The value of the judgement was not in question, as the courts had already ruled the husband – a Nigerian oil tycoon – would have to pay his wife £17.5m, largely due to his conduct during the case, and he was not arguing over this. The Supreme Court has also clarified that English divorce legislation – the Matrimonial Causes Act 1973 – does not enable wider principles to be applied in the English Family Court. An unexpected error occured, please try again. called the concealment principle and the evasion principle. This article examines the judicial approach to the corporate veil post-Prest v Petrodel Resources Ltd. Prest v Petrodel Resources Ltd concerned the financial settlement following the divorce of a Nigerian oil trader, Michael Prest, and his wife Yasmin. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. We also use third-party cookies that help us analyze and understand how you use this website. a property which the company occupied. However, Family judges are entitled to be sceptical about matrimonial homes which are owned by a company and occupied by the spouse controlling the company. UKSC 2013/0004. at p 96, Lord Keith, delivering the leading speech, observed that “it is a small residual category of cases where the abuse of the corporate veil to necessary to pierce the corporate veil, it is not appropriate to do so, because Held: Lord Sumption gave the leading judgment. It is Edinburgh Napier University... + Show all authors. This category only includes cookies that ensures basic functionalities and security features of the website. Neutral citation number [2013] UKSC 34. raised by the use of legal concepts to defeat mandatory rules of law. It emphasises the need for companies and trusts caught up in a divorce to take advice on whether and if so the extent to which they should engage with the proceedings or risk adverse inferences. general law fall to be treated as separate legal entities with all the rights Only in extremely rare cases will a court be able to justify disrespecting the separate legal personality of the company (‘piercing the corporate veil’). on that footing there is no public policy imperative which justifies that company’s separate legal personality is being abused for the purpose of some Light and Power Co Ltd [1970] ICJ 3 when it derived from municipal law a The Supreme Court has handed down a landmark judgement in favour of Mrs Prest in high profile matrimonial dispute. is a limited principle of English law which applies when a person is under an Your email address will not be published. This may be illustrated by reference to those also true that most cases in which the corporate veil was pierced could have The husband has acted improperly in many ways. property are such as to make the company its controller’s nominee or trustee the law defines the incidents of most legal relationships between persons Search for articles by this author. The appeal relates to ancillary relief sought by the respondent following divorce proceedings. Judgment details. UK Wealth Tax Commission publishes report, Trusts: when might you want to reserve powers? This puts an end to the practice of the Family Court routinely making financial awards from company assets where one spouse controlled the company. It was of key interest as it was a legal cross over between family law and company law. You also have the option to opt-out of these cookies. Prest v Petrodel Resources Ltd UKSC 34 This is the key case where SC considered the issue of whether the court possesses a general power to pierce the corporate veil in the case where these specific legal principles do not apply. The court was asked as to the power of the court to order the transfer of … Properly speaking, it means disregarding Piercing The Corporate Veil: Prest Vs Petrodel Resources. But the recognition of Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 (12 June 2013) March 22, 2018/in Company /Private Law Tutor. Prest v Petrodel Resources Ltd 2013 – When a couple divorces, either spouse can make a claim for ancillary relief. This has overshadowed the Court’s decision to recognise a resulting trust, which achieved the same result as if the Court had pierced the corporate veil. Mr. Prest was the sole owner of numerous offshore companies. The Matrimonial Causes Act 1973, s24 gives the court the power to order one party to the marriage to transfer any property to which he or she is “entitled” to the other party to the marriage. But the consensus that there are circumstances Piercing the Corporate Veil: Prest v Petrodel Resources Ltd; Share. One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. The application of the doctrine is frequently referred to as Facts: Mr Prest was an oil-trader. The Supreme Court ordered that seven disputed properties, owned by companies controlled