Everyone knows that the corporate veil has the advantage of shielding directors from personal liability. However, far fewer people are aware of its downsides. In one case which illustrates this point, a businessman who dealt with a bank entirely through his company failed to establish that he was himself the bank’s customer.

The businessman was a director and the sole shareholder of a company which was alleged to have been mis-sold certain interest rate hedging products by the bank. Following a review of such sales by the Financial Services Authority, the bank agreed to pay the company almost £2.4 million. The payment was made voluntarily, without admission of liability, and was expressed to be in final settlement of all the company’s complaints, claims and causes of action.

However, the businessman subsequently launched proceedings against the bank in his own right as a ‘private person’, within the meaning of Section 138 of the Financial Services and Markets Act 2000. It was said that he had suffered personal loss due to the bank’s alleged breaches of conduct of business rules.

In dismissing his claim, however, the High Court found that the rules were designed to protect bank customers and clients. The businessman did not fall within that category as he had not had any personal dealings with the bank. The company had already received redress for its loss and a further claim by its only shareholder would involve an element of double recovery. The bank was granted summary judgment on the businessman’s claim, which had no real prospect of success.