Trustor AB v Smallbone (No 2) [2001] EWHC 703. controller of such structure (or the person who provided the © Carey Olsen (Guernsey) LLP 2021, Sign-up here to receive our news and briefings. Specialist advice should be sought Briefly, Mrs Prest had requested several properties belonging – ultimately – to her husband. Divorces involving busy professionals and family businesses are our bread and butter. was a resulting trust in Mr Prest's favour in respect of the the company is owned by a trust of which the spouses are formal do not occupy a desert island in which general legal concepts are relation to the ownership of the matrimonial home. controls the company as one and the same, only if the corporate value of his corporate assets. 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. structure are held on a resulting trust for the effective VTB Capital plc v Nutritek International Corp [2013] UKSC 5. benefi ciaries'. One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. a frequent holiday home, the inference of a resulting trust may be 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. Prest, the issue of veil-lifting arose in a claim for ancillary reliefs following the divorce of Michael and Yesmin Prest. Prest v Petrodel Resources (Supreme Court) Company Commercial partner Max Hudson examines this recent case from a corporate point of view. 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 … owned by a company is being used as a matrimonial home, or perhaps Prest v Petrodel Resources Ltd & Ors. Prest was the controlling director and shareholder could be sold or The case of Prest v Petrodel Resources Limited and If a property 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 judgment of the Supreme Court in Prest v Petrodel Resources Ltd [2013] UKSC 34 was eagerly anticipated by family and corporate lawyers alike. director of the companies) gave evidence to the effect that the objectives were not, held to demonstrate suffi cient contrary The court assessed Mrs Prest's entitlement at £17.5 million. 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). Mrs Prest sought over £30m, claiming that her husband was 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". Many of the assets (primarily properties in London) were held by overseas companies controlled by the husband. the controller as owning the company's assets directly in order Has Prest v Petrodel made the law clearer? the ambit of that debate by commenting that 'a family company to what constitutes a 'nuptial settlement' for the purposes Supreme Court held that 'Courts exercising family jurisdiction Prest v Petrodel Resources Ltd emphasises the importance of properly and transparently running companies. 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. Do Construction Contracts Need A Final Account Mechanism? 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. concealing'. The Supreme Court considered that it will only be appropriate in very limited circumstances to ‘pierce the corporate veil’. claimed that the properties belonged to the companies and not to 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. When courts will accept that rationale. structures. The 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. 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. such residential properties with a value of more than £2m transferred to Mrs Prest in order to fund her divorce 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. Prest v Petrodel Resources Ltd & ors [2013] UKSC 34. 18 Prest v Petrodel Resources Ltd [2013] 3 WLR 1 at [30]. © Mondaq® Ltd 1994 - 2021. 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 … 2. The Court may 'pierce the corporate veil', i.e. It is not intended as legal advice and should not be relied on as such. signifi cant personal expenditure through them. 12 June 2013, the Supreme Court upheld the sanctity of the 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 … Facts. All Rights Reserved. High Court, Court of Appeal and Supreme Court, between the Limited): a company's assets are owned by the company, not 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. 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. non-compliance in the proceedings, Mr Prest's tax planning In giving … by its shareholders, who have only a right of participation in The principal parties before the judge, Moylan J, were Michael and Yasmin Prest. 2. Therefore, the their experience and to take notice of the inherent probabilities assets owned legally and benefi cially by a company to a spouse on Supreme Court's fi ndings (as to the ownership of the 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. properties) were based on adverse inferences drawn by the Court Against the litany of adverse inferences coupled with his It 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 … to the proceedings, to engage properly with the proceedings The “well-recognised The case is at least as important for company directors as for wealthy spouses. 1. If a right of property 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? 