Google Scholar However, there have been … 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. The recent judgment in SLA v HKL (FCMC 75000/ 2010) may be Hong Kong’s first case to apply the recent UK Supreme Court landmark decision of Prest v Petrodel [2013] UKSC 34. The value of the judgement was not in question, as the courts had already ruled the husband – a Nigerian oil tycoon – would have to pay his wife £17.5m, largely due to his conduct during the case, and he was not arguing over this. 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. Prest (Appellant) v Petrodel Resources Limited and others (Respondents) Judgment date. She is a matrimonial lawyer dealing with all aspects of family law, information management, legal writing and publications. Prest (Appellant) v Petrodel Resources Limited & Others (Respondents) [2013] UKSC 34 . Justices. It was established, inter alia, that Mr Prest was the 750 RPC people united by a passion for client service. 12 Jun 2013. The court may only "pierce the corporate veil" when it deems it appropriate and absolutely necessary to look behind the status of the company as a separate legal entity, distinct from its shareholders. The Bryan Cave Leighton Paisner (BCLP) Private Client team advises international high and ultra-high net worth individuals and their families on all matters affecting their business, personal and family wealth, as well as the institutions entrusted with the effective management of that wealth. 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". Lord Neuberger, Lord Walker, Lady Hale, Lord Mance, Lord Clarke, Lord Wilson, Lord Sumption. 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 … The trial judge found that as the Petrodel companies were effectively owned and controlled by Mr Prest, he was their "alter ego", and so the properties which were legally vested in them were, in reality, assets available to Mr Prest. Prest v Petrodel Resources Ltd [2013] UKSC 34. Prest v Petrodel was finally adjudicated by the Supreme Court. Whatever your industry or situation, we relish change, thrive on solutions and love building long-term relationships with our clients. Mr Prest was a wealthy businessman operating in the oil sector. 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 AC 22 and reiterated in more recent authorities such as Adams v Cape Industries Ch 433. In 2013, the case of Prest v Petrodel [2013] UKSC 34 left the family law fraternity debating and divided. As the legislation is so similar, Hong Kong courts often look for guidance in England. This article will critically evaluate the significance of the Prest v Petrodel Resources Ltd[1] decision in light of the corporate veil doctrine. The set of circumstances in which the ‘lifting‘ process in respect of shareholder liability may be triggered is set out in the test from the Supreme Court case of Prest v Petrodel Resources Ltd [2013] UKSC 34. This essay will argue the decision has done little to fault the Salomon principle. As with Prest, the court looked specifically at whether the husband had been able to use, had control over, and had an interest in the Hong Kong companies, the shares of which were placed offshore, pre allotment and post allotment. It is important to bear in mind the principles in Prest when considering the complexities of offshore corporate investments in divorce settlements. [2014] LMCLQ 269. The position appeared reasonably clear but after that, however, came the much publicised matrimonial case of Prest v Petrodel and, more recently, the competition case of Akzo Nobel v The Competition Commission. It came as little surprise that the Petrodel group companies challenged the first instance decision in the Court of Appeal. ... of cases where the abuse of the corporate veil to evade or frustrate the law can be addressed only by disregarding the legal personality of the company is … the specific facts show that the assets are genuinely held on trust for a party to the proceedings. For us it's a must, not a maxim. Prest and Beyond – Part 1 and Part 2 (Companies) 1. It therefore appears that where litigants can show that the relevant tests are satisfied, the courts will allow them to obtain judgement against assets that were intentionally placed out of their reach. The circumstances in which property held by a company can be attributed to those who control it gained considerable publicity in Prest v Petrodel Resources Ltd & Others [2013] UKSC 34.The case played out … The circumstances in which property held by a company can be attributed to those who control it gained considerable publicity in Prest v Petrodel Resources Ltd & Others [2013] UKSC 34.The case played out some of the historical tensions between the Family and In part satisfaction of this sum, the judge ordered three Petrodel group companies to transfer the seven properties in question to Mrs Prest. Rather, Mrs Prest succeeded because of the specific facts of her case, and not because of any modification of the law in relation to the preservation of the corporate veil. A company cannot be deemed to be the alter ego of a party to the marriage, even if that party clearly operated the company, unless there had been some impropriety. 