Prest v Petrodel Resources Ltd [2013]
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Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415 concerns the application of the doctrine of piercing the corporate veil in the context of family law. Ms Yasmin Prest sought ancillary relief under the Matrimonial Causes Act 1973, claiming that properties owned by offshore companies solely owned by her ex-husband, Mr Michael Prest, were beneficially owned by him.
High Court
Moylan J ruled that Mr Prest had the practical ability to transfer the properties, concluding that he was entitled to them under Matrimonial Causes Act 1973 section 24. Although rejecting the notion of piercing the corporate veil under general principles, Moylan J found justification for it under the Act. The court ordered Mr Prest to transfer several properties to his ex-wife, with a fair award totalling £17.5 million.
Court of Appeal
The Court of Appeal, with Rimer LJ and Patten LJ in the majority, overturned the High Court's decision. It held that the Family Division's practice of treating assets of companies substantially owned by one party as available for distribution was beyond its jurisdiction unless the corporate form was being abused. The majority opinion conflicted with established cases. Thorpe LJ dissented, emphasising the husband's use of the companies for an extravagant lifestyle and later strategies to deprive his wife.
Supreme Court
The Supreme Court unanimously overturned the Court of Appeal. It held that Mr Prest beneficially owned the assets of Petrodel Resources Ltd companies under a resulting trust, making the piercing of the corporate veil unnecessary. Lord Sumption, delivering the leading judgment, emphasised a limited power to pierce the veil, specifically in situations where an existing legal obligation is deliberately evaded. He highlighted the narrow scope of this principle, reserving it for cases where someone owning and controlling a company is identified with it in law due to ownership and control. Five principles were established:
The Prest case established that piercing the corporate veil is a limited doctrine and should be a last resort. The metaphorical notion of piercing was considered unhelpful by most Supreme Court judges. The decision highlighted the importance of examining the specific facts of each case and suggested that remedies outside of piercing, particularly in equity or the law of tort, could achieve appropriate results.
High Court
Moylan J ruled that Mr Prest had the practical ability to transfer the properties, concluding that he was entitled to them under Matrimonial Causes Act 1973 section 24. Although rejecting the notion of piercing the corporate veil under general principles, Moylan J found justification for it under the Act. The court ordered Mr Prest to transfer several properties to his ex-wife, with a fair award totalling £17.5 million.
Court of Appeal
The Court of Appeal, with Rimer LJ and Patten LJ in the majority, overturned the High Court's decision. It held that the Family Division's practice of treating assets of companies substantially owned by one party as available for distribution was beyond its jurisdiction unless the corporate form was being abused. The majority opinion conflicted with established cases. Thorpe LJ dissented, emphasising the husband's use of the companies for an extravagant lifestyle and later strategies to deprive his wife.
Supreme Court
The Supreme Court unanimously overturned the Court of Appeal. It held that Mr Prest beneficially owned the assets of Petrodel Resources Ltd companies under a resulting trust, making the piercing of the corporate veil unnecessary. Lord Sumption, delivering the leading judgment, emphasised a limited power to pierce the veil, specifically in situations where an existing legal obligation is deliberately evaded. He highlighted the narrow scope of this principle, reserving it for cases where someone owning and controlling a company is identified with it in law due to ownership and control. Five principles were established:
- Piercing the corporate veil is a narrow doctrine, applicable only when there is a deliberate evasion of an existing legal obligation.
- Fraud is a ground for piercing, but evidence must show it is used to evade legal obligations.
- Piercing the corporate veil is justified to prevent the abuse of corporate legal personality, not merely for incurring a liability.
- Legal incidents may differ if dealings are dishonest; public policy may justify setting aside acts.
- In the case of the matrimonial home, the facts often infer beneficial ownership and trust in the controlling spouse.
The Prest case established that piercing the corporate veil is a limited doctrine and should be a last resort. The metaphorical notion of piercing was considered unhelpful by most Supreme Court judges. The decision highlighted the importance of examining the specific facts of each case and suggested that remedies outside of piercing, particularly in equity or the law of tort, could achieve appropriate results.
