Piercing the corporate veil?
The Prest case arose out of proceedings for financial remedies following the divorce of Mr and Mrs Prest. Mr Prest, an international 'oil baron', set up Petrodel which is now one of the leading African energy companies. Mr and Mrs Prest lived a luxurious lifestyle during their 15 year marriage. They lived in a multi-million pound home in London with numerous other properties at their fingertips in London and Nevis. Unfortunately for Mrs Prest, the properties were owned by companies within the Petrodel corporate structure. The principal assets in the marriage were not therefore owned by Mr or Mrs Prest; they were owned by the Petrodel group. Mr Prest was a shareholder of these companies.
The question was whether the court could order the transfer of the properties to Mrs Prest given that they legally belonged not to Mr Prest but to his companies. In other words, could the corporate veil be pierced? The importance of the question in financial terms was crucial. If the court could order the transfer of the properties to Mrs Prest, she would receive an award worth millions of pounds. By contrast, if the court could not make such an order, she would receive a far smaller award and Mr Prest's wealth would effectively be preserved through his companies.
The case worked its way up on appeal through the courts to the Supreme Court. Ultimately, in a judgment delivered on 12 June, it was decided that the properties belonged to Mr Prest beneficially, enabling the court to make an order for the transfer of the properties to Mrs Prest under the Matrimonial Causes Act 1973. This decision was awaited with much anticipation and the case is something of a landmark in the context of family law. Nevertheless, while the court did not allow Mr Prest to protect his wealth through his companies in the particular circumstances of this case, it remains to be seen whether the same approach will consistently be adopted in future cases of a similar nature.
For further information please contact Simon Thomas, head of the Family Law practice at Michelmores.