On 12th June 2013 the Supreme Court handed down judgment in the case of Prest v Petrodel Resources Ltd and Others  UKSC 34.
The full judgment can be found by clicking here
In summary: The court unanimously allowed Mrs Prest’s appeal on a solitary ground of appeal, namely that Mr Prest was the beneficial owner of various London properties which were ostensibly owned by the companies. This point had not been addressed by Moylan J at first instance because he had found that Mr Prest was ‘entitled’ to the properties pursuant s.24(1)(a) of the Matrimonial Causes Act 1973. That finding was rejected by the Court of Appeal and similarly rejected by the Supreme Court.
The Supreme Court also rejected the argument that the corporate veil could or should be pierced. Lord Sumption (who gave the primary judgment in the appeal) set out in great detail the history of the doctrine of the corporate veil and concluded that only evasion of a pre-existing legal obligation amounts to sufficient wrongdoing. This was later supported by Lord Neuberger. The judgments of both of them arguably combine to both define and restrict the circumstances in which the corporate veil can be pierced.
The last ground of appeal, namely that the companies were ‘nuptial settlements’ within the meaning of s.24(1)(c) of the Matrimonial Causes Act 1973, was rejected during the course of the hearing and permission to appeal on that ground was refused.
Comment: Although Mrs Prest won in her appeal, she did so in prescriptive circumstances. On the facts of this particular case (and in particular in the face of the wilful non-engagement in proceedings by the companies and inferences that could be drawn from that), a finding was made regarding beneficial ownership of the properties ostensibly owned by the companies. The judgment is unlikely to represent a general defeat for parties who seek to exploit pre-existing corporate structures within financial remedy proceedings. Indeed, by further defining and restricting the doctrine of corporate veil, and by rejecting the ‘entitlement’ argument pursuant to s.24(1)(a) MCA 1973, unscrupulous litigants may only need to avoid a finding that they are the beneficial owner of property which is held by a company in order to exploit the doctrine of the corporate veil. Time will tell as to the willingness of Family Division judges to make findings as to beneficial ownership on the facts of cases in the future, particularly if the companies participate with greater transparency than Petrodel Resources Ltd. ever did.
Peter Newman – 12th June 2013