Application of the misuse of the "piercing-the-corporate-veil" doctrine

Mr Fabián Rubén Pardini sued Compañía Fredel S.R.L. and its partners for damages caused by the defective fulfilment of the obligations under a prepaid health services agreement. The first instance decision in re “Pardini, Fabián c/ Compañía Fredel SRL s/ ordinario”[1] issued a judgement in favour of the plaintiff, without considering the liability of the company’s partners.

Tribunal C of the Court of Appeals in Commercial Matters of the City of Buenos Aires broadly confirmed the first instance decision; however, it also extended the liability to the partners of the company. The members of Tribunal C based their judgement on Section 54 of the Argentine Companies Law, which provides that the limitation of liability may be set aside in case the company is exploited for non-corporate purposes, or as a means to infringe the law, the company’s by-laws, its rules, or to frustrate the right of third parties.

The Tribunal stated that the misuse of the "piercing-the-corporate-veil" doctrine is an extraordinary resource, to be applied exclusively when there is complete and absolute certainty that the corporate structure has been abused to reach purposes contrary to the interests of the company or to violate the law. Also, the Justices further stated that irrefutable evidence must be provided so that the "piercing-the-corporate-veil" doctrine may be set aside.

The Tribunal deemed that an abuse of the corporate structure did exist, and there was also highly irregular performance of both partners, giving rise to confusion between the legal entity and its partners. This took into consideration the following evidence: (i) the company does not carry an inventory book; (ii) the bills were not properly registered; (iii) the company has neither registered goods, nor securities, nor stockholdings in other companies; (iv) another company carries out its activities in the legal domicile of the defendant company; (v) the defendant changed the domicile of collection of the affiliates’ payment, making difficult to Mr. Pardini to carry out the payments, with the intention of forbidding him to access to the health services; and (vi) the person who collected the company’s services door to door was not a company employee.

In conclusion, the Tribunal ruled to apply Section 54 in fine of the Argentine Companies Law in this case, extending the joint and several liability to the company’s partners.