Prest v Petrodel Resources Ltd[2013] UKSC 34 [2013] 2 AC 415

Case Name: Prest v Petrodel Resources Ltd 

[2013] UKSC 34, [2013] 2 AC 415

Court:

United Kingdom Supreme Court

Judicial Bench:

Lord Neuberger PSC, Lady Hale, Lord Clarke, Lord Wilson, Lord Sumption (delivered the leading judgment), Lord Mance and Lord Walker

Date of Judgment:

11 June 2013

Parties Involved

Appellant:

• Yasmin Prest (the wife), seeking financial remedies arising from the breakdown of the marriage.

Respondents:

• Michael Prest (the husband)
• Petrodel Resources Ltd, Vermont Petroleum Ltd, and other companies within the Petrodel Group controlled by the husband.

Relationship of the parties:

• Mr Prest wholly owned and controlled several companies in the Petrodel Group.
• These companies held legal title to a number of valuable residential properties in London.
• The dispute centred on whether the properties were truly company assets or beneficially owned by Mr Prest and therefore available to satisfy the wife’s matrimonial claims.

Facts of the Case

Marriage Background

Mr and Mrs Prest married in 1993 and had four children. In 2008, matrimonial proceedings commenced following the breakdown of the marriage. As part of the financial settlement, Mrs Prest sought full disclosure of her husband’s wealth to ensure a fair (equitable) division of assets under the Matrimonial Causes Act 1973.

Mr Prest and His Business Structure

Mr Prest was a successful business magnate who controlled multiple companies within the Petrodel Group. Although the companies were distinct legal entities, Mr Prest exercised “effective” financial and managerial control over them. Several high-value London residential properties were registered in the names of these companies rather than in Mr Prest’s own name.

The Disputed Properties

A central dispute arose regarding seven properties purchased in the names of Petrodel companies. Mrs Prest argued that the assets, though legally owned by corporate bodies, were in substance her husband’s property and should therefore be available for distribution in the matrimonial proceedings. The companies and Mr Prest denied this, maintaining that “legal ownership” rested solely with the corporate entities.

Family Court Proceedings

The High Court ordered full disclosure of Mr Prest’s financial affairs. Moylan J concluded that disclosure had been incomplete and drew adverse inferences accordingly, holding that several properties were beneficially owned by Mr Prest and should be transferred to Mrs Prest as part of the matrimonial award.

Court of Appeal Decision

The Court of Appeal overturned the High Court’s ruling, holding that the corporate veil could not be pierced merely on grounds of fairness. It found that the legal title to the properties rested with the companies, and that no basis existed to disregard the separate legal personality of the group entities. Mrs Prest appealed further to the Supreme Court.

Appeal to the Supreme Court

The Supreme Court was asked to determine whether the family court could properly treat the company-owned properties as the husband’s assets. This raised the question of whether beneficial ownership existed in favour of Mr Prest, despite the absence of formal legal title.

Issues Raised (Legal Questions)

The Supreme Court was required to consider four key legal questions involving overlapping areas of law:

• Company law – whether the court could pierce or lift the corporate veil to treat the assets of the Petrodel companies as matrimonial property.
• Trusts law – whether the properties were held on resulting trust for Mr Prest, making him the beneficial owner despite the companies holding legal title.
• Family law – whether the jurisdiction of the family courts permitted access to company-held assets to achieve a fair distribution of marital property, particularly in light of White v White.
• Legal coherence – whether the principles governing veil-piercing were sufficiently clear to guide future cases involving complex financial arrangements.

Arguments of the Parties

Appellant (Mrs Prest)

• She argued that the companies operated as Mr Prest’s alter egos and that, in substance, the properties should be treated as his assets.
• She contended that veil-piercing was justified under the evasion principle, as the companies were used to shield Mr Prest from the financial consequences of divorce.
• Alternatively, she submitted that the properties were held on resulting trust for Mr Prest on the basis of his financial contributions and control.

Respondents (Mr Prest and the Petrodel Companies)

• Mr Prest and the companies argued that legal ownership of the disputed properties rested solely with the companies.
• They maintained that the corporate veil could not be pierced merely for reasons of fairness in matrimonial proceedings.
• They denied that any trust existed, contending that no beneficial entitlement in favour of Mr Prest as a third party had been established.
• They further emphasised respect for the doctrine of separate corporate personality articulated in Salomon v A Salomon & Co Ltd.

Judgment and Final Decision

The Supreme Court allowed the appeal in part. It held that:

• There was no basis for piercing the corporate veil, as the evasion principle did not apply: the companies had not been created to “defeat an existing legal obligation”.
• However, the evidence supported the conclusion that the properties were held on resulting trust for Mr Prest due to his financial contributions and dominating control over the corporate structures.
• Consequently, the family court could treat the properties as part of Mr Prest’s resources when determining financial relief without disregarding the corporate form.

The Supreme Court clarified that veil-piercing is a doctrine of last resort, and in most cases equitable principles such as resulting trusts should be applied instead.

Legal Reasoning (Ratio Decidendi)

The Court rejected veil-piercing because the facts did not satisfy the evasion principle. Lord Sumption explained that veil-piercing is a “limited principle” applying only where an existing legal obligation is deliberately evaded through the interposition of a controlled company. Instead, the Court applied the concealment principle, which involves looking behind corporate personality to identify the true factual position without disregarding the company’s existence.

The Court found that Mr Prest had provided the purchase funds and retained effective control over the properties. This supported the conclusion that the companies held the properties on resulting trust for him, making him the beneficial owner. As beneficial ownership was established, the properties could be included in the matrimonial award without contravening the principle of separate corporate personality.

The Court affirmed that equitable trust doctrines could support fair distribution under the Matrimonial Causes Act 1973 while maintaining the internal integrity of company law.

Dissenting Judgments

There were no dissenting judgments. The decision was unanimous, with all members of the Court endorsing Lord Sumption’s reasoning.

Conclusion (Critique)

Prest v Petrodel demonstrates the Supreme Court’s preference for resolving disputes of substance through traditional equitable principles rather than expanding veil-piercing. The ruling narrowed the circumstances in which corporate personality may be disregarded, holding that only deliberate evasion of an existing legal duty can justify veil-piercing. However, the same practical outcome was achieved by acknowledging Mr Prest’s beneficial ownership under a resulting trust (hence no need to evade).

A significant strength of the judgment is the doctrinal clarification it provides following decades of inconsistent case law on the veil. Previous decisions had left uncertainty as to whether fairness alone sufficed to justify intervention. The Supreme Court’s articulation of two categories — concealment and evasion — provides a more stable framework for future cases, supports predictability, and ensures that divorce courts and lawyers do not undermine commercial reliance on separate corporate personality.

Moreover, the Court secured an outcome that was both equitable and commercially sound: it protected the integrity of company law while enabling family law objectives to be met via resulting trusts rather than legal fiction.

However, the reasoning also raises concerns. The reliance on evidentially-based trust analysis means that claimants may struggle where financial disclosure is incomplete or opaque — a common problem in matrimonial finance. In cases where control exists but financial contribution cannot be proven, the doctrinal solution may appear theoretically elegant yet difficult to apply in practice. Additionally, although the judgment rationalises veil-piercing principles, areas remain where cases may fall into doctrinal gaps between concealment and evasion. As consequence of not closing this loophole (albeit small), this could equally create uncertainties for companies in the future in the UK and expose them to unpredictable and unprecedented negative financial risks.

Ultimately, Prest marks a major modern authority that stabilises veil-piercing jurisprudence while reinforcing the interplay between company, trust, and family law. Yet as financial structures become more complex, further development may be required to ensure that the law continues to achieve just results in hard cases. Whilst the first stage of bridging legislations together has taken place, the second stage for the courts to prepare is on further controversies associated to a fast-moving society that may not be predictable to both sides. This would make the Prest case and judgment the birth of new legal challenges.