Prest v Petrodel Resources Ltd [2013] UKSC 34

Facts

  • The case arose out of divorce proceedings between Mr. and Mrs. Prest.
  • Mr. Prest transferred several assets, including properties, to companies he controlled, notably Petrodel Resources Ltd.
  • Mrs. Prest sought to have these company-held properties treated as Mr. Prest’s personal assets in the divorce settlement.
  • She argued the court should pierce the corporate veil to make the assets available for the settlement.
  • The central dispute was whether the courts could disregard the companies’ separate legal personalities to satisfy Mrs. Prest’s claim.

Issues

  1. Whether the court could pierce the corporate veil to treat company-held assets as belonging to Mr. Prest for divorce purposes.
  2. Under what circumstances the corporate veil could be pierced, specifically regarding concealment versus evasion of legal obligations.
  3. Whether family law provided grounds for departing from standard company law principles on corporate personality and veil piercing.

Decision

  • The Supreme Court overturned the Court of Appeal’s decision, finding the properties were held on resulting trust for Mr. Prest, making them available for the divorce settlement.
  • Mrs. Prest was awarded 50% of the value of the properties.
  • The Court clarified that piercing the corporate veil is only justified to prevent the evasion of existing legal obligations or to frustrate enforcement by use of a company.
  • It distinguished between concealment (which does not justify veil piercing) and evasion (where piercing may be appropriate).
  • The judgment reaffirmed that mere control of a company does not permit treating company assets as personal assets of the controller.
  • The ruling applied equally in family law, with no special rules permitting veil piercing in that context absent abuse of the corporate structure.

Legal Principles

  • The corporate veil may be pierced only as a last resort, in cases of deliberate evasion of pre-existing legal obligations.
  • Concealment, where a company is used simply to hide ownership, is not sufficient for veil piercing; courts can look behind the facade without disregarding corporate personality.
  • The corporate structure’s separate legal personality, as established in Salomon v Salomon & Co Ltd [1897] AC 22, is reaffirmed and can only be disregarded where there is abuse aimed at evading enforcement of legal duties.
  • The mere fact that a company is controlled by one individual does not automatically link its assets to that person.
  • Family courts must apply the same company law principles as other courts in relation to corporate personality and veil piercing.
  • Piercing the corporate veil remains a residual and exceptional remedy, used only when other legal avenues are inadequate.
  • The decision narrows the circumstances under which corporate personality will be disregarded, ensuring greater certainty in commercial and legal contexts.

Conclusion

Prest v Petrodel Resources Ltd [2013] UKSC 34 confirms a strict, residual approach to piercing the corporate veil, restricting this remedy to cases of evasion of existing legal obligations and reinforcing the principle of separate legal personality in both corporate and family law contexts.

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