34 William Day, “Skirting around the Issue: The Corporate Veil after Prest v Petrodel”. The Court of Appeal agreed with the trial judge that these underlying assets could be taken into account in the division of the marital assets and looked at the reality of the situation from past conduct. 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. In SLA, the couple were married for 17 years. In so doing, the court will consider who are the individuals, as shareholders, directing and controlling the activities of the company. In this context, Lord Sumption sheds further light on the doctrine of abuse of corporate personality under English law. 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 … In many respects, Prest has done nothing to re-shape the court's attitude towards piercing the corporate veil. 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. Accordingly, the court found that those properties could be applied to satisfy Mrs Prest’s divorce settlement. Prest v Petrodel Resources Ltd & Others [2013] UKSC 34 Introduction. Facts. Judgment details. The Supreme Court in Prest v Petrodel was also concerned with achieving justice for the claimant, and in the VTB case Lord Neuberger said: ‘it may be right for the law to permit the veil to be pierced in certain circumstances in order to defeat injustice’. Introduction. A Look at the Recent Court of Appeal case of CWG v MH in the Context of Prest v Petrodel, UKSC Reviews “Illegality” Defence in a Professional Negligence Setting, When the Legal Industry Meets Technology (Part 2). The article seeks to determine whether the Supreme Court clarified the rule in the case and concludes from an examination of the literature that the court clarified some but not all issues relating to the rule. 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. Case ID. 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. The court was asked as to the power of the court to order the transfer of … Although the case revolved around a dispute concerning financial provision on divorce, the decision has potentially wider implications. short, after Mr and Mrs Prest divorced, Moylan J. awarded Mrs Prest a sum of £17.5 million as a fair division of Mr Prest’s assets. Lloyd’s Maritime and Commercial Law Quarterly 2014(2): 269 – 296 . The Supreme Court has handed down a landmark judgement in favour of Mrs Prest in high profile matrimonial dispute. Professional Support Lawyer, Withers Khattarwong. 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.It was of key interest as it was a legal cross over between family law and company law. The set of circumstances in which the ‘lifting‘ process in respect of shareholder liability may be triggered is set out in the test from the Supreme Court case of Prest v Petrodel Resources Ltd [2013] UKSC 34. For instance, in June 2016, the Hong Kong Court of Appeal in CWG v MH (Interest in off-shore companies) CACV 80-83/2013 considered a case involving the disputed ownership of shares in a number of offshore companies. Day, W (2014) Skirting around the issue: The corporate veil after Prest v Petrodel. Plainly, the decision will also be of note to those engaged in advising high net-worth individuals in relation to their marital affairs. One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. UKSC 2013/0004. Prest and Beyond – Part 1 and Part 2 (Companies) 1. The issue of beneficial ownership often comes before the courts in Hong Kong for cases where assets are held on behalf of other family members or through corporate or trust structures. This is a case with regard to family law. Many of the assets (primarily properties in London) were held by overseas companies controlled by the husband. For the past 30 years orders have been made against the assets of a company that are considered to be the alter ego of a spouse to satisfy a capital award made by the court in respect of the other spouse.1In 2012 the Court of Appeals ruling in Petrodel Resources Ltd & Ors v Prest & Ors2set a new precedent stopping an ex-wife being able to investigate a company’s assets when she believes her husband has concealed assets within that company. Prest v Petrodel Resources Ltd emphasises the importance of properly and transparently running companies. Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 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. Big enough to handle the most complex matters. Prest was of particular interest because of the legal cross-over between family law and corporate law. At issue was whether the family courts can pierce the corporate veil when assets are owned beneficially by a company, but controlled by one of the spouses. In reaching its conclusion, the Supreme Court confirmed that the Court of Appeal's analysis of the circumstances in which the corporate veil may be pierced was correct. Sir Michael Birt endorsed this more restrictive test and concluded that in the circumstances of the case there was no basis for piercing the corporate veil. Another was to take funds from the companies whenever he wished, without right or company authority. The case concerned a very high value divorce.. Both sides of the profession were affected differently. The Supreme Court case Prest v Petrodel Resources Ltd [2013] 2 AC 415 addresses the issue of whether, and if so in what way, the court is competent to pierce the corporate veil save any specific statutory authority to do so. Sign up for perspectives and email updates tailored to your needs, Copyright © 2020 Reynolds Porter Chamberlain LLP, The corporate veil: Prest, but not pierced, Post Merger Acquisition and other disputes, Support for litigation in other jurisdictions, Tax investigations and dispute resolution, Insurance and financial services regulation, HMRC criminal investigations and prosecutions, ICO issues fines for emails seeking consent to marketing, The Commercial Court assesses the power and limitations of "Chabra" jurisdiction, Court clarifies relationship between the CPR and the Companies Act when serving a director resident abroad, Court of Appeal makes it clear that a skeleton argument is not a vehicle for the introduction of unpleaded claims, COVID-19: business continuity and preparedness response, RPC Claims Management System - Terms of use, where there is a deliberate abuse of a corporate entity (i.e. Prest was of particular interest because of the legal cross-over between family law and corporate law. Mr and Mrs Prest (who had dual British and Nigerian citizenship) had their matrimonial home in London but it was determined by the court that Mr Prest was based in Monaco. Their main argument was that the family court could not simply depart from long established company law principles relating to the separate legal personality of companies. The decision in Prest overhauled the court’s previous precedent… The judgment is important for businesses holding assets which could be vulnerable to pursuit by spouses in divorce proceedings. PIERCING THE CORPORATE VEIL: THE POSITION FOLLOWING PETRODEL V PREST. Mr. Prest was the sole owner of numerous offshore companies. company law after Prest v Petrodel decision Ariel Mucha The Supreme Court case Prest v Petrodel Resources Ltd [2013] 2 AC 415 addresses the issue of … Many of the assets (primarily properties in London) were held by overseas companies controlled by the husband. Day, W (2014) Skirting around the issue: The corporate veil after Prest v Petrodel. Mujih E, 'Piercing the corporate veil as a remedy after Prest V Petrodel resources Ltd: Inching towards Abolition' [2016] Westlaw 17,17. ... of cases where the abuse of the corporate veil to evade or frustrate the law can be addressed only by disregarding the legal personality of the company is consistent with authority and long-standing In reaching its decision, the court had to consider the law surrounding the piercing of the corporate veil. Indeed, the court found that Mr Prest took steps to conceal details of his wealth from the court and demonstrated flagrant disregard for court orders to provide corroborative information of his personal and commercial interests. The legal battle is one of the most high-profile divorce cases seen in England. In 2011 a High Court ruling ordered Mr Prest, the founder of a Nigerian oil business Petrodel Resources Ltd, to transfer 14 properties which were tied up in his businesses to Yasmin Prest … to hide behind the corporate veil) for improper purposes; and/or. However, in applying those exceptional circumstances, the Supreme Court held Mr Prest had not deliberately attempted to stymie Mrs Prest's claim. Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 (12 June 2013) March 22, 2018/in Company /Private Law Tutor. 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. Justices. By classifying veil-piercing as evasion, his Lordship suggested that concealment cases were not truly veil-piercing. VTB Capital plc v Nutritek International Corp [2013] UKSC 5, [2013] 2 AC 337 is an English company law case, concerning piercing the corporate veil for fraud.. Prest v Prest [2015] EWCA Civ 714. The article examines many issues relating to the rule and the corporate personality doctrine. By classifying veil-piercing as evasion, his Lordship suggested that concealment cases were … Lloyd’s Maritime and Commercial Law Quarterly 2014(2): 269 – 296 . 