Petrodel Resources Ltd & Ors v Prest & Ors

Section 24(1)(a) of the Matrimonial Causes Act 1973 reaches only property to which the respondent spouse is beneficially entitled. A company’s assets remain beneficially its own even where one person controls all its shares. The ability to procure a transfer is not itself beneficial ownership. Family courts must apply the same company-law principles as other courts. The corporate veil may be pierced only in limited circumstances involving relevant impropriety in the misuse of the corporate structure to conceal wrongdoing. Mere control, perceived fairness, absence of third-party interests, or litigation misconduct is insufficient. A genuine bare trustee or nominee arrangement is different because the spouse is then beneficially entitled to the asset.

The wife sought financial relief from the husband. The husband controlled a group of companies which held several London properties. Moylan J found that the husband was the effective owner and controller of the group, rejected his case concerning alleged family trusts, and found no relevant impropriety sufficient to pierce the corporate veil.

Despite that finding, the judge ordered the husband to transfer properties held by Petrodel Resources Ltd and Vermont Petroleum Ltd to the wife under section 24(1)(a) of the Matrimonial Causes Act 1973. The companies appealed. The central issue was whether those properties were property to which the husband was beneficially entitled, and whether the family court could treat the companies’ assets as his merely because he controlled the companies.

The majority allowed the appeals. Rimer LJ, with whom Patten LJ agreed, held that the paragraph 5 transfer orders concerning properties held by Petrodel Resources Ltd and Vermont Petroleum Ltd were outside the jurisdiction conferred by section 24(1)(a) of the Matrimonial Causes Act 1973.

1. Section 24(1)(a) concerns property to which the respondent spouse is beneficially entitled. The inquiry is the same as in any other context. Legal title may be immaterial, but beneficial ownership is decisive.
2. Under the principle in Salomon v Salomon & Co Ltd [1897] AC 22, a duly incorporated company is a separate legal person. Its assets belong beneficially to the company, not to its shareholders, even where one shareholder has total control. The husband’s ability to procure a corporate transfer did not make him beneficially entitled to the properties.
3. The family jurisdiction does not create a special exception to company law. The corporate veil can be pierced only in limited circumstances involving relevant impropriety linked to misuse of the corporate structure to conceal wrongdoing. The principles stated in Ben Hashem v Al Shayif [2009] 1 FLR 115 and affirmed in VTB Capital PLC v Nutritek International Corp [2012] EWCA Civ 808 applied equally in family proceedings.
4. The husband’s false evidence and obstruction in the litigation did not establish the necessary impropriety. Nor was there a finding that the appealed properties were held by the companies as the husband’s bare trustees or nominees. The dicta in Nicholas v Nicholas [1984] FLR 285 suggesting a wider family-law power were obiter, inconsistent with established authority, and should not be followed.

Thorpe LJ dissented. He considered that section 24(1)(a) permitted the court to address the reality of assets held by companies which were wholly controlled by the husband and had no material third-party interests. Patten LJ expressly endorsed Rimer LJ’s analysis and stated that the separate family-law approach should cease.

• Court of Appeal (Civil Division) — [2012] EWCA Civ 1395: majority allowed the appeals against the paragraph 5 orders.
• High Court of Justice, Family Division — Moylan J ordered the husband to transfer specified properties held by companies to the wife under section 24(1)(a) of the Matrimonial Causes Act 1973.