Prest v Petrodel Resources Ltd

The Supreme Court considered ancillary relief following divorce and whether English courts may reach assets legally vested in companies controlled by a spouse. The court held that the court's power under section 24(1)(a) of the Matrimonial Causes Act 1973 is confined to property to which the spouse is legally or equitably entitled; it does not confer a free‑standing power to ignore corporate personality. The court analysed the law on "piercing the corporate veil" and identified two concepts often conflated in authority: the concealment principle (looking behind a company to discover the true facts) and the evasion principle (disregarding corporate personality where a controller evades an existing legal obligation by interposing a company). The court accepted a narrow doctrine of veil‑piercing limited to cases of deliberate evasion of existing legal obligations, but held that in this case the orders against the companies could only be justified by a finding that the companies held the disputed properties on trust for the husband. On the facts, and having drawn adverse inferences from the husband's obstruction and non‑disclosure, the court concluded that the seven disputed UK properties were held on trust for the husband and restored the trial judge's order requiring their transfer to the wife.

This was an appeal from the Court of Appeal ([2012] EWCA Civ 1395) following first instance ancillary relief proceedings before Moylan J. The wife sought transfer of seven United Kingdom residential properties which were legally owned by companies within the Petrodel group but which she alleged were held for the husband.

Background and parties: The matrimonial proceedings arose after the breakdown of the marriage of Mr and Mrs Prest. The husband was found to be the effective owner and controller of the Petrodel group. PRL (and related companies) held title to the matrimonial home and six other London properties; Vermont held two further London properties. Moylan J ordered transfer of the matrimonial home (which he found was held on trust for the husband) and directed PRL and Vermont to transfer the seven disputed properties to the wife in partial satisfaction of a lump sum order; the companies appealed.

Nature of the claim / relief sought: Ancillary relief under Part II of the Matrimonial Causes Act 1973: orders under section 24(1)(a) for the transfer of property to which a party to the marriage is "entitled, either in possession or reversion". The wife also sought orders to give effect to a large lump sum and periodical payments.

Issues framed:

• whether the Family Court may, by reference to section 24(1)(a) or otherwise in ancillary relief proceedings, treat company assets as the spouse's property merely because he owns and controls the company;
• whether the corporate veil could be pierced in this case (and, more generally, the scope of any veil‑piercing doctrine); and
• whether the seven disputed properties were held on trust for the husband so as to fall within section 24(1)(a).

Reasoning: The court reviewed authority on separate corporate personality and the various cases described as "piercing the corporate veil". It distinguished between (i) looking behind a corporate structure to ascertain the true facts (the concealment principle), and (ii) disregarding corporate personality to defeat an interposed company used to evade an existing legal obligation (the evasion principle). The court recognised a limited veil‑piercing doctrine confined to deliberate evasion of pre‑existing legal obligations, to be used only where no adequate conventional remedy exists. The court rejected the proposition that section 24(1)(a) gives family courts an independent and wider jurisdiction to ignore corporate personality. Accordingly, the only legal basis for ordering transfer of company property under section 24(1)(a) is that the relevant spouse is in law entitled to it (for example, because the company holds it on trust for him). On the facts, having regard to the husband’s persistent obstruction, failures of disclosure, and the evidential inferences properly drawn, the court concluded that the seven disputed properties were held on trust for the husband and that the orders to transfer them to the wife should be restored.

Procedural history: First instance: Moylan J (Family Division) made extensive ancillary relief orders, including transfer orders against the companies (order dated 16 November 2011). Court of Appeal: [2012] EWCA Civ 1395 (majority in favour of limiting the Family Division practice). Supreme Court: appeal allowed in part on the trust point; orders restored so far as they required PRL and Vermont to transfer the disputed properties to the wife.

Wider comment: The court emphasised the rarity and narrowness of any veil‑piercing jurisdiction and the continued primacy of established property and company law concepts when exercising family jurisdiction; it also noted the relevance of full and frank disclosure and the courts' power to draw adverse inferences from obstruction.

Appeal allowed in part. The Supreme Court held that section 24(1)(a) of the Matrimonial Causes Act 1973 does not confer a general power to disregard corporate personality and that veil‑piercing is limited to narrow cases of deliberate evasion of an existing legal obligation. On the facts the seven disputed properties were held on trust for the husband and the trial judge's transfer order against PRL and Vermont was restored; arguments based on broad veil‑piercing or on construing section 24 to reach company assets were rejected.

First instance: Moylan J, Family Division (order dated 16 November 2011). Court of Appeal: [2012] EWCA Civ 1395 (majority disallowed the orders against the companies). Supreme Court: appeal from Court of Appeal allowed in part; [2013] UKSC 34.