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.
Facts
Ms Yasmin Prest claimed under Matrimonial Causes Act 1973 sections 23 and 24 for ancillary relief against the offshore companies solely owned by Mr Michael Prest. Mrs Prest said they held legal title to properties that he beneficially owned, including a £4m house at 16 Warwick Avenue, London. They had married in 1993 and divorced in 2008. He did not comply with orders for full and frank disclosure of his financial position, and the companies did not file a defence. The Matrimonial Causes Act 1973 section 24 required that for a court to be able to order a transfer a property, Mr Prest had to be ‘entitled’ to the properties held by his companies. Mr Prest contended that he was not entitled to the properties.
Judgment
High Court
Moylan J, in the Family Division of the High Court, held that Mr Prest had the ability to transfer the properties in practice, so he was “entitled” to them under MCA 1973 s 24(1)(a). The court therefore had jurisdiction to make a transfer order. He ordered Mr Prest to transfer to the wife six properties and an interest in a seventh which were held in the name of two of the husband’s companies. He rejected the husband had done anything improper relating to the companies to allow piercing the corporate veil. But under MCA 1973 s 24(1)(a) ancillary relief was wider. Because Mr Prest’s properties were worth £37.5 million, Mrs Prest’s fair award was valued at £17.5m. In reviewing the law as it relates to piercing the corporate veil, he noted the following principles:
Ownership and control were not in themselves sufficient to pierce the corporate veil. Even where there was no unconnected third party interest the veil could not be pierced only because it is necessary in the interests of justice. The veil can only be pierced if there is impropriety. The impropriety must be linked to the use of the company structure to avoid or conceal liability. In order to pierce the veil, both control by the wrongdoer and impropriety must be demonstrated. A company may be a façade even though originally incorporated without deceptive intent.
In that regard, he found that piercing was justified, not under the general principles, but by virtue of the Act. The husband's properties were worth approximately £37.5 million, and therefore the wife's fair award was valued at £17.5 million.
Court of Appeal
The Court of Appeal, with Rimer LJ and Patten LJ in the majority, allowed an appeal by the companies. The Family Division’s practice of treating the assets of companies substantially owned by one party to the marriage as available for distribution under MCA 1973 section 24(1)(a) was beyond the jurisdiction of the court unless the corporate personality of the company was being abused. The corporate form needed to be used for an improper purpose, or it had to be shown that the companies held the properties on trust for Mr Prest. Because Munby J had rejected these possibilities in Ben Hashem v Al Shayif his order must have been incorrect. In the majority's view, this conflicted with Salomon v A Salomon & Co Ltd, as affirmed in Woolfson v Strathclyde Regional Council and Adams v Cape Industries plc. Patten LJ commented on other Family Division cases leading to similar results.
Thorpe LJ (a former judge of the Family Division) dissented, and said the following.
Supreme Court
The Supreme Court unanimously overturned the Court of Appeal and held that Mr Prest beneficially owned the assets of the Petrodel Resources Ltd companies under a resulting trust because he contributed to their purchase price. There was no need to pierce the corporate veil, which could only be done in limited situations. However, because Mr Prest had been "entitled" to the assets of his companies under a resulting trust, under the Matrimonial Causes Act 1973 section 24 the court had jurisdiction to transfer half the value of the properties to Mrs Prest.