Prest v Petrodel Resources Limited

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Recently, the Supreme Court was asked to consider the issues surrounding divorce and the transfer of company assets and property in the case of Prest v Petrodel Resources Limited [2013] UKSC 34.

Mr and Mrs Prest married in 1993 and had four children. Mr Prest was a successful businessman who worked in international oil development and trade. The family lived a very comfortable lifestyle with the matrimonial home being worth approximately £4 million.

Mr Prest had acquired seven residential properties in the UK which were held under a number of companies belonging to the Petrodel Group. These companies were wholly owned and controlled by Mr Prest himself.

Mrs Prest petitioned for divorce in March 2008. Decree Nisi was pronounced in December 2008 followed by Decree Absolute in November 2011.

An application for financial relief was also made by Mrs Prest. One of the main points of concern for the Judge when deciding the outcome of the financial proceedings was whether the seven properties, which were owned by the husband's companies, should and could be transferred to Mrs Prest as part of the financial settlement.

First instance decision

It was decided at first instance that the companies were for Mr Prest's sole benefit and under his sole control. For this reason it was decided that the assets within these companies could and should be transferred to Mrs Prest.

Mr Prest's companies appealed this decision.

Appeal decision

The Court of Appeal allowed the appeal by Mr Prest's companies and stated that it made no difference that the companies had a single corporator which had total control over them and their assets.

Rimer LJ stated that "there may be factual circumstances in which it will be legitimate for the Court to pierce the corporate veil" but he went on to decide that this was not such a case.

Mrs Prest then appealed to the Supreme Court.

Supreme Court decision

The main question for the Supreme Court was whether the court had power to transfer these seven properties to Mrs Prest given that they legally belonged to the husband's companies, as opposed to Mr Prest directly.

It was held that the seven disputed properties were being held on resulting trust for the husband by the companies which legally owned them and that in very limited circumstances the Court may pierce the corporate veil in financial relief proceedings.

It was found that the husband had deliberately sought to conceal his interests in his evidence and failed to comply with Court orders with particular regard to disclosing evidence. It was established that adverse influences could therefore be drawn against him.

The Supreme Court decided that they therefore had such power to transfer the seven properties to Mrs Prest and unanimously allowed Mrs Prest's appeal.

The Judge ordered that the properties be transferred to Mrs Prest in partial satisfaction of a lump sum order.