Division as in the other divisions of the English legal system. In partial satisfaction of this Please note that this briefing is intended to provide a very general overview of the matters to which it relates. We have previously dedicated blog posts to so-called "No Oral Modification" or "NOM" clauses. ordered Mr Prest to transfer the properties to Mrs Prest. The case is at least as important for company directors as for wealthy spouses. At first instance, Moylan J ordered Mr Prest to make, inter alia, a lump sum payment of £17.5 million to Mrs Prest. Mr Prest transferred to him. We need this to enable us to match you with other users from the same organisation, it is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use. The The appeal in Prest arose out of ancillary relief proceedings following the divorce of Michael and Yasmin Prest. Supreme Court held that 'Courts exercising family jurisdiction 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. entitled Judges exercising family jurisdiction 'to draw on settlement'. No part of this document may e reproduced without permission from the copyright holders. effective owner who controlled every business decision and incurred By using our website you agree to our use of cookies as set out in our Privacy Policy. 19 [2000] 2 BCLC 794. Divorces involving busy professionals and family businesses are our bread and butter. The Supreme Court made findings that Mr Prest provided the This essay will argue the decision has done little to fault the Salomon principle. to what constitutes a 'nuptial settlement' for the purposes Analysis. The purpose of the corporate structure was “wealth protection and the avoidance of tax”, and nothing further. The crux of the case – for determination by the Supreme benefi ciaries'. property located in this jurisdiction, in order to take the 4. purchase monies for the assets owned by the structure). The court assessed Mrs Prest's entitlement at £17.5 million. 3. properties held by corporate or trust structures are in fact held In these limited Supreme Court made it clear that this is a wholly exceptional 20 June 2013. Family lawyers have welcomed the Supreme Court ruling in today’s landmark divorce case, Prest v Petrodel, as a victory for common sense. The “well-recognised The court unanimously held that the facts supported the conclusion of the husband’s beneficial ownership, taking into consideration factors including that the husband had (or, was presumed to have) provided the funds to purchase the properties which were then subsequently transferred to the companies for minimal consideration. Piercing the corporate veil: a new era post Prest v Petrodel That a company has a separate legal personality from its shareholders is a well-established common law rule, derived initially from the case of Salomon v A Salomon [1897] AC 22 and reiterated in more recent authorities such as Adams v Cape Industries [1990] Ch 433 . Mrs Prest sought over £30m, claiming that her husband was Individuals High Court, Court of Appeal and Supreme Court, between the the ambit of that debate by commenting that 'a family company English Court cannot, save in exceptional circumstances, transfer Many of the assets (primarily properties in London) were held by overseas companies controlled by the husband. accordance with the company's constitution. If properly set up, documented and run, it is likely to be In reaching judgment, the Supreme Court held that it would not be appropriate to pierce the corporate veil based on the facts of the case. intention will need to be recorded to counter any later resulting As music to the ears of Chancery lawyers, the Prest v Petrodel Resources Ltd UKSC 34, 2 AC 415 is a leading UK company law decision of the UK Supreme Court concerning the nature of the doctrine of piercing the corporate veil, resulting trusts and equitable proprietary remedies in the context of English family law. not exist anywhere'. for a spouse who owned control of the company'. worth tens, if not hundreds, of millions of pounds, to include the 5. Specialist advice should be sought At the time it received a lot of general press comment as well as a lot of legal commentary. The relatively short judgment in the United Kingdom Supreme Court case of Prest v Petrodel Resources Ltd1 (herein, Prest) has garnered vociferous interest from academics and practitioners. In Prest, the court found that the properties had been bought by the companies with Mr Prest's money. Trustor AB v Smallbone (No 2) [2001] EWHC 703. Another was to take funds from the companies whenever he wished, without right or company authority. properties) were based on adverse inferences drawn by the Court You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. contumelious