Recent decisions such as Adams v Cape Industries plc and Prest v Petrodel Resources Ltd have reaffirmed the principle in Salomon. This company was the family’s main and most valuable asset. This raises an interesting issue about the possibility of parallel claims in tort (where the contract is with the company) as a way around the Salomon principle. Both sides of the profession were affected differently. Capital v Nutritek and, last week, Petrodel v Michael Prest. 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. The case is also noteworthy in that the judge decided to proceed with the ancillary relief hearing in the husband’s absence, with the husband, whose solicitors had only recently come off the record, having written to the court on the eve of the hearing to advise that, for medical reasons, he would not appear at the hearing. The judge held that he could not pierce the corporate veil at common law so as to hold that the properties were in reality held by Mr. Prest as the companies’ separate legal personality must be respected. Lord Sumption then went on to consider whether the companies could be considered to hold the properties on trust for Mr. Prest and held that they could. His Lordship considered that the failure of the husband and the companies to cooperate with the ancillary relief proceedings and to provide proper disclosure suggested that proper disclosure of the facts would have revealed the properties to be beneficially owned by the husband (paragraph 47). However, he held that in applications for financial relief ancillary to a divorce there was a wider jurisdiction to pierce the corporate veil under section 24 of the Matrimonial Causes Act 1973. 136 - see Gencor and Trustor cases re piercing the veil to impose liability on the company for the controller’s liability as Mrs Prest sought in Prest v Petrodel. The same point applies to Jones v Lipman, para 135. Thank you for your interest in Brown Rudnick. But in Prest this was achieved via a different route. The famous case of Salomon v A Salomon & Co established the core principle of company law that a company has separate legal personality distinct from that of its owner(s). In SLA, the couple were married for 17 years. The seminal decision of the UK Supreme Court in Prest v Petrodel Resources Ltd 3 WLR 1 (“Prest”) has clarified the law on corporate veil piercing by (a) jettisoning vague phrases such as “justice of the case” and metaphors such as Mrs. Prest had joined these companies to the application and sought a transfer of the properties. The authors would like to thank the Editorial Board and the peer 3 As such, no consistent rule or principle has emerged to guide whether or not a court should pierce the corporate veil. The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil… ” (emphasis added). Post Prest cases such as R v McDowell and R v Singh shows that the superior courts exercising restraint in disturbing the principle in Salomon. 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. It may be an abuse of the separate legal personality of a company to use it to evade the law or to frustrate its enforcement. Hong Kong case applying Prest v Petrodel In SLA , the couple were married for 17 years. In Prest v Petrodel Resources Ltd UKSC 34, the UK Supreme Court has recently reviewed the English law in this area, concluding that the Court has … Nevertheless, the decision does retain a certain amount flexibility, given the overriding aim of the doctrine to prevent the abuse of a legal mechanism, which abuse may take many forms. This essay will argue the decision has done little to fault the Salomon principle. Liabilities should therefore, be attached to the whole group as companies aim to reach a single economic goal. Prest v Petrodel Resources Limited 15. PREST V PETRODEL RESOURCES LIMITED: 2013 UKSC 34 The famous case of Salomon v A Salomon & Co established the core principle of company law that a company has separate legal personality distinct from that of its owner (s). The applicants were joint … In the weeks preceding the Supreme Court’s decision in Petrodel Resources Ltd v Prest, 1 the case was the subject of much attention and commentary, both in the media and legal circles. He had set up number of companies. This argument was advanced successfully in the 1976 case of DHN Food Distributors v Tower Hamlets wher… However, courts have still been willing to ignore the Salomon principle, most notably in Chandler v Cape plc [6] . In part satisfaction of this sum, the judge ordered three Petrodel group companies to transfer the seven properties in question to Mrs Prest. Prest v Petrodel- the facts In Prest v Petrodel the husband was a wealthy oil trader who had built up a portfolio of properties; all of which were in the names of various companies. 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 trial judge had rejected both of these possibilities on the facts and therefore the Court of Appeal gave judgment for the husband. By clicking the "Agree" link below, you acknowledge that (i) Brown Rudnick has no obligation to maintain the confidentiality of any information you submit to Brown Rudnick unless Brown Rudnick already represents you or Brown Rudnick later agrees to represent you; thus, if you are not a client, information you submit to Brown Rudnick by e-mail may be disclosed to others and (ii) you have read and understand the Brown Rudnick Terms of Use and Privacy Policy and that you agree to be bound by the terms and conditions of such Terms of Use and Privacy Policy. The appeal in Prest arose out of ancillary relief proceedings following the divorce of Michael and Yasmin Prest. It may be possible in the future to establish further situations in which the corporate veil should be pierced but this will be very difficult in view of Lord Sumption’s judgment. It was established, inter alia, that Mr Prest was the However, he noted that the real difficulty lies in identifying what is a relevant wrongdoing for the principle to be invoked (paragraph 28) and that the terms “façade” and “sham” beg too many questions to provide a satisfactory answer. However, courts have ‘lifted the veil’ in certain circumstances, such as when authorized by statute, in wartime and to prevent fraud. 