Industrial Equity Ltd v Blackburn (1977) 137 CLR 567

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  • In 30 October 1975, Industrial Equity Ltd’s (Industrial) board of directors declared a “special distribution” payable in part cash, part shares in Minerva Centre Ltd.
  • Members who held less than 400 shares would be paid solely in cash.
  • At the date of distribution, the amount payable was more than Industrial’s profits for the year, but less than the consolidated group of companies which Industrial was the holding company.
  • Shareholders applied to the NSW Supreme Court to declare the declaration invalid on the grounds that it involved a payment of a dividend other than out of profits and that it discriminated against shareholders with less than 400 shares.
  • Needham J allowed the application and declare the declaration invalid.  Industrial appealed.


  • Were the directors able to make payments of dividends out of funds other than out of profits, and decide which shareholders received cash and shares or cash only?
  • Did the profits of the subsidiaries lay within the general disposition of Industrial, as holding company, to distribute?


  • The High Court rejected that the profits in subsidiaries lay within the disposition of Industrial (as holding company) to distribute.
  • Company A cannot (in the absence of a contrary agreement) look to Company B for payment.
  • The High Court is reluctant to pierce the corporate veil in respect of corporate groups.
  • The Articles of Association did not allow Industrial’s directors to pay some shareholders in cash and shares, and some in cash only.


“It has been said that the rigours of the doctrine enunciated by Salomon v Salomon & Co Ltd have been alleviated by the modern requirements as to consolidated or group accounts…But the purposes of these requirements is to ensure that members of, and for that matter persons dealing with, a holding company are provided with accurate information as to the profit or loss and the state of affairs of that company and its subsidiary companies within the group… However, it can scarcely be contended that the provisions of the Act operate to deny the separate legal personality of each company in a group. Thus, in the absence of contract creating some additional right, the creditors of company A, a subsidiary company within a group, can look only to that company for payment of their debts. They cannot look to company B, the holding company, for payment (see Walker v Wimborne).”

(Mason J at page 577)

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Useful Article

To further explore piercing the corporate veil, a useful resource is:

Ian Ramsay, “Piercing the Corporate Veil in Australia” (2001) 19 Company and Securities Law Journal 250…/122-Piercing_the_Corporate_Veil1.pdf

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