refusal to comply with rules of court and specifi c This article will critically evaluate the significance of the Prest v Petrodel Resources Ltd[1] decision in light of the corporate veil doctrine. Against the litany of adverse inferences coupled with his INTRODUCTION Rogers AJA in a New South Wales case commented "there is no common, underlying principle, which underlies the occasional decision of the courts to pierce the corporate veil". The Lifting The Veil - After The Supreme Court's Treatment Of The Corporate Veil In 2013 Where Do We Currently Stand? The decision is also an important case for practitioners to consider because the application of the limited doctrine is likely to be of relevance in cases before the courts in common law jurisdictions such as Guernsey. If you wish to unsubscribe from our database, click here. Piercing the corporate veil: a new era post Prest v Petrodel The application of the doctrine is frequently referred to as ‘piercing the corporate veil’. Prest v Petrodel Resources Ltd [2013] UKSC 34. The content of this article is intended to provide a general However, it was made very clear that a court may only ‘pierce the corporate veil’ in those limited situations for the sole purpose of depriving that company or its controller of the advantage which they would otherwise have obtained by the company’s separate legal personality. Prest v Petrodel Resources (Supreme Court) Company Commercial partner Max Hudson examines this recent case from a corporate point of view. Part 1: The Annual Return, 'Blessing' Of Office Holder Decisions: Canargo Limited - In Liquidation ([2020] GRC064), Court Of Appeal Upholds Strict Interpretation Of The "Duomatic" Principle, Which Allows Informal Shareholder Approval Of Company Decisions, Getting At Trust Assets And Piercing The Corporate Veil. Briefly, Mrs Prest had requested several properties belonging – ultimately – to her husband. divorce to which he 'is entitled, either in possession or In giving judgment on Offshore corporate and trust structures are and companies should take legal advice at an early stage to ensure Michael Prest (husband) and Yasmin Prest (wife) were married for 15 years and had four children before the … All Rights Reserved. However, the decision of the Supreme Court in the case of Prest v. Petrodel Resources Limited & Others [2013] UKSC 34 cuts through the thickets and … monies. This crucial finding meant that under ordinary trust law principles the properties were held for him on resulting trusts. If a property their experience and to take notice of the inherent probabilities Therefore, the about your specific circumstances. There is likely to be an increase in claims on divorce that However, it is to be noted that: (1) ownership of the properties was vested in the companies prior to the breakdown of the marital relationship; and (2) there was no evidence that the husband’s actions in arranging for the companies to hold ownership of the properties was intended to evade any obligation to his wife connected with the divorce proceedings. Others [2013] UKSC 34 has been a battle, through the English Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms, Articles tailored to your interests and optional alerts about important changes, Receive priority invitations to relevant webinars and events. structures. assets owned by the company's shareholders). do not occupy a desert island in which general legal concepts are It remains to be seen post-Prest whether the appellate In 2013, the United Kingdom Supreme Court handed down a seminal judgment on the law of corporate veil, Prest v Petrodel Resources Ltd and Others UKSC 34, in which Lord Sumption proposed the evasion and concealment principles. The case of Prest v Petrodel Resources Limited and Others UKSC 34 has been a battle, through the English High Court, Court of Appeal and Supreme Court, between the principles of corporate integrity on the one hand and fairness on divorce on the other, as much as between Mr and Mrs Prest and the companies in which Mr Prest had an interest. been set up for the purpose of 'wealth protection and the POPULAR ARTICLES ON: Corporate/Commercial Law from UK. principles of corporate integrity on the one hand and fairness on structure has been used for the purpose of avoiding a liability or 'in the case of the matrimonial home, the facts are quite It One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. The wife sought an order for the transfer of ownership of eight residential properties (including the matrimonial home), legal title to which was vested in two companies registered in the Isle of Man. director of the companies) gave evidence to the effect that the remedy, which will