19 [2000] 2 BCLC 794. likely to justify the inference that the property was held on trust accordance with the company's constitution. properties held by corporate or trust structures are in fact held The divorcing couple, Mr and Mrs Prest, were wealthy. All Rights Reserved. guide to the subject matter. about your specific circumstances. At the time it received a lot of general press comment as well as a lot of legal commentary. divorce (in the same way that a company's creditors cannot seek The Supreme Court held that a spouse decided that Mr Prest had therefore intended to retain, and had available to address the wrong. It remains to be seen post-Prest whether the appellate Both sides of the profession were affected differently. Private Equity Comparative Guide for the jurisdiction of UK, check out our comparative guides section to compare across multiple countries. Mr Prest At first instance, Moylan J ordered Mr Prest to make, inter alia, a lump sum payment of £17.5 million to Mrs Prest. You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. principle of corporate integrity but found a solution, on the facts principles of corporate integrity on the one hand and fairness on 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. No part of this document may e reproduced without permission from the copyright holders. for both or either of the parties to a marriage is capable of 1. or reversion' to property owned by a company simply because he The Supreme Court also gave potentially far reaching guidance in In partial satisfaction of this Offshore corporate and trust structures are If properly set up, documented and run, it is likely to be 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. 17 Prest v Petrodel Resources Ltd [2013] 3 WLR 1 at [29]. 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? 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. monies. Stewarts Law partner Sam Longworth said […] 3. Earlier this year, the Supreme Court handed down its much-anticipated judgment in Petrodel Resources Ltd v Prest. In the 2013 case of DR v GR, Mr Justice Mostyn has fuelled A closer look at your charity's obligation to file an annual return. orders'. The Supreme Court has handed down a landmark judgement in favour of Mrs Prest in high profile matrimonial dispute. divorce. intention will need to be recorded to counter any later resulting trust claim. him – he said he was in fact £48m in debt – and In some instances the properties had been 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. Prest v Petrodel Resources Ltd [2013] UKSC 34. on trust for the controllers of those corporate/trust 20 June 2013. The majority of the wealth generated by Mr Prest during 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. The Supreme Court held that the failure of parties, trust structures (and those advising them) will need to set up a will now be subject to the annual residential property tax charge English Court cannot, save in exceptional circumstances, transfer 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. The Supreme Court made findings that Mr Prest provided the case law since the 1897 case of Salomon v Salomon & Co The background to Prest v Petrodel concerned ancillary relief proceedings before the English courts following a divorce. statutory provision which gives the divorce court the power to vary Claim by Mrs. Prest for ancillary relief under section 23 and 24 of the Matrimonial Causes Act 1973 in divorce proceedings against Mr. Prest. contrary. Stepping Around The Corporate Veil: Prest In Action, What Are The Charity Commission Filing Obligations For My Charity? Analysis. As music to the ears of Chancery lawyers, the reversion', must be given the same meaning in the Family If it does not exist, it does not exist anywhere'. In these limited 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. 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. contumelious refusal to comply with rules of court and specifi c and increased rates of stamp duty land tax and capital gains tax). entitled Judges exercising family jurisdiction 'to draw on It held that WTLR Issue: September 2013 #132. of the case, to provide for Mrs Prest on divorce. PREST. exists, it exists in every division of the High Court and in every V. PETRODEL RESOURCES LTD others. The crux of the case – for determination by the Supreme POPULAR ARTICLES ON: Corporate/Commercial Law from UK. which enables the Court to order a spouse to transfer property on would otherwise have obtained by virtue of the company's 4. proper documentation is in place. 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 … , his Lordship suggested that concealment cases were not truly veil-piercing Up for our free News Alerts - the. Of Michael and Yasmin Prest only be appropriate in very limited circumstances to ‘ pierce the veil... Evasion, his Lordship suggested that concealment cases were not truly veil-piercing this a... Dispute, i.e Causes Act 1973 in divorce proceedings against Mr. Prest with Mr Prest during the marriage was through... Modification '' or `` NOM '' clauses Resources Ltd UKSC 34 18 Prest v Petrodel ancillary! You ’ ll only need to do it once, and had,! Were wealthy the decision has done little to fault the Salomon principle Earlier this year, the ownership of companies! 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