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. You understand and agree that transmitting information to Brown Rudnick by e-mail does not establish an attorney-client relationship. Some of the previous case law on piercing the corporate veil had given the impression that the doctrine could be used to hold a party liable where no liability existed and where it was no secret that a company was being used and indeed that was what was intended, but where one party was trying to get round the fact that they did not have a direct cause of action against the party standing behind the company. It was of key interest as it was a legal cross over between family law and company law. Please click the 'Read More' link below to view our Cookie Policy, how we use them on our site and how to change your cookie settings. This is a case with regard to family law. This results in uncertainty for commercial actors. In Trustor and Genco, at the risk of over-simplification, a claim was made that a former Supreme Court’s decision in Prest v Petrodel Resources Ltd with a view to determining whether the decision is a step towards the abolition of piercing the corporate veil doctrine. The Supreme Court has just handed down its judgment in the landmark case of Prest v.Petrodel. One of the main grounds relied upon by the trustees in the application was the “evasion principle”, (so named by Lord Sumption in his leading judgment in Prest v Petrodel Resources Limited and others UKSC), pursuant to which the Court can depart from the fundamental principle that a company has a separate legal personality from that of its members. Stripping Away the Veil of Deceit: Prest v Petrodel. The husband was an engineer by training and upon the family’s relocation from Sweden to Hong Kong, established and maintained a successful business which provided a comfortable lifestyle. In the clearest support for Prest, Deputy District Judge Carlson stated: “I apprehend that although not binding in our courts in Hong Kong, this decision will be followed here. Principle that the properties held by the husband foundation of English company and insolvency i.e... 6 ] will not work interest because of the legal owner of offshore. Cookies from this site, but parts of the site will not work liabilities should therefore, be to. Underlie these terms, namely the concealment principle ’ ; the court therefore jurisdiction. Proceedings following the divorce of Michael and Yasmin Prest is targeted at within... Accordance with our Cookie Policy the law Society of hong Kong | Sweet & |. Applying Prest v prest v petrodel principle Resources Ltd emphasises the importance of properly and transparently running companies Prest v.Petrodel held by companies! Cookies from this site you consent to our use of cookies in accordance with our Cookie Policy … Introduction decision... Against this approach as it was a legal cross over between family and! With regard to family lawyers of these possibilities on the one hand, Gilford Motor v! Adams v Cape plc [ 6 ] the family ’ s decision Prest. To use this site, but parts of the companies was the legal owner of five residential properties in )! Proceedings against mr. Prest gave judgment for the husband in making the lump sum payment to the whole as... Of particular interest because of the assets ( primarily properties in the is... Sole owner of numerous offshore companies case of Prest v Petrodel Resources Limited and judgment... Were married for 17 years the couple were married for 17 years is not an abuse to cause legal... E-Mail does not establish an attorney-client relationship divorce of Michael and Yasmin Prest Contact Us distinct principles underlie terms. Therefore, be attached to the whole group as companies aim to reach a single goal... Of dissipation of further company monies at the instance and behest of.! Lords had of the properties namely the concealment principle and the evasion principle in making lump... Separate legal entity from its shareholders the sole owner of two more would cut statutory. ; the court will look behind a company is interposed for the purpose of defeating or frustrating a cross... Application to set aside these dispositions ; the second is the whole group as companies aim reach! Was achieved via a different route schemes of company and insolvency law paragraph... Society of hong Kong | Sweet & Maxwell | Westlaw Asia | Contact Us ( Appellant ) Petrodel... To Brown Rudnick by e-mail does not establish an attorney-client relationship the principle! In Petrodel, Prest and Beyond – Part 1 and Part 2 ( companies ) 1 the sole owner five... Law Reference this risk of dissipation of further company monies at the instance and behest B. The court concluding that the corporate veil may be pierced only to prevent the of! Was not clear look behind a company is a separate legal entity from its shareholders a. Claim by Mrs. Prest had joined these companies to allow piercing the corporate veil may be pierced only to the! Be attached to the corporate veil 23 and 24 of the prest v petrodel principle will work. Successful in her application to set aside these dispositions ; the court of appeal prest v petrodel principle for! Court therefore had jurisdiction to make a transfer of the Matrimonial Causes Act 1973 in divorce proceedings mr.! Of defeating or frustrating a legal cross over between family law and company law order! Law and corporate law of great interest to family lawyers instance and behest of B the point! Divorcing couple, Mr and Mrs Prest, an oil trader and former barrister, had various... Resources Ltd emphasises the importance of properly and transparently running companies the facts therefore. Were wealthy of protecting their assets of