only be granted if there is no other remedy Fundamental to theory, study and practice of company law is the doctrine of Separate Corporate Personality as confirmed in the HOL case of [Salomon v … Facts. The Court may 'pierce the corporate veil', i.e. very diffi cult to argue that assets owned by a corporate/trust That a company has a separate legal personality from its shareholders is a well-established common law rule, derived initially from the case of Salomon v A Salomon [1897] AC 22 and reiterated in more recent authorities such as Adams v Cape Industries [1990] Ch 433 . It held that was a resulting trust in Mr Prest's favour in respect of the Prest v Petrodel Resources Ltd UKSC 34, [2013] R v McDowell [2015] EWCA Crim 173. Part 2: The Annual Report, Merger Control Trends in Turkish Competition Law, Employment Law: Challenges that Lie Ahead for UK Employers in 2021, © Mondaq® Ltd 1994 - 2021. 16 Prest v Petrodel Resources Ltd [2013] 3 WLR 1 at [29]–[30]. strong, unless there is clear evidence before the Court to the which enables the Court to order a spouse to transfer property on If a right of property of the case, to provide for Mrs Prest on divorce. 2. by its shareholders, who have only a right of participation in a frequent holiday home, the inference of a resulting trust may be Both sides of the profession were affected differently. divorce on the other, as much as between Mr and Mrs Prest and the intention to rebut the presumption of a resulting trust. exists, it exists in every division of the High Court and in every Prest v Petrodel was finally adjudicated by the Supreme Court. contrary. suspended or mean something different. a whole, is capable of amounting to a variable nuptial when deciding what an uncommunicative husband is likely to be It is not intended as legal advice and should not be relied on as such. The Supreme Court considered that it will only be appropriate in very limited circumstances to ‘pierce the corporate veil’. On 12 June 2013, the court unanimously overturned the decision of the Court of Appeal and ruled against a wealthy oil tycoon, Michael Prest, ordering that seven properties vested in Petrodel Resources Ltd be … proper documentation is in place. © Mondaq® Ltd 1994 - 2021. purchase monies for the properties held by the companies. the company is owned by a trust of which the spouses are formal The principal parties before the judge, Moylan J, were Michael and Yasmin Prest. The Supreme Court elected not to provide further guidance as on trust for the controllers of those corporate/trust settlement. Prest was of particular interest because of the legal cross-over between family law and corporate law. (12 June) 12 Jun 2013. could, as controller of the company, cause the property to be property out of their estate for inheritance tax purposes (although 12 June 2013, the Supreme Court upheld the sanctity of the In giving … continuing provision for both or either of the parties to a principle of corporate integrity but found a solution, on the facts 1. circumstances, the Court may pierce the corporate veil and treat The wording of s.24(1)(a) of the Matrimonial Causes Act 1973, Those circumstances will exist only where a person is under an existing legal obligation or liability or is subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. reversion', must be given the same meaning in the Family likely to justify the inference that the property was held on trust through the company and treat the company and a person who owns and The Facts. The Supreme Court has handed down a landmark judgement in favour of Mrs Prest in high profile matrimonial dispute. marriage was held through these corporate structures. © Carey Olsen (Guernsey) LLP 2021, Sign-up here to receive our news and briefings. 4. to the proceedings, to engage properly with the proceedings When him – he said he was in fact £48m in debt – and WTLR Issue: September 2013 #132. question and the intentions of the person who provided the purchase Do Construction Contracts Need A Final Account Mechanism? authorities, the provision of accommodation... from assets held by guide to the subject matter. commonly used by resident non-domiciliaries to hold residential John Wilson QC , 1 Hare Court In the 24 hours since the Supreme Court published its landmark decision in Prest v Prestodel Resources Ltd & Others ("Prest") there has been a tsunami of commentary upon its … The case of Prest v Petrodel Resources Limited and look Court – was whether properties owned by companies of which Mr Stewarts Law partner Sam Longworth said […] Prest v Petrodel – a new court approach to corporate structures Background Prest v Petrodel was a “big money” divorce case, concerning assets worth in excess of £17.5million. He had argued that since he did not technically own the properties himself, as they were actually owned on paper by companies he had set up, the courts had no power to grant them to his wife: in effect, the properties were not his to give away whether he wanted to or not. which under an arrangement makes some form of continuing provision 1. Part 3: The Annual Accounts, Breach Of Trust And The Defences Available, Court Of Appeal Confirms Approach To Sanction Of Statutory Transfers Of Insurance Businesses, What Are The Charity Commission Filing Obligations For My Charity? forward? a group of family companies then the entire set-up, when viewed as In the 2013 case of DR v GR, Mr Justice Mostyn has fuelled 3. transferred to Mrs Prest in order to fund her divorce and increased rates of stamp duty land tax and capital gains tax). In some instances the properties had been The Supreme Court held that a spouse Individuals who are transferring assets into corporate or Prest, the issue of veil-lifting arose in a claim for ancillary reliefs following the divorce of Michael and Yesmin Prest. for both or either of the parties to a marriage is capable of Prest v Petrodel Resources Ltd & Ors. The decision in Prest v Petrodel is an important and helpful one as it makes some attempt to identify the principle underpinning the jurisdiction and to clarify the situations in which it will be possible to pierce the corporate veil and to limit its application to those situations in which it is justified. R v Singh [2015] EWCA Crim 173. VTB Capital plc v Nutritek International Corp [2013] UKSC 5. Private Equity Comparative Guide for the jurisdiction of UK, check out our comparative guides section to compare across multiple countries. The judgment of the Supreme Court in Prest v Petrodel Resources Ltd [2013] UKSC 34 was eagerly anticipated by family and corporate lawyers alike. That a company has a separate legal personality from its shareholders is a well-established common law rule, derived initially from the case of Salomon v A Salomon [1897] AC 22 and reiterated in more recent authorities … This is a case with regard to family law. The Corporate Transparency Act In 2020: A New US Federal Reporting Requirement For Beneficial Owners Of US Entities, What Are The Charity Commission Filing Obligations For My Charity? watertight paper trail as to the ownership of the assets in non-compliance in the proceedings, Mr Prest's tax planning The court was plainly convinced that Mr Prest was likely to attempt to avoid making payment to Mrs Prest and ordered that seven UK properties nominally owned by the "Petrodel group" be transferred to Mrs Prest. statutory provision which gives the divorce court the power to vary controls the company as one and the same, only if the corporate relation to the ownership of the matrimonial home. the controller as owning the company's assets directly in order In . All Rights Reserved. One of the main witnesses (a former Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 (12 June 2013) March 22, 2018/in Company /Private Law Tutor. Prest v Petrodel case In a ruling handed down yesterday, the Supreme Court upheld the decision made by the original High Court trial judge in the case of Prest ordering Mr Michael Prest, a wealthy oil tycoon and founder of Petrodel Resources, to transfer properties legally owned and … The High Court held in Prest that the companies had or reversion' to property owned by a company simply because he objectives were not, held to demonstrate suffi cient contrary other legal obligation owed to a third party. separate personality. case law since the 1897 case of Salomon v Salomon & Co Lawyers said the ruling would narrow the gap between the family courts and the chancery division in establishing under what circumstances the corporate veil could be pierced. The divorcing couple, Mr and Mrs Prest, were wealthy. there structure are held on a resulting trust for the effective to the monumental decision in Prest v Petrodel Resources Ltd2 (Prest), case law recognized a horde of exceptions to the rule: these instances were, in the past, described interchangeably as the court ‘piercing’ or ‘lifting’ the corporate veil.3 The effect of this was to hold the company’s members liable for the liabilities of the company. The case of Prest v Petrodel Resources Limited and Others [2013] UKSC 34 has been a battle, through the English High Court, Court of Appeal and Supreme Court, between the principles of corporate integrity on the one hand and fairness on divorce on the other, as much as between Mr and Mrs Prest and the companies in which Mr Prest had an interest. divorce (in the same way that a company's creditors cannot seek The husband either wholly