Prest v Petrodel Resources Ltd

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLady Hale,Lord Wilson,Lord Mance,Lord Sumption,Lord Clarke,Lord Neuberger,Lord Walker
Judgment Date12 June 2013
Neutral Citation[2013] UKSC 34
Date12 June 2013

[2013] UKSC 34

THE SUPREME COURT

Trinity Term

On appeal from: [2012] EWCA Civ 1395

Before

Lord Neuberger, President

Lord Walker

Lady Hale

Lord Mance

Lord Clarke

Lord Wilson

Lord Sumption

Prest
(Appellant)
and
Petrodel Resources Limited and Others
(Respondents)

Appellant

Richard Todd QC

Daniel Lightman

Stephen Trowell

(Instructed by Farrer & Co)

Respondent

Tim Amos QC

Oliver Wise

Ben Shaw

Amy Kisser

(Instructed by Jeffrey Green Russell Ltd)

Heard on 5 and 6 March 2013

Lord Sumption
Introduction
1

This appeal arises out of proceedings for ancillary relief following a divorce. The principal parties before the judge, Moylan J, were Michael and Yasmin Prest. He was born in Nigeria and she in England. Both have dual Nigerian and British nationality. They were married in 1993, and during the marriage the matrimonial home was in England, although the husband was found by the judge to have been resident in Monaco from about 2001 to date. There was also a second home in Nevis. The wife petitioned for divorce in March 2008. A decree nisi was pronounced in December 2008, and a decree absolute in November 2011.

2

The husband is not party to the appeal in point of form, although he is present in spirit. The appeal concerns only the position of a number of companies belonging to the group known as the Petrodel Group which the judge found to be wholly owned and controlled (directly or through intermediate entities) by the husband. There were originally seven companies involved, all of which were joined as additional respondents to the wife's application for ancillary relief. They were Petrodel Resources Ltd ("PRL"), Petrodel Resources (Nigeria) Ltd ("PRL Nigeria"), Petrodel Upstream Ltd ("Upstream"), Vermont Petroleum Ltd ("Vermont"), Elysium Diem Ltd, Petrodel Resources (Nevis) Ltd ("PRL Nevis") and Elysium Diem Ltd (Nevis). Three of these companies, PRL, Upstream and Vermont, all incorporated in the Isle of Man, are the respondents in this court. PRL was the legal owner of the matrimonial home, which was bought in the name of the company in 2001 but was found by the judge to be held for the husband beneficially. There is no longer any issue about that property, which is apparently in the process of being transferred to the wife. In addition, PRL was the legal owner of five residential properties in the United Kingdom and Vermont is the legal owner of two more. The question on this appeal is whether the court has power to order the transfer of these seven properties to the wife given that they legally belong not to him but to his companies.

3

Part II of the Matrimonial Causes Act 1973 confers wide powers on the court to order ancillary relief in matrimonial proceedings. Section 23 provides for periodical and lump sum payments to a spouse or for the benefit of children of the marriage. Under section 24(1)(a), the court may order that "a party to the marriage shall transfer to the other party… such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion". Section 25 provides for a number of matters to which the court must in particular have regard in making such orders, including, at section 25(2)(a), the "income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future".

4

The proper exercise of these powers calls for a considerable measure of candour by the parties in disclosing their financial affairs, and extensive procedural powers are available to the court to compel disclosure if necessary. In this case, the husband's conduct of the proceedings has been characterised by persistent obstruction, obfuscation and deceit, and a contumelious refusal to comply with rules of court and specific orders. The judge, Moylan J, recited in his judgment the long history of successive orders of the court which were either ignored or evaded, the various attempts of the husband to conceal the extent of his assets in the course of his evidence, and the collusive proceedings in Nigeria by which he sought declarations that certain of the companies were held in trust for his siblings. The only evidence on behalf of the respondent companies was an affidavit sworn by Mr Jack Murphy, a director of PRL and the corporate secretary of the three respondent companies, who failed to attend for cross-examination on it. The judge rejected his excuse that he was in bad health, and found that he was "unwilling rather than unable to attend court." His conclusion was that "as a result of the husband's abject failure to comply with his disclosure obligations and to comply with orders made by the court during the course of these proceedings, I do not have the evidence which would enable me to assemble a conventional schedule of assets." However, he found that the husband was the sole beneficial owner and the controller of the companies, and doing the best that he could on the material available assessed his net assets at £37.5 million.

