I agree that this appeal should succeed, on the basis that the properties in question were held by the respondent companies on trust for the husband. In fact, he dismissed the claim on the ground that the restrictive covenant was void. References to a "facade" or "sham" beg too many questions to provide a satisfactory answer. But the court considered all the principal authorities on that question and arrived at substantially the same conclusions as Sir Andrew Morritt V-C and Munby J. Munby J's statement of principle was adopted by the Court of Appeal subject to two qualifications. Prest v Petrodel Resources Ltd [2013] UKSC 34. In many, perhaps most cases, the occupation of the company's property as the matrimonial home of its controller will not be easily justified in the company's interest, especially if it is gratuitous. Robin Charrot, ‘Lessons Learned from Prest v Petrodel’ (2013) 5 PCB 281, 283; Bowen argues that the doctrine has been all but buried, see Andrew Bowen, ‘Concealment, Evasion and Piercing the Corporate Veil: Prest v Petrodel Resources Ltd (2014) 129 Bus LB 1, 3. This is the issue which the judge felt that he did not need to decide. In those circumstances, it seems clear that Lipman could have compelled the company to convey the property to the plaintiffs (on the basis that he would have to account to the company for the purchase price, which would have ensured that the bank was in no way prejudiced). To decide that question, it was necessary to establish the facts which demonstrated the true legal relationship between Mr Smallbone and Introcom. Rimer LJ, delivering the leading judgment for the majority, held that the practice developed by the Family Division was beyond the jurisdiction of the court unless (i) the corporate personality of the company was being abused for a purpose which was in some relevant respect improper, or (ii) on the particular facts of the case it could be shown that an asset legally owned by the company was held in trust for the husband. Prior to the monumental decision in Prest v Petrodel Resources Ltd2 (Prest), case law recognized a horde of exceptions to the rule: these instances were, in the past, described interchangeably as the … 100. 79. Lord Sumption refers to the process compendiously as "disregarding the separate personality of the company" at para 16. But the fiction is the whole foundation of English company and insolvency law. Creating your profile on CaseMine allows you to build your network with fellow lawyers and prospective clients. The decision in Salomon plainly represents a substantial obstacle in the way of an argument that the veil of incorporation can be pierced. Prest v Petrodel Resources Ltd UKSC 34, [2013] R v McDowell [2015] EWCA Crim 173. It cannot follow that the court should disregard the legal personality of the companies with the same insouciance as he did. This contention, which has been repeated before us, raises a question of some importance. Management control of PRL has always been in the hands of the husband, ostensibly as chief executive under a contract of employment conferring on him complete discretion in the management of its business. In short, otherwise, the inevitable consequence can only be what has been impliedly foreseen / prophesied by the learned writer in the concluding part of his write-up. These examples illustrate the breadth, at least as a matter of legal theory, of the concept of abuse of rights, which extends not just to the illegal and improper invocation of a right but to its use for some purpose collateral to that for which it exists. These dicta were subsequently applied by judges of the Family Division dealing with claims for ancillary financial relief, who regularly made orders awarding to parties to the marriage assets vested in companies of which one of them was the sole shareholder. The controller may be personally liable, generally in addition to the company, for something that he has done as its agent or as a joint actor. After reminding himself of what he had said in A v A and conducting a careful review of both family and non-family cases, Munby J formulated six principles at paras 159-164 which he considered could be derived from them: (i) ownership and control of a company were not enough to justify piercing the corporate veil; (ii) the court cannot pierce the corporate veil, even in the absence of third party interests in the company, merely because it is thought to be necessary in the interests of justice; (iii) the corporate veil can be pierced only if there is some impropriety; (iv) the impropriety in question must, as Sir Andrew Morritt had said in Trustor, be "linked to the use of the company structure to avoid or conceal liability"; (v) to justify piercing the corporate veil, there must be "both control of the company by the wrongdoer(s) and impropriety, that is (mis)use of the company by them as a device or facade to conceal their wrongdoing"; and (vi) the company may be a "facade" even though it was not originally incorporated with any deceptive intent, provided that it is being used for the purpose of deception at the time of the relevant transactions. The effect of the judge's order in this case was to make the wife a secured creditor. It may be that the possibility on which I touched in para 77 would evaporate as a possible further exception to the principle in Salomon's case. That was within his power, in the sense that there was no one to stop him. The latest disclosed accounts of PRL are draft accounts for 2008 and 2009. I infer that the funds were