Piercing the Corporate Veil: Prest v Petrodel Resources Ltd
| Author | Nicholas Grier |
| Pages | 275-279 |
| Date | 01 May 2014 |
| Published date | 01 May 2014 |
| DOI | 10.3366/elr.2014.0212 |
A wealthy Nigerian oil-trader, Michael Prest,
Details of Prest's background and his business career, in his own words, may be found at
When the enforcement proceedings relating to the divorce settlement were being heard in the lower courts, Moylan J used his powers under sections 23–25 of the Matrimonial Causes Act 1973 to order that Prest should procure the conveyance of the matrimonial home to his ex-wife and make various other payments. In addition Moylan J ordered the transfer of seven UK properties, legally owned by British companies that Prest controlled, to Prest's ex-wife in partial satisfaction of a lump sum order. The judge directed those companies to execute such documents as would give effect to the transfer of the properties to her. The transfer of the matrimonial home took place but the decision relating to the seven properties was appealed by the companies that Prest controlled. They sought to set aside the judge's order on the grounds that the judge had no jurisdiction to make such an order. The decision was appealed to the Supreme Court.
All the Justices of the Supreme Court clearly thought that Prest should be made to pay the sums due under the divorce settlement and Lord Sumption found a way to do so. The companies that Prest controlled, and which owned the seven properties, had been in existence for some years and in some cases had owned the properties before Prest's marriage. There was no suggestion that the companies had been set up as a method of avoiding any legal obligations or that the companies were being run dishonestly. While Lord Sumption may have wished to pierce their corporate veils to make the companies transfer the properties he felt unable to do so because there had been no attempt to hide anything. There was no evidence that the companies were deliberately set up to evade an obligation or frustrate the operation of law, these grounds being, in his view, the occasions when the veil should be pierced.
Having failed in this respect, Lord Sumption turned to section 24 (1)(a) of the Matrimonial Causes Act 1973 which empowers a judge to make an order requiring one party to the marriage to transfer to the other “property to which the first-mentioned party is entitled, either in possession or reversion”. Moylan J had made an order under that section requiring the companies to transfer the properties on the grounds that, since Prest had the effective control of the companies, he was in the same position as he would have been if he were the beneficiary of a bare trust or if the companies were his nominees.
Para 39.
The effect of Moylan J's assumption was to disregard the corporate veil in the context of matrimonial disputes and specifically when one party had control of a company. Lord Sumption indicated that there were no special virtues applicable to the Matrimonial Causes Act 1973 which allowed company lawTo continue reading
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