5

By his order dated 16 November 2011, Moylan J ordered that the husband should procure the conveyance of the matrimonial home at 16, Warwick Avenue, London W2 to the wife, free of incumbrances, and that he should make a lump sum payment to her of £17.5 million and periodical payments at the rate of 2% of that sum while it remained outstanding, together with £24,000 per annum and the school fees for each of their four children. In addition he awarded costs in favour of the wife, with a payment of £600,000 on account. The judge ordered the husband to procure the transfer of the seven UK properties legally owned by PRL and Vermont to the wife in partial satisfaction of the lump sum order. He directed those companies to execute such documents as might be necessary to give effect to the transfer of the matrimonial home and the seven properties. Moreover, in awarding costs to the wife, the judge directed that PRL, Upstream and Vermont should be jointly and severally liable with the husband for 10% of those costs. Corresponding orders were made against certain of the other corporate respondents to the original proceedings, but they did not appeal, either to the Court of Appeal or to this court, and are no longer relevant, save insofar as the facts relating to them throw light on the position of the three respondents. No order was made (or sought) for the transfer of any assets of Upstream, but that company is interested in the present appeal by virtue of its liability under the judge's order for part of the wife's costs.

6

The distinctive feature of the judge's approach was that he concluded that there was no general principle of law which entitled him to reach the companies' assets by piercing the corporate veil. This was because the authorities showed that the separate legal personality of the company could not be disregarded unless it was being abused for a purpose that was in some relevant respect improper. He held that there was no relevant impropriety. He nevertheless concluded that in applications for financial relief ancillary to a divorce, a wider jurisdiction to pierce the corporate veil was available under section 24 of the Matrimonial Causes Act. The judge found that the matrimonial home was held by PRL on trust for the husband, but he made no corresponding finding about the seven other properties and refused to make a declaration that the husband was their beneficial owner. It is tolerably clear from his supplementary judgment of 16 November 2011 (on the form of the order), that this was because having decided that he was specifically authorised to dispose of the companies' properties under section 24, it was unnecessary for him to do so and undesirable because of "the potential tax consequences". It is not clear what potential tax consequences he had in mind, but his observation suggests that without them he might well have made the declaration sought.

7

In the Court of Appeal, the three respondent companies challenged the orders made against them on the ground that there was no jurisdiction to order their property to be conveyed to the wife in satisfaction of the husband's judgment debt. This contention, which has been repeated before us, raises a question of some importance. For some years it has been the practice of the Family Division to treat the assets of companies substantially owned by one party to the marriage as available for distribution under section 24 of the Matrimonial Causes Act, provided that the remaining assets of the company are sufficient to satisfy its creditors. In the Court of Appeal, the practice was supported by Thorpe LJ, but the majority disagreed. Rimer LJ, delivering the leading judgment for the majority, held that the practice developed by the Family Division was beyond the jurisdiction of the court unless (i) the corporate personality of the company was being abused for a purpose which was in some relevant respect improper, or (ii) on the particular facts of the case it could be shown that an asset legally owned by the company was held in trust for the husband. He considered that the judge had rejected both of these possibilities on the facts, and that he ought not therefore to have made the order. In a short concurring judgment, Patten LJ said that the Family Division had developed "an approach to company owned assets in ancillary relief applications which amounts almost to a separate system of legal rules unaffected by the relevant principles of English property and company law." The practice, he concluded, "must now cease". This has significant practical implications. Unless the UK properties of the Petrodel Group are transferred to Mrs Prest, it is possible (she says likely) that the lump sum order in her favour will remain wholly unsatisfied. To date, the matrimonial home has been transferred to her but only...