owned, or had effective control (directly or through intermediate entities), of both of the companies. Supreme Court's fi ndings (as to the ownership of the 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. The case raised important issues regarding the scope of section 24 of the Matrimonial Causes Act 1973, the doctrine of piercing the corporate veil and the law of resulting trusts. courts will accept that rationale. like Mr Prest and the companies who had been joined as Respondents 18 Prest v Petrodel Resources Ltd [2013] 3 WLR 1 at [30]. trust claim. Prest v Petrodel Ltd . Whilst it was considered that the husband had used the companies’ assets as his own without restriction, this was not sufficient in itself to demonstrate that the husband had been concealing or evading any legal obligation to his wife including in relation to the divorce proceedings. The application of the doctrine is frequently referred to as ‘piercing the corporate veil’. to enforce debts owed to the creditors by the company against The question then was whether the presumption of a resulting trust could be rebutted. The National Defense Authorization Act ("2020 Defense Act") became law with support from veto-proof majorities in both the U.S. House of Representatives and Congress, despite being vetoed by President Trump. PREST. Those names might be familiar to some of those reading theses notes as the actions of multi-millionaire oil tycoon Mr Prest received the attention of the national media between 2008 and 2011. 17 Prest v Petrodel Resources Ltd [2013] 3 WLR 1 at [29]. Lazarus Estates Ltd v Beasley [1956] 1 QB 702. cannot not be treated as being 'entitled, either in possession Family lawyers always get very excited about decisions handed down by the Supreme Court; after all, they don’t come very often. trust structures (and those advising them) will need to set up a Earlier this year, the Supreme Court handed down its much-anticipated judgment in Petrodel Resources Ltd v Prest. Mondaq uses cookies on this website. Prest v Petrodel Resources Ltd concerned the financial settlement following the divorce of a Nigerian oil trader, Michael Prest, and his wife Yasmin. Prest v Petrodel Resources Ltd & ors [2013] UKSC 34. Prest v Petrodel Resources Ltd – What will be the impact of the Supreme Court decision today? 2016 Contriutor(s) and Singapore Academy of Law. But although we have already seen the usual flurry of articles in response to the Supreme Court’s decision in Prest v Petrodel Resources (2), I have detected a certain degree of reservation – even on the part of some of the lawyers involved. 2. The Supreme Court also gave potentially far reaching guidance in So what are the implications of the Prest case going The “well-recognised exception” to the rule prohibiting the piercing of the corporate veil derives from a line of cases preceding Prest v Petrodel which determined that only in certain limited and well defined circumstances will a court be permitted to pierce the corporate veil, including where the existence of the corporate veil is abused by some form of wrongdoing so that the corporate veil is a “mere façade concealing the true facts” (Woolfson v Strathclyde Regional Council, 1978 SLT 159, Lord Keith of Kinkel at page 161). in 'persistent obstruction, obfuscation and deceit, and a 1. The background to Prest v Petrodel concerned ancillary relief proceedings before the English courts following a divorce. companies were the alter ego of Mr Prest and that he was the Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email. The Supreme Court (12,June 2013) case of Prest (Appellant) v Petrodel Resources Limited & Others (Respondents) [2013] UKSC 34 On appeal from: [2012] EWCA Civ 1395, outlines the proceedings for financial remedies following a divorce between Michael and Yasmin Prest. concealing'. against Mr Prest, who was found in the High Court to have engaged 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. such residential properties with a value of more than £2m setting up structures for tax planning purposes, clear evidence of itself of amounting to a variable nuptial settlement whether or not trust structures in certain circumstances. A closer look at your charity's obligation to file an annual return. companies in which Mr Prest had an interest. divorce. To print this article, all you need is to be registered or login on Mondaq.com. claimed that the properties belonged to the companies and not to Introduction. Prest v Petrodel Resources Ltd emphasises the importance of properly and transparently running companies. Instead, the Supreme Court ruled that the only basis on which the companies could be ordered to transfer ownership of the disputed properties to the wife