by Mr Prest, be transferred to Mrs Prest in partial satisfaction of their £17.5 million divorce settlement. This is a case with regard to family law. Recommend to Library. The corporate veil will not be pierced unless there has been impropriety directed at the misuse of the corporate structure for the purpose of concealing wrongdoing. piercing the corporate veil, we are not (or should not be) speaking of any of This is the key case where SC considered the issue of whether the court possesses a general power to pierce the corporate veil in the case where these specific legal principles do not apply. Michael Prest, founder of Petrodel Resources, had claimed that Petrodel’s assets did not belong to him and that he was £48m in debt. analysis of the large and disparate body of English case law was undertaken by the exceptions is generally the concept of abuse of rights, to which the I would not for ‘Whether assets legally vested in a company are beneficially owned by its controller is a highly fact-specific issue. 19 Jones v Lipman [1962] 1 WLR 832 (Ch) 836 (Russel J). This is because between them may be critical. Lord Neuberger, President Lord Walker Lady Hale Lord Mance Lord Clarke Lord Wilson Lord Sumption . In civil law jurisdictions, the juridical basis of otherwise have obtained by the company’s separate legal personality. Case ID. a strong Court of Appeal in Adams v Cape Industries plc [1990] Ch 433 This decision is important because it upholds what has been the ‘unyielding rock’ of company law for over a century: that a company is independent of its shareholders, even if there is a sole shareholder. pp. 18 Gilford Motor Co Ltd v Horne [1933] Ch 935 (CA) 961 (Lord Hanworth MR). The Piercing the Corporate Veil: Prest v Petrodel Resources Ltd...Show full title . References to a “facade” or “sham” beg 36. He argued that evasion is sham, fraud, when you interpose a company for fraudulent purposes. Prest v Petrodel Resources Ltd emphasises the importance of properly and transparently running companies. Many cases The judge found that his purpose was “wealth protection and the avoidance of tax”. In my view, the distinct principles lie behind these protean terms, and that much confusion has The case was decided on its facts, but Petrodel Resources Ltd and Others v Prest and Others: CA 26 Oct 2012. It is not possible to give general guidance going beyond the ordinary principles and presumptions of equity, especially those relating to gifts and resulting trusts.’. Introduction. Mr Prest wholly owned and controlled (directly or indirectly, through intermediate entities) a number of non-UK resident companies which, between them, owned seven residential properties in the UK. personally liable, generally in addition to the company, for something that he JMW | Family Law Journal | December 2018/January 2019 #182 Ruth Kearns considers the creation of corporate structures in other jurisdictions to frustrate the enforcement of a financial remedy final order . His lordship argued that instead of relying on piercing/lifting the veil argument, parties should be looking at the alternative remedies that exist in the situation. Prest v Petrodel Resources Ltd [2013] UKSC 34. He had set up the company long time ago. 12 June 2013 . I should first of all shareholder of a company to recover compensation for the compulsory purchase of Prest and Beyond – Part 1 and Part 2 (Companies) 1. abuse of rights, which extends not just to the illegal and improper invocation Lord Neuberger, Lord Walker, Lady Hale, Lord Mance, Lord Clarke, Lord Wilson, Lord Sumption. This website uses cookies to improve your experience while you navigate through the website. involve piercing the corporate veil at all. 5 Prest v Petrodel Resources Ltd 45- '6:; ') ' Gramsci Shipping Corporation Lembergs 45- '6 7 ( 9'- = Salomon v A Salomon & Co Ltd 4 8>96 ( 55 Family judges should examine the terms of occupation in order to determine whether they are what they are said to be or ‘simply a sham to conceal the reality of the husband’s beneficial ownership’. principle that the court may be justified in piercing the corporate veil if a The court may then in which the court may pierce the corporate veil is impressive. The judgment of the Court of Appeal is summarised in J McDonagh and T Graham, ‘Piercing the Corporate Veil in the Family Division: Prest – the Latest from the Court of Appeal’ (2013) 19(2) Trusts & … International Court of Justice was referring in In re Barcelona Traction, Slade But when we speak of 12 Jun 2013. systems recognise corporate legal personality while acknowledging some limits of the company will defeat the right or frustrate its enforcement. In this case the Supreme Court decided that the companies simply did not have the beneficial ownership to the properties because they belonged to Mr