provided to PRL by the husband. It is no answer to say, as occasionally has been said in cases about ancillary financial relief, that the court will allow for known creditors. There is therefore an ordinary resulting trust back to the husband, which is held by him subject to the charges in favour of Ahli United Bank and BNP Paribas. Lawrence LJ, who gave the fullest consideration to the point, based his view entirely on Mr Horne's evasive motive for forming the company. But of course such property can be taken into account when computing that party's resources for the purpose of section 25(2) of the 1973 Act, which lays down a non-exhaustive list of factors to be taken into account by the court when deciding how to exercise its various powers to make financial and property adjustment orders. In the absence of any explanation of these transactions by the husband or his companies, I conclude that both of the properties acquired in the name of Vermont were beneficially owned by the husband. But when we speak of piercing the corporate veil, we are not (or should not be) speaking of any of these situations, but only of those cases which are true exceptions to the rule in Salomon v A Salomon and Co Ltd [1897] AC 22, i.e. This showed that it was "a mere channel used by the defendant Horne for the purpose of enabling him, for his own benefit, to obtain the advantage of the customers of the plaintiff company, and that therefore the defendant company ought to be restrained as well as the defendant Horne." It empowers the court to order one party to the marriage to transfer to the other "property to which the first-mentioned party is entitled, either in possession or reversion". The judge rejected his excuse that he was in bad health, and found that he was "unwilling rather than unable to attend court." In the present case, Moylan J held that he could not pierce the corporate veil under the general law without some relevant impropriety, and declined to find that there was any. But this was inconsistent with the company's financial statements, and the judge rejected it. But not even they can validly consent to their own appropriation of the company's assets for purposes which are not the company's: Belmont Finance Corpn Ltd v Williams Furniture Ltd [1979] Ch 250, 261 (Buckley LJ), Attorney-General's Reference (No 2 of 1982) [1984] QB 624, Director of Public Prosecutions v Gomez [1993] AC 442, 496-497 (Lord Browne-Wilkinson). Stone & Rolls Ltd v Moore Stephens (a firm) [2009] 1 AC 1391 is an example of going behind the separate legal personality of the company in order to "get at" the person who owned and controlled it, not for the purpose of suing him, but in order to attribute his knowledge to the company so that its auditors could raise a defence of ex turpi causa to the company's allegation that they had negligently failed to detect the fraudulent nature of its business. INTRODUCTION Rogers AJA in a New South Wales case commented "there is no common, underlying principle, which underlies the occasional decision of the courts to pierce the corporate veil". On 12 June 2013 the Supreme Court handed down its decision in the second of the two cases, Prest v Petrodel Resources Limited. This is a proposition which can be justified only by asserting that the corporate veil does not matter where the husband is in sole control of the company. The husband's evidence was that the shares of PRL Nevis were owned by its own subsidiary PRL Nigeria. Prest v Petrodel Resources Ltd UKSC 34, [2013] R v McDowell [2015] EWCA Crim 173. The question is heavily burdened by authority, much of it characterised by incautious dicta and inadequate reasoning. The evasion principle is different. Click here to remove this judgment from your profile. But judges exercising family jurisdiction are entitled to draw on their experience and to take notice of the inherent probabilities when deciding what an uncommunicative husband is likely to be concealing. The decree of restitution of conjugal rights was abolished in the comprehensive package of matrimonial law reforms which came into force on 1 January 1971. The difficulty is to identify what is a relevant wrongdoing. where a person who owns and controls a company is said in certain circumstances to be identified with it in law by virtue of that ownership and control. 98. Or to abrogate a right derived from a legal status, such as marriage: R v Secretary of State for the Home Department, Ex p Puttick, 32. This was because the authorities showed that the separate legal personality of the company could not be disregarded unless it was being abused for a purpose that was in some relevant respect improper. It is not an abuse to rely upon the fact (if it is a fact) that a liability is not the controller's because it is the company's. Lazarus Estates Ltd v Beasley [1956] 1 QB 702. He was born in Nigeria and she in England. Initially, there were two principal companies involved, Aurora and the Petrodel companies. Section 4(a) later became section 24(1)(a) of the Matrimonial Causes Act 1973. He directed those companies to execute such documents as might be necessary to give effect to the transfer of the matrimonial home and the seven properties. Thus in a case like VTB Capital, where the argument was that the corporate veil should be pierced so as to make the controllers of a company jointly and severally liable on the company's contract, the fundamental objection to the argument was that the principle was being invoked so as to create a new liability that would not otherwise exist. The landmark Supreme Court judgment in Prest v Petrodel Resources Ltd provides a significant re-assessment of the law relating to a court’s ability to circumvent corporate personality. It is that the interposition of a company or perhaps several companies so as to conceal the identity of the real actors will not deter the courts from identifying them, assuming that their identity is legally relevant. There is nothing in the language, the history, or indeed the Report of the Law Commission which led to the 1970 Act (Law Com No 25), to suggest that those words should be read to include "property over which the first-mentioned party has such control that he could cause himself to become entitled, either in possession or reversion". 