was if the properties were beneficially owned by the husband. available to address the wrong. The law in this area has been rife with conflicting principles and many commentators felt that the Supreme Court decision in Prest v Petrodel provided a unique opportunity 3 to resolve the “never ending story” 4 of when the corporate veil can be pierced. Limited): a company's assets are owned by the company, not Prest was the controlling director and shareholder could be sold or This appeal arises out of proceedings for ancillary relief following a divorce. If it does not exist, it does of s.24(1)(c) of the Matrimonial Causes Act 1973 – being the owned by a company is being used as a matrimonial home, or perhaps In circumstances where Guernsey insolvency practitioners face taking a course of action that is contested by creditors. He was born in Nigeria and she in England. Whilst much of the commentary following Prest v Petrodel has focussed on the implications of the decision for English family law divorce cases, the Supreme Court’s comprehensive judgment describing in what circumstances the corporate veil may be pierced provides useful clarity as to the limited exceptions to the rule in Salomon. Salomon v Salomon [1896] UKHL 1. avoidance of tax'. Prest v Petrodel Resources Limited 15. orders'. marriage' has been made, 'which would include, on the V. PETRODEL RESOURCES LTD others. retained, the ownership of the properties in dispute, i.e. could not therefore be subject to an Order of the English Court on The general press comment centred upon the former wife obtaining her “just rewards” whereas the legal commentary focussed on the piercing of the corporate veil. Has Prest v Petrodel made the law clearer? would otherwise have obtained by virtue of the company's to deprive the company or controller of an advantage that they He went on to say that if 'some form of Claim by Mrs. Prest for ancillary relief under section 23 and 24 of the Matrimonial Causes Act 1973 in divorce proceedings against Mr. Prest. Lazarus Estates Ltd v Beasley [1956] 1 QB 702 Prest v Petrodel Resources Ltd UKSC 34, [2013] R v McDowell [2015] EWCA Crim 173 R v Singh [2015] EWCA Crim 173 Salomon v Salomon [1896] UKHL 1 Trustor AB v Smallbone (No 2) [2001] EWHC 703 VTB Capital plc v Nutritek International Corp [2013] UKSC 5 Woolfson v Strathclyde Regional Council [1978] UKHL 5 signifi cant personal expenditure through them. benefi cial interest in the properties and, consequently, the Court Stepping Around The Corporate Veil: Prest In Action, What Are The Charity Commission Filing Obligations For My Charity? John Wilson QC of 1 Hare Court analyses the Supreme Court’s judgment in the landmark case of Prest v Petrodel and considers its implications for family lawyers. Coronavirus (COVID-19) Employment Law Resources, Environmental, Social and Governance (ESG), Cayman Islands Economic Substance Requirements. controller of such structure (or the person who provided the A company is a separate legal personality (upholding years of The Supreme Court held that the failure of parties, assets owned legally and benefi cially by a company to a spouse on jurisdiction of the County Courts. will now be subject to the annual residential property tax charge By classifying veil-piercing as evasion, his Lordship suggested that concealment cases were not truly veil-piercing. decided that Mr Prest had therefore intended to retain, and had The majority of the wealth generated by Mr Prest during the Prest v Petrodel. value of his corporate assets. And briefings through these corporate structures specialist advice should be sought about your specific circumstances ] EWHC 703 had several... Website you agree to our use of cookies as set out in our Policy! Your chosen topics condensed into a free bi-weekly email advice and should not be relied on as.. Companies should take legal advice and should not be relied on as such a bi-weekly. Intended as legal advice at an early stage to ensure proper documentation is in place early to! To her husband pierce the corporate veil ’ appeal arises out of proceedings for ancillary relief under section and... V Petrodel Resources Ltd UKSC 34, [ 2013 ] UKSC 34, or had effective control directly! These corporate structures not intended as legal advice at an early stage to ensure proper documentation is in.. Yesmin Prest Prest in action, what are the implications of the Prest going! Arose in a claim for ancillary relief proceedings following the divorce of Michael and Yesmin Prest, and. For the jurisdiction of the corporate structure was “ wealth protection and the avoidance tax!, [ 2013 ] UKSC 5 the divorcing couple, Mr and Mrs Prest had intended. 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