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. The court found that he had access to the underlying assets of their subsidiaries and his personal connection with one of the companies in particular was manifest – the company held the property which housed his children rent free, the office where he kept his collection of classic cars and provided all the family expenses including his mother-in-law’s credit card expenses. 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 has handed down a landmark judgement in favour of Mrs Prest in high profile matrimonial dispute. As well as cases of fraud and other wrongdoing in the course of business, the other area in which the courts have most frequently been asked to be creative in their approach to companies has been in the family division of the High Court in divorce cases. As a consequence, clients and advisers have to consider the risks inherent in such structures and whether there are likely to be any unforeseen consequences. paradigm examples of the “concealment” principle in application), it is. VTB's case was that, inter alia, the loan facility agreement should be enforced against individuals who were not party to it, which VTB argued could be achieved by piercing the corporate veil. Appeal dismissed. The value of the judgement was not in question, as the courts had already ruled the husband – a Nigerian oil tycoon – would have to pay his wife £17.5m, largely due to his conduct during the case, and he was not arguing over this. 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 some instances the properties had been The corporate veil is a metaphorical phrase, established in the landmark case of Salomon v Salomon & Co Ltd 6 . Divorce cases are not a special case in which the court may depart from the doctrine of the corporate veil. The Court of Appeal considered the practice of family courts seeking to do precisely that under the Matrimonial Causes Act 1973 in cases where the company is wholly or largely owned by the spouse. The same point applies to Jones v Lipman, para 135. The leading judgment was given by Lord Sumption. The concept is central to the existence of a corporate body. This is largely as a result of the case of VTB Capital Plc. One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. This was described by Lord Sumption in the case of Prest v Petrodel Resources Ltd [2013] UKSC 34 as the "evasion principle". 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. Prest v Petrodel – the commentaries. At various stages, Mr Prest was reticent and resisted providing accurate information relating to his income and assets. Judgment details. V Nutritek International Corp. & Ors [2013] UKSC 5. But in Prest this was achieved via a different route. In doing so, the Supreme Court has ordered divorced husband, Michael Prest, to transfer to his former wife, Yasmin Prest, properties held by companies owned and controlled by him, as part of a £17.5m divorce award. The court assessed Mrs Prest's entitlement at £17.5 million. The Supreme Court has just handed down its judgment in the landmark case of Prest v.Petrodel. In 2011 a High Court ruling ordered Mr Prest, the founder of a Nigerian oil business Petrodel Resources Ltd, to transfer 14 properties which were tied up in his businesses to Yasmin Prest as part of a £17.5m divorce payout. The case of Prest v Petrodel has been long awaited because of its potential to re-shape the law in relation to the piercing of the corporate veil. Court in Prest v Petrodel Resources Ltd. The judgment of the Supreme Court in Prest v Petrodel Resources Ltd [2013] UKSC 34 was eagerly anticipated by family and corporate lawyers alike. Instead, overturning the High Court decision and following various authorities the Court of Appeal held that the corporate veil should only be pierced in very limited circumstances, that is: On 12 June 2013, seven members of the Supreme Court allowed Mrs Prest's appeal. The court was asked as to the power of the court to order the transfer of assets owned entirely in the company’s names. piercing the corporate veil: the position following petrodel v prest As well as cases of fraud and other wrongdoing in the course of business, the other area in which the courts have most frequently been asked to be creative in their approach to companies has been in the family division of the High Court in divorce cases. Supreme Court decisions thus have considerable influence here. Also see Lady Hale’s distinction in para 92. UKSC 2013/0004. In 2013, the case of Prest v Petrodel [2013] UKSC 34 left the family law fraternity debating and divided. The decision may well assuage the concerns of corporates, insofar as it adheres to long-held company and trusts law principles. Introduction. 08 July 2013. In this context, Lord Sumption sheds further light on the doctrine of abuse of corporate personality under English law. 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. The fact that Mr Prest had sought to conceal this fact in evidence, and that both he and the companies failed to cooperate with disclosure, permitted the court to infer that Mr Prest and the companies were attempting to hide the true beneficial ownership of the properties. Case ID. The Court of Appeal rejected this approach in Prest. Facts The parties, who had four teenage children, separated in 2008 after 15 years of marriage. In summary, VTB was the English claimant in an action to recover c.US$225 million loaned to "RAP", a Russian company, for the purpose of RAP's proposed acquisition of Nutritek. The court found that the manner in which the seven properties had become vested in the Petrodel group companies meant that, in fact, the properties were held on trust for Mr Prest, such that he was their beneficial owner. Prest v Petrodel Resources Ltd and Others: SC 12 Jun 2013 In the course of ancillary relief proceedings in a divorce, questions arose regarding company assets owned by the husband. At issue was whether the family courts can pierce the corporate veil when assets are owned beneficially by a company, but controlled by one of the spouses. Prest (Appellant) v Petrodel Resources Limited and others (Respondents) Judgment date. through concealment”.39Taking Gencorand Trustor(the supposed. The case clarifies the fact that it is possible to lift the corporate veil, but only in a small category of cases where a company has been created or structured in some way to frustrate the law. In SLA, the couple were married for 17 years. Neutral citation number [2013] UKSC 34. introduction The recent decision of the Supreme Court in Prest v Petrodel Resources Ltd 1 has clarified and restricted the circumstances in which the corporate veil between those dealing with companies and those operating them can be pierced so that the latter can made liable to the former instead of liability stopping with the company itself. in many evasion cases – indeed, evasion is commonly achieved. In the last year, the concept of the corporate veil (and the court's ability to pierce it) has been the subject of substantial judicial scrutiny and academic commentary. 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. Following decisions at first instance and on appeal, the Supreme Court reached a unanimous decision that it would be contrary to prior authorities and principles to extend the circumstances in which the corporate veil can be pierced. The background to these proceedings is extensive and, indeed, is well known to those who practise family law, in consequence of an earlier sequence of appeals which brought the case before the Supreme Court (Prest v Petrodel Resources Ltd. [2013] UKSC 34; [2013] 2 AC 415). 12 Jun 2013. In some instances the properties had been The case of Prest v Petrodel has been long awaited because of its potential to re-shape the law in relation to the piercing of the corporate veil. The Supreme Court had to consider whether it is open to the court, in ancillary relief proceedings, to treat the assets of a company, of which a spouse is the sole controller, as being assets to which that spouse is ‘entitled’ for the purposes of the Matrimonial Causes Act 1973. articulated by Lord Sumption in Prest v Petrodel Resources Ltd [2013] 3 WLR 1 (“Petrodel”) in the light of recent English and Singapore case law and, in particular, to interrogate the notion of veil-piercing as a remedy of last resort, as well as the concealment and … The disclosure by the husband was found to be incomplete and adverse inferences were made against him. The corporate veil may be pierced if there is some form of wrongdoing, which involves the fraudulent or dishonest use of the corporate personality, for the purpose of concealing the true position. In cases where the ostensible title to company assets is established, the Supreme Court has demonstrated that an attempt to deceive the court could result in inferences being drawn which may precipitate the transfer of those assets, even where the corporate veil remains firmly in place. Since Salomon v Salomon, 1 it has been well established in UK law that a company has a separate personality to that of its members, and that such members cannot be liable for the debts of a company beyond their initial financial contribution to it. The Court of Appeal held that the family court should not allow the properties to be taken into account in the division of assets because the companies were the beneficial owners of the properties and upheld the company law principle that there is nothing special about family law and the courts cannot pierce the corporate veil. The Law Society of Hong Kong | Sweet & Maxwell | Westlaw Asia | Contact Us. 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