained Cape's chairmanship and his benefits with the company. At the same time, he assumed the leadership of Charter's Industrial Division and is thus on Charter's Executive Committee. He is paid by Charter (Cape is apparently debited for its share of him), and he testified: "I normally go to Cape on Monday and Tuesday each week and I go to Charter on Wednesday and Thursday each week and on Friday I do whatever is necessary." Higham (April 8, 1981) at 177.
There is more -- more Charter Executive Committee minutes evincing Charter's desire to impose certain policies on Cape's management (see, e.g., Rudland, Ex. B at 1459, 1464, 1465, 1469) and, as Stopford-Sackville noted, Cape usually fulfilled Charter's desires (Stopford-Sackville at 80-81); Charter's role as registrar for Cape and underwriter of two rather large share issues by Cape (see, e.g., Rudland Ex. A at 1487, Ex. B at 1444, 1451); Charter's consolidation, in compliance with English law, of Cape's profits with its own; and so on -- but in light of the foregoing, it is not necessary to describe the corporate interconnections in any greater detail. Making every inference in favor of the party moved against, as we are required to do at this stage, it is clear that the evidence of Charter's control of Cape presents a genuine issue of fact.
We thus proceed to the second part of the test for disregarding the corporate veil. As noted above, the equitable doctrine quite logically provides that the corporate entity may be disregarded where it is being used in an inequitable fashion.
Charter makes much of the fact that the courts of Pennsylvania and elsewhere require illegality or fraud in order to pierce the corporate veil, and that none of Cape's activities, even if they are attributed to Charter, constitute such egregious behavior. We assume, however, that when the Pennsylvania Supreme Court repeatedly states that the corporate entity may not be used "to defeat public convenience, justify wrong, protect fraud or defend crime," and that the form will be disregarded "whenever justice or public policy demand. . . .," the court means exactly what it says. See Ashley, supra, 482 Pa. at 237, 393 A.2d at 641; Sams, supra, 431 Pa. at 244, 244 A.2d at 781.
The fact that the Pennsylvania courts have not had occasion to elaborate on what is meant by inconvenience (the cases deal primarily with fraud), does not rob the term of its common meaning, nor deprive it of its legal effect. Long ago, the Supreme Court took note of the need to provide an American citizen with a forum in this country when the fund in dispute was located in England. See Phelps v. McDonald, 99 U.S. (IX Otto) 298, 25 L. Ed. 473 (1878). The Court asked: "Why should not this question of paramount right be settled in this case, rather than that the American claimant should be subjected to the delay, expenses, and other inconveniences of a suit before a foreign tribunal?" Id. at 308. While we now possess methods superior to those existing in 1878 for crossing the Atlantic, most asbestos plaintiffs are ill-equipped to undertake the sort of trans-Atlantic, if not trans-global, litigation, necessitated by Cape's apparently evasive maneuvers. The expense alone supplies the inconvenience in this case. Add to that the ill-health and age of many of these plaintiffs, and there simply can be no doubt.
Nor can we ignore the state court's admonition that the corporate form must be disregarded "whenever justice and public policy demand." Thus, although limitation of liability is a legitimate benefit of incorporation, that benefit is lost where the corporate form is resorted to "deliberately, with specific intent to escape liability for a specific tort or class of torts . . . ." Zubik, supra, 384 F.2d at 273. And there is no rational basis for distinguishing between formation of a corporation for these purposes and use of an already existing entity to achieve them. See Fletcher Supp. § 43.20 at 34. In either event, a distinction may be drawn between (1) carrying out the everyday affairs of corporate business (e.g., the mining and sale of asbestos) -- the sort of activity which traditionally merits the privilege of limitation of liability bestowed by the protective corporate form; and (2) carrying out legal maneuvers aimed at maximizing the limitation of liability to a point of near invulnerability to responsibility for injury to the public. In our view, the latter, which may well be the situation here, constitutes an abuse of privilege, which in an equitable analysis of competing public policy considerations must surely fail.
As mentioned previously, the record reveals that on the same day that the Cape Board was advised of its $1.1 million contribution to a settlement of asbestos litigation in Texas, the Board proposed a
reorganization of the Group's asbestos selling arrangements, particularly in the U.S.A., which in future would be more closely controlled from South Africa. As part of this reorganization it is proposed that North American Asbestos Corporation should be wound up.
Appendix to LAQ's supplemental brief, Ex. 3 at 3. Present at this meeting were all three Charter executives who were nominees to Cape's Board, including Cape's deputy chairman. North American Asbestos Corp. (NAAC),
a wholly owned subsidiary of Cape, was dissolved in May 1978.
Thereafter, acting on English and American legal advice, Cape's management resolved that it would not appear in any asbestos suits brought against it in the United States (see Higham (July 5, 1984) at 62-63), the prevailing corporate belief being that default judgments entered against Cape in the United States could not be enforced against it in England. See 1982 Charter Annual Report, quoted in LAQ's supplemental brief at 5 n.5. Cape also appears to have instructed its insurers not to defend any such suits. See LAQ's supplemental brief at 4 & n.3.
In June 1979, Cape completely divested itself of its South African asbestos mines; the mines were sold to Transvaal Consolidated Land and Exploration Co. (TCL), a South African firm. The Cape-Charter board members recalled that negotiations for the sale originated perhaps as early as the mid-1970s for various reasons, including the decline in the profitability of asbestos ventures and the political obstacles involved in doing business with South African firms. See, e.g., Richardson at 28; Higham at 68; Dent at 82. None of these gentlemen could recall the sale being primarily motivated by a desire to be rid of liability-rich assets. As noted above, however, the agreement of sale indemnified TCL for any judgment arising out of asbestos claims existing at the time of sale or instituted within three years thereafter. The terms of the indemnification included the condition that the purchaser not appear to defend actions instituted in the United States; i.e., this protection was conditioned on TCL defaulting in American lawsuits. See Appendix to LAQ's Supplemental Brief, Ex. 4 at C1000142-143. Thus, although as Higham observed, TCL was not thereby absolutely precluded from defending suits in this country, it was effectively deprived of whatever incentive it may have had to do so.
In our view, the issue whether Cape management, by these acts
deliberately sought to escape liability is a second disputed issue of material fact which precludes the entry of summary judgment.
We do not, of course, hereby attach liability to Charter. It is clear, however, that if the plaintiff and LAQ can prove that Charter controls Cape, and that Cape has deliberately avoided liability to American plaintiffs, it will be fair to ask Charter to stay and defend Cape's position. Motions denied.
AND NOW, this 6th day of May, 1985, it is ORDERED that the Motions for Summary Judgment of defendants Charter Consolidated, Ltd., Charter Consolidated Investments, Ltd., Central Mining Finance, Ltd., Charter Consolidated Services, Ltd., Consolidated Mines Selection Company, Ltd., and The British South Africa Company in the above-captioned cases are hereby denied.