Did the Supreme Court pierce the corporate veil — and does it matter?
The case was Prest v Petrodel Resources Ltd. Prest was a successful businessman. In particular, he was the sole beneficial owner and controller of a number of companies. When his marriage foundered, the High Court ordered him to transfer properties owned by two of the companies to his ex-wife as part of her financial settlement. Prest, through his companies, challenged this, arguing that the court lacked the jurisdiction to make the order. The Court of Appeal agreed. It held that the court could not order the transfer of corporate assets in family proceedings unless the corporate personality of the company was being abused or the asset in question was held by the company on trust for the husband. Mrs Prest appealed to the Supreme Court.
The Supreme Court allowed the appeal. It did so on the basis that the properties, while legally owned by the companies, were in fact beneficially owned by Prest. The Supreme Court stated that a determination of whether assets were held on trust would depend on the facts of each case and on the assets in question. In this particular case, Prest had transferred some of the properties to the companies for a nominal consideration, which encouraged the inference that the properties were held on trust for him.
Because the properties were held on trust, it was not actually necessary to decide whether to pierce the corporate veil. However, the Supreme Court dealt at some length with the issue. In essence, this is the principle that a company has a separate legal personality from its members…
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