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Piercing the corporate veil: Prest v Petrodel

Posted on 28th June 2013 by Goodwins Family Law Solicitors

Specialist family law firms have recently had cause to celebrate following the landmark ruling achieved during the divorce case, Prest v Petrodel. Mrs Prest filed for divorce in 2008 following a 15 year marriage which produced 4 children. Mr Prest “resisted her claims for ancillary relief” on several grounds, the most significant of which was that he claimed the financial provision she was entitled to wasn’t within his possession.

This referred to several properties which were registered as belonging to a number of companies which Mr Prest had founded, and as these companies by law have their own legal personality, Mr Prest implied he had no direct ownership of the properties. The case concluded in Mrs Prest’s favour, with one of the biggest surprises being that the decision was unanimously reached by all Judges of the Supreme Court.

The court ruled that the properties were indeed ‘held on bare legal title on trust for the Husband’; the decision was then supported and upheld by all seven Justices of the Supreme Court, thereby setting a precedent for all future cases of this nature. Mrs Prest was granted seven properties after it was agreed that it was “property to which the [husband] is entitled, either in possession or reversion”, and thereby could be claimed.

Many are celebrating this ruling as a shard of light through the previously impenetrable corporate veil; In the past there have been many cases in which justice has been perverted through the use of the corporate veil, causing family lawyers to petition elsewhere to satisfy a divorce settlement, whereas now assets may be shared more fairly and cases handled on a common sense basis in future.

Daniel Lightman, a barrister of Serle Court remarked that “The Supreme Court has made clear that assets which are held in the name of a company but which in truth are owned beneficially by a spouse can be accessed by the family court – and has encouraged family judges to draw adverse inferences against spouses who fail to disclose relevant documents or provide pertinent information.”

In conclusion The Supreme Court ruling achieved in this case has set a precedent for all future cases of this nature, and is being heralded as a victory for common sense. In the past justice has been perverted by using the separate corporate identity, but the Prest v Petrodel case has changed this.


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