3. The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil. Many cases will fall into both categories, but in some circumstances the difference between them may be critical. What he held was that the assets of the companies were "effectively" the husband's property, because he treated them as such. That was proved in both cases. It is however often dangerous to seek to foreclose all possible future situations which may arise and I would not wish to do so. In the present case, the difficulty is aggravated by the fact that the last financial statements, which are not obviously unreliable, are more than five years old. In these circumstances, I was initially strongly attracted by the argument that we should decide that a supposed doctrine, which is controversial and uncertain, and which, on analysis, appears never to have been invoked successfully and appropriately in its 80 years of supposed existence, should be given its quietus. At the time of the marriage, and throughout the 1990, the husband was employed by a succession of major international oil trading companies as a trader, but in 2001 he left his last employer, Marc Rich, and began to run his own companies. The result would have been exactly the same if Burnstead, instead of being a company, had been a natural person, say Mr Dalby's uncle, about whose separate existence there could be no doubt. Nor do I doubt that the object is to achieve a proper division of the assets of the marriage. 24. In Gencor ACP Ltd v Dalby [2000] 2 BCLC 734, the plaintiff made a large number of claims against a former director, Mr Dalby, for misappropriating its funds. To some extent that is the fault of the husband and his companies, but that is unlikely to be much comfort to unsatisfied creditors with no knowledge of the state of the shareholder's marriage or the proceedings in the Family Division. The objection to that argument is obvious in the case of a consensual liability under a contract, where the ostensible contracting parties never intended that any one else should be party to it. The case was decided on its facts, but at p 96, Lord Keith, delivering the leading speech, observed that "it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere facade concealing the true facts. The concealment principle is legally banal and does not involve piercing the corporate veil at all. 935 and Jones v Lipman [1962] 1 WLR 832 with, on the other, Genco ACP v Dalby [2000] 2 BCLC 734 and Trustor AB v Smallbone (No 2) [2001] 1 WLR 1177). Since no explanation has been forthcoming for the gratuitous transfer of these properties to PRL, there is nothing to rebut the ordinary presumption of equity that PRL was not intended to acquire a beneficial interest in them. The correct analysis of the situation was that the court refused to be deterred by the legal personality of the company from finding the true facts about its legal relationship with Mr Dalby. It is a very specific statutory power to order one spouse to transfer property to which he is legally entitled to the other spouse. 52. The problem about this is that if, as the judge thought, the property of a company is property to which its sole shareholder is "entitled, either in possession or reversion", then that will be so even in a case where the sole shareholder scrupulously respects the separate personality of the company and the requirements of the Companies Acts, and even in a case where none of the exceptional circumstances that may justify piercing the corporate veil applies. 42. I agree with Lord Mance that it is often dangerous to seek to foreclose all possible future situations which may arise and, like him, I would not wish to do so. Nor, more generally, was he concealing or evading the law relating to the distribution of assets of a marriage upon its dissolution. This appeal arises out of proceedings for ancillary relief following a divorce. The practice, he concluded, "must now cease". 68. There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party's failure to rebut it. If a right of property exists, it exists in every division of the High Court and in every jurisdiction of the county courts. I infer for the same reason that PRL was funded by the husband. These include elaborate provisions regulating the repayment of capital to shareholders and other forms of reduction of capital, and for the recovery in an insolvency of improper dispositions of the company's assets. But that, as the judge pointed out at para 219 "is simply [the] husband giving false evidence." In these circumstances it is not strictly necessary for this Court to add further general comments on the vexed question of piercing the corporate veil. The judge found that none of the companies had ever had any independent directors. 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