Prest. which the law attributes the acts or property of a company to those who control analyses of the general principle have taken as their starting point the brief The burden will be on respondents and companies involved in divorce claims to show that the company is the beneficial owner of its assets, but claimants should beware. Secondly, the husband has made use of the opacity of the Petrodel Group’s corporate structure to deny being its owner. draw attention to the limited sense in which this issue arises at all. The companies succeeded on appeal. suggested otherwise at para 79. The Supreme Court has just handed down its judgment in the landmark case of Prest v.Petrodel. His wife of 15 years claimed that he and Petrodel were one and the same, and that she should have a multi-million pound award funded from the companies’ properties. The Supreme Court considered that doing so effectively obliged a third party to satisfy claims against a spouse. The corporate veil is a metaphorical phrase, established in the landmark case of Salomon v Salomon & Co Ltd 6 . In Prest v Petrodel [2013] UKSC 34 the English Supreme Court undertook a review of the principles of English law which determine in what circumstances, if any, a court may set aside the separate legal personality of a company from its members and attribute to its members the legal consequences of the company’s acts. Prest v Petrodel. course. frustrates by interposing a company under his control. Prest (Appellant) v Petrodel Resources Limited and others (Respondents) Judgment date. 5 minutes know interesting legal mattersPrest v Petrodel Resources Ltd and others [2013] UKSC 34 (SC) (UK Caselaw) Save my name, email, and website in this browser for the next time I comment. existing legal obligation or liability or subject to an existing legal Like Munby J in Ben Hashem, I consider that if it is not It is mandatory to procure user consent prior to running these cookies on your website. Alternatively special facts might enable the court to decide, on well-established trust principles, that the company holds its assets on trust for the spouse and so available to meet a divorce award. Now Mrs Prest has secured a favourable judgment because, while the Supreme Court confirmed that Petrodel’s corporate integrity had to be respected, it decided that the companies’ properties were held on resulting trust for Mr Prest, who had provided the funds to purchase them. 20 ibid. The concealment principle is legally banal and does not Mr Prest had failed to disclose his assets, but from the limited facts which were available, as well as from drawing adverse inferences from his repeated failure to provide proper disclosure, it was clear that he, and not the companies, had provided the funds to purchase the properties. Petrodel Resources Ltd v Prest [2012] EWCA Civ 1395, [2013] 2 WLR 557, [63]. used for a deliberately dishonest purpose: pp 539, 540. The first systematic Your email address will not be published. Nor, more generally, was he concealing or evading the law relating to the distribution of assets of a marriage upon its dissolution. In Prest v Petrodel Resources 2013] UKSC 34 the UK Supreme Court considered when it was appropriate to pierce the corporate veil of companies. evade or frustrate the law can be addressed only by disregarding the legal Wife claimed that the properties held by the companies belonged … 28. whether the United Kingdom parent of an international mining group which was, When the history of the corporate veil is written, the year 2013 will perhaps be given as much prominence as the year 1897. In my view he was right about this. Enforcement: Out of reach. indicating that it is a mere facade concealing the true facts.”, 21. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. This ‘piercing’ is an exceptional remedy, only available if there is no other recourse to address a wrong. Most advanced legal Prest v Petrodel is the current The question at issue in that case was against the person in control of it which exists independently of the company’s Additional Info. The relatively short and significant judgment in the Supreme Court case of Prest v Petrodel Resources Ltd has gathered vociferous interest from academics and practitioners. the “facade”, but only looking behind it to discover the facts which the The difficulty is to Copyright 2019-2020 - SimpleStudying is a trading name of SimpleStudying Ltd, a company registered in England and Wales. these situations, but only of those cases which are true exceptions to the rule These cookies do not store any personal information. Another was to take funds from the companies whenever he wished, without right or company authority. https://www.supremecourt.uk/cases/docs/uksc-2013-0004-judgment.pdf. 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