To continue reading

Request your trial
380 cases
  • B v IB
    • United Kingdom
    • Family Division
    • 29 d5 Novembro d5 2013
    ...of a third party, is irrelevant to this analysis, whatever the effect of the decision in Prest v Petrodel Resources Limited and Others [2013] UKSC 34 either in the Court of Appeal and the Supreme Court. 56 . I have already referred to Trowbridge, which supports the proposition that both s37......
  • Rush Hair Ltd v Hayley Gibson-Forbes and Another
    • United Kingdom
    • Queen's Bench Division
    • 21 d5 Outubro d5 2016
    ...to submit short written submissions on a point of law arising from the decision of the Supreme Court in Petrodel Resources Ltd v Prest [2013] 2 AC 415. Both counsel filed short written submissions in response to this invitation. Unfortunately, through no fault of Mr Quinn's, his submissions......
  • R v Sale
    • United Kingdom
    • Court of Appeal (Criminal Division)
    • 25 d4 Julho d4 2013
    ...become apparent. 19 Shortly before this appeal was heard, the Supreme Court gave judgment in Prest v Petrodel Resources Limited & Others [2013] UKSC 34. That decision has a bearing on this appeal, although its subject matter related to the question of piercing the corporate veil in relation......
  • British Airways Plc v Airways Pension Scheme Trustee Ltd
    • United Kingdom
    • Chancery Division
    • 19 d5 Maio d5 2017
    ...T C Coombs & Co [1991] 2 AC 283 and Murray v DPP [1994] 1 WLR 1 and the comments of Lord Sumption in the Supreme Court in Prest v Prest [2013] 2 AC 415 at 143 These principles mean that before I draw an inference and made a finding of fact adverse to a witness who was not called, I need to......
  • Request a trial to view additional results
19 firm's commentaries
  • Business Rates Mitigation Schemes – The Court Of Appeal Refuses To 'Pierce The Corporate Veil'
    • United Kingdom
    • Mondaq UK
    • 5 d5 Abril d5 2019
    ...to disguise the true involvement of the third party as an owner of assets (as per the Supreme Court in Prest v. Petrodel Resources Ltd [2013] UKSC 34); and the "evasion principle" demonstrated in Jones v. Lipman [1962] 1 WLR 832, where a legal right against the person in control of the comp......
  • Piercing the Corporate Veil – the Supreme Court Rules Again
    • United Kingdom
    • JD Supra United Kingdom
    • 19 d4 Dezembro d4 2013
    ...to do so. It should only do so when all other remedies have proved to be of no assistance. 1 Prest v. Petrodel Resources Ltd and others [2013] UKSC 34 2 Ben Hashem v. Al Shayif [2008] EWHC 2380 (Fam)...
  • Business rates mitigation schemes – The Court of Appeal refuses to
    • United Kingdom
    • JD Supra United Kingdom
    • 28 d4 Março d4 2019
    ...to disguise the true involvement of the third party as an owner of assets (as per the Supreme Court in Prest v. Petrodel Resources Ltd [2013] UKSC 34); the "evasion principle" demonstrated in Jones v. Lipman [1962] 1 WLR 832, where a legal right against the person in control of the company ......
  • Prest – Piercing The Corporate Veil? Or Going Around?
    • United Kingdom
    • Mondaq United Kingdom
    • 24 d1 Junho d1 2013
    ...Supreme Court's much-publicised judgment in the case of Prest v Petrodel Resources Limited [2013] UKSC 34 was handed down on Wednesday 12 June The plight of Mrs Prest had drawn much attention from the press at each stage of the procession of her case though the Courts, and the Supreme Court......
  • Request a trial to view additional results
18 books & journal articles
  • REVISITING THE ALTER EGO EXCEPTION IN CORPORATE VEIL PIERCING
    • Singapore
    • Singapore Academy of Law Journal Nbr. 2015, December 2015
    • 1 d2 Dezembro d2 2015
    ...seminal decision of the UK Supreme Court in Prest v Petrodel Resources Ltd[2013]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 “sham” or “façade” that had hitherto characterised English ......
  • No (,) More Bolam Please: Montgomery v Lanarkshire Health Board
    • United Kingdom
    • The Modern Law Review Nbr. 79-3, May 2016
    • 1 d0 Maio d0 2016
    ...per Lord Phillips at [67]-[68]. See also Bilta n 1 above at [135] and [152] per Lords Toulsonand Hodge.42 Prest vPetrodel Resources Ltd [2013] 2 AC 415 at [41] per Lord Sumption (emphasis added). Seealso Stone & Rolls n 2 above at [230] per Lord Mance.43 Bilta n 1 above at [28].482 C2016 T......
  • Injunctive Relief: But Let's Agree Not To Have It?
    • United Kingdom
    • The Modern Law Review Nbr. 79-3, May 2016
    • 1 d0 Maio d0 2016
    ...per Lord Phillips at [67]-[68]. See also Bilta n 1 above at [135] and [152] per Lords Toulsonand Hodge.42 Prest vPetrodel Resources Ltd [2013] 2 AC 415 at [41] per Lord Sumption (emphasis added). Seealso Stone & Rolls n 2 above at [230] per Lord Mance.43 Bilta n 1 above at [28].482 C2016 T......
  • Attribution and the Illegality Defence
    • United Kingdom
    • The Modern Law Review Nbr. 79-3, May 2016
    • 1 d0 Maio d0 2016
    ...per Lord Phillips at [67]-[68]. See also Bilta n 1 above at [135] and [152] per Lords Toulsonand Hodge.42 Prest vPetrodel Resources Ltd [2013] 2 AC 415 at [41] per Lord Sumption (emphasis added). Seealso Stone & Rolls n 2 above at [230] per Lord Mance.43 Bilta n 1 above at [28].482 C2016 T......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT