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Prest v Petrodel Resources Ltd & Ors
Factual and Procedural Background
The appeal stems from ancillary-relief proceedings following the divorce of Plaintiff and Defendant. After a decree absolute was made, Plaintiff sought financial relief. Defendant, who effectively owned and controlled a group of offshore companies (“Company A,” “Company B,” and “Company C”), had caused seven United Kingdom residential properties to be registered in the companies’ names. Judge Moylan found Defendant to be the sole beneficial owner of the group and, doing the best he could with limited disclosure, assessed Defendant’s net assets at approximately £37.5 million.
On 16 November 2011 Judge Moylan ordered Defendant to pay a lump sum of £17.5 million, periodical payments, and to procure the transfer of the seven properties (plus the former matrimonial home) to Plaintiff. He also made the companies jointly and severally liable for a portion of Plaintiff’s costs.
The companies (not Defendant) appealed. The Court of Appeal (majority) held that, absent relevant impropriety or a finding that the properties were held on trust for Defendant, the Family Division had no jurisdiction to order the transfer of company-owned assets. Plaintiff then appealed to the Supreme Court.
Legal Issues Presented
- Whether the court may, under general law, pierce the corporate veil so as to treat assets legally owned by the companies as Defendant’s assets.
- Whether section 24(1)(a) of the Matrimonial Causes Act 1973 confers a special matrimonial-law power to disregard the companies’ separate personalities.
- Whether, on the evidence, the seven properties are held on resulting or constructive trust for Defendant, making them “property to which [he] is entitled, either in possession or reversion.”
Arguments of the Parties
Plaintiff’s Arguments
- The companies were mere alter-egos of Defendant; their assets should be available to satisfy Plaintiff’s award.
- Section 24(1)(a) should be interpreted purposively to reach assets under Defendant’s control, even if legally owned by a company.
- Alternatively, the properties were held on trust for Defendant, given that purchase funds came from him and transfers were for nominal or non-commercial consideration.
Company Respondents’ Arguments
- The corporate veil cannot be pierced absent impropriety aimed at evading an existing legal obligation, none of which was found.
- Section 24(1)(a) is confined to property in which Defendant has a legal or equitable proprietary right; company property is outside its scope.
- There was no finding that the seven properties were held in trust for Defendant.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Salomon v A Salomon & Co Ltd [1897] AC 22 | Company is a separate legal person; its property is not the shareholder’s. | Starting point for analysis; confirms that company assets are prima facie unavailable to creditors of its controller. |
| Macaura v Northern Assurance [1925] AC 619 | Shareholder has no legal or equitable interest in company property. | Cited to reinforce strict separation between shareholder and company assets. |
| Lonrho Ltd v Shell Petroleum [1980] 1 WLR 627 | Documents of a subsidiary are not in the “power” of a parent merely because of ownership/control. | Supports proposition that ownership does not collapse corporate separateness. |
| Bank of Tokyo v Karoon [1987] AC 45 | Distinction between economic reality and legal form is fundamental in company law. | Used to emphasise policy behind maintaining separate personality. |
| Woolfson v Strathclyde RC 1978 SC(HL) 90 | Veil may be pierced only where company is a “mere façade.” | Forms part of historical analysis limiting veil-piercing. |
| Adams v Cape Industries [1990] Ch 433 | Veil cannot be pierced merely because “justice” requires; dishonesty needed. | Relied on by Court of Appeal; accepted by Supreme Court as correct statement of general law. |
| Trustor AB v Smallbone (No 2) [2001] 1 WLR 1177 | Possible to pierce veil where company is device/facade concealing true facts to avoid liability. | Cited in discussion of “impropriety” requirement. |
| Lazarus Estates v Beasley [1956] 1 QB 702 | “Fraud unravels everything.” | Illustrates broader principle that courts will not allow advantage obtained by fraud. |
| Duchess of Kingston’s Case (1776) | Jurisdiction to set aside judgments obtained by fraud. | Part of historical survey showing scope of fraud principle. |
| R v SSHD ex p Puttick [1981] QB 767 | Fraud can defeat rights derived from legal status. | Supports idea that dishonesty may unravel otherwise secure positions. |
| Welwyn Hatfield BC v Secretary of State [2011] 2 AC 304 | Dishonesty can disapply statutory time bar. | Used as modern example of fraud principle. |
| Gilford Motor Co Ltd v Horne [1933] Ch 935 | Veil pierced where company used to evade restrictive covenant. | Analysed as classic “evasion” case. |
| Jones v Lipman [1962] 1 WLR 832 | Company interposed to defeat specific performance; veil pierced. | Example of court disregarding company to enforce contract rights. |
| Gencor ACP Ltd v Dalby [2000] 2 BCLC 734 | Company as nominee may lead to liability without piercing veil. | Cited to show many cases can be decided on trust/agency principles. |
| VTB Capital plc v Nutritek [2013] UKSC 5 | Supreme Court emphasised need for impropriety; veil not pierced. | Adopted to confirm narrow scope for doctrine. |
| Nicholas v Nicholas [1984] FLR 285 | Family Division dicta suggesting wider veil-piercing. | Shown as practice that Court now disapproves. |
| Ben Hashem v Al Shayif [2009] 1 FLR 115 | Sets six principles; requires control plus impropriety. | Approved by Supreme Court as accurate summary. |
| British Railways Board v Herrington [1972] AC 877 | Court may draw adverse inferences where party withholds evidence. | Used to justify drawing inferences against Defendant and companies. |
| R v IRC ex p TC Coombs [1991] 2 AC 283 | Silence may convert opposing evidence into proof. | Forms part of inference-drawing framework. |
| Nokes v Doncaster Collieries [1940] AC 1014 | General words in statute not read to overthrow fundamental principles without clear words. | Supports narrow reading of section 24(1)(a). |
Court's Reasoning and Analysis
1. Piercing the Corporate Veil (General Law) – The Court reviewed authorities and confirmed a limited doctrine: the veil may be pierced only to prevent a controller from evading an existing legal obligation by interposing a company. Defendant’s use of the companies to hold properties long before these proceedings did not meet that test; therefore veil-piercing was unavailable.
2. Statutory Power under Matrimonial Causes Act 1973 – Section 24(1)(a) authorises transfer of “property to which [a party] is entitled.” The Court held that “entitled” means having a proprietary right recognised by general law; the section does not create a matrimonial-specific power to override corporate personality.
3. Trust/Beneficial Ownership – Although the trial judge thought a trust finding unnecessary, the Supreme Court re-examined the evidence. Purchases were funded by Defendant, many for nominal consideration, and the companies failed to disclose documents or give evidence. Applying equitable presumptions and drawing adverse inferences, the Court found that all seven properties were held on resulting or constructive trust for Defendant.
4. Application of Section 24(1)(a) – Because Defendant is the beneficial owner, the properties are “property to which [he] is entitled.” The Court reinstated Judge Moylan’s order requiring Companies A and B to convey the properties to Plaintiff in part-satisfaction of the lump-sum award, and restored the associated costs orders.
Holding and Implications
HELD: The seven United Kingdom properties are held on trust for Defendant. Companies A and B must transfer them to Plaintiff; the earlier costs orders against those companies are restored.
Implications: The decision confirms that (a) the corporate veil is pierced only in rare “evasion” cases; (b) section 24(1)(a) does not confer any special family-law power to disregard corporate personality; and (c) in matrimonial finance cases, trusts and equitable presumptions, coupled with robust inferences from non-disclosure, provide the primary route for accessing assets held through companies. No new doctrine was created; rather, existing principles were clarified and applied.
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