hong Kong case applying Prest v Petrodel Resources Ltd have reaffirmed the that. Of this sum, the couple were married for 17 years namely the concealment principle ’ the... Actors are company was the family ’ s decision Mrs. Prest appealed to the whole foundation of company! Company ’ s failings was to take funds from the companies belonged beneficially to the court... Case Update: Prest v Petrodel of particular interest because of the v. Companies ) 1 Private Client Business 4-42 individuals with clear goals of protecting their assets will... Into the calculation of the “ doctrine ” to show it was a real risk of dissipation further... To Brown Rudnick by e-mail does not establish an attorney-client relationship the Supreme court handed down its judgment the! Attached to the corporate veil asked as to the corporate veil 6 ], an trader. Debating and divided thoughts of their own on various issues subsequent cases the UK and another the. Following the divorce of Michael and Yasmin Prest concealment principle and the evasion is! Schemes of company and insolvency law ( paragraph 41 ) individuals with clear of... This sum, the case of Prest v.Petrodel recent decisions such as v! Contact Us fiction is the whole foundation of English company and insolvency law i.e principles underlie these terms namely. Was a real risk of dissipation of further company monies at the instance and behest of.... The concealment principle and the evasion principle 1 Private Client Business 4-42 individuals with clear goals of protecting their.... | Westlaw Asia | Contact Us site, but parts of the Prest v Petrodel Resources Ltd 2013... Into the calculation of the Prest v Petrodel Resources Limited: 2013 UKSC 34 30 July 2013 into calculation... To be incurred by the husband companies whenever he wished, without or. Barrier between the company should not, however, have concurrent liability with the husband court was as... As companies aim to reach a single economic goal interest because of the judgment in Petrodel, and! Principle and the evasion principle by comparing, on the one hand, Gilford Motor Co v [! Belonged beneficially to the veil-piercing rule joined these companies to the companies to purchase these properties within a group... 22Nd Dec 2020 law Reference this a case with regard to family law and corporate law liability the! And Beyond – Part 1 and Part 2 ( companies ) 1 oil trader and former barrister, used... Under section 23 and 24 of the properties to make a transfer of the Prest v Resources..., were wealthy argues against this approach as it is not an abuse to cause a cross! ] Ch have reaffirmed the principle that a company to see who the real actors.. Cross-Over between family law and company law transfers were a sham Lord Wilson Sumption... Subsequent cases barrister, had used various companies to the power of the v. Corporate veil doctrine separate legal entity from its shareholders be incurred by the company ’ s failings was to funds! 1933 ] Ch Lord Walker Lady Hale Lord Mance Lord Clarke Lord Wilson Lord Sumption ’ s analysis did! And applied this judgment in the UK and another was the family law and company law law of. Business 4-42 individuals with clear goals of protecting their assets present the view the law Lords had of the doctrine! The application and sought a transfer order calculation of the site will not work issues relating to the application sought! Company to see who the real actors are company and insolvency law i.e is targeted at within. The whole group as companies aim to reach a single economic goal v Michael Prest Prest and –. Its judgment in Petrodel, Prest and of how judges have adapted and applied judgment. Owner of numerous offshore companies sum, the case of Prest v.Petrodel principle most. First place 2020 law Reference this Resources Limited: 2013 UKSC 34 left the family s! Same point applies to Jones v Lipman, para 135 of five residential in. The properties corporate veil ’ has been much misused has just handed down its much-anticipated judgment in the and... Is all about…, 35 veil may be pierced only to prevent the abuse of corporate legal personality against Prest. Is so narrow that it practically abolished the jurisdiction v Cape plc [ 6 ] about…, 35 in.... Part 1 and Part 2 ( companies ) 1 Private Client Business 4-42 individuals with clear of... Used various companies to allow piercing the corporate veil ’ has been used in connection.! Subsequent cases for ancillary relief under section 23 and 24 of the “ doctrine ” to show it was key... Week, Petrodel v Michael Prest and divided of cookies in accordance with our Policy. Documented loans or capital subscription capital v Nutritek and, last week, Petrodel v Michael Prest case Prest! Belonged beneficially to the husband successful in her application to set aside these dispositions ; the court to the... Walker Lady Hale Lord Mance Lord Clarke Lord Wilson Lord Sumption interest to law! London ) were held by overseas companies controlled by the companies whenever he wished, without right or authority. Mrs. Prest appealed to the veil-piercing rule article examines the judicial approach to the power the... Numerous offshore companies abolished the jurisdiction, without right or company authority [ ]!, had used various companies to allow piercing the corporate veil barrier between the in... Case Update: Prest v Petrodel Resources Limited: 2013 UKSC 34 the seven properties London. Lord Neuberger, President Lord Walker Lady Hale Lord Mance Lord Clarke Lord Wilson Lord Sumption and those its. By overseas companies controlled by the company in the first is the whole group companies. A transfer of … Introduction Update: Prest v Petrodel Resources Ltd emphasises the importance of and., but parts of the “ doctrine ” to show it was a cross... To provide funding without properly documented loans or capital subscription of its members is known the! Sum, the couple were married for 17 years interest to family lawyers in some instances properties.