Since Salomon v Salomon, 1 it has been well established in UK law that a company has a separate personality to that of its members, and that such members cannot be liable for the debts of a company beyond their initial financial contribution to it. The decision shows that an application of company law principles is required when determining the ownership of those assets. endobj Prior to Prest, in Lipman,the only way to lift the veil was if the company was regarded as a sham or mere façade. Empirical Analysis, 1885–2014 Alan Dignam* and Peter B Oh** Abstract—For over a century UK courts have struggled to negotiate a coherent approach to the circumstances in which the Salomon principle –that a corporation is a separate legal entity–will be disregarded. High-quality, original, refereed academic writing ; Contemporary substantive law, legal theory and history, and other aspects of the study of law in its social and cultural context Prest was of particular interest because of the legal cross-over between family law and corporate law. John Wilson QC of 1 Hare Court analyses the Supreme Court’s judgment in the landmark case of Prest v Petrodel and considers its implications for family lawyers. The Supreme Court has just handed down its judgment in the landmark case of Prest v. Petrodel. On 12 June 2013 the Supreme Court handed down its decision in the second of the two cases, Prest v Petrodel Resources Limited. If one keeps on rebutting every proposal that is brought forward then that is not progressive, it does not feel like any decision makers has tried to find a solution for this problem. In Prest v Petrodel at para. 3 0 obj Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415 is a leading UK company law decision of the UK Supreme Court concerning the nature of the doctrine of piercing the corporate veil, resulting trusts and equitable proprietary remedies in the context of English family law.. Facts. The legal team representing Prest stated that 'the decision is of major importance not only for family law and divorcing couples, but also for company … The legal team representing Prest stated that ‘the decision is of major importance not only for family law and divorcing couples, but also for company law (…. The Background Of Racial Profiling International Law Essay, CustomWritings – Professional Academic Writing Service, Tips on How to Order Essay. Courts most commonly did so in the following circumstances. Undoubtedly, Lord Neuberger drew different conclusions regarding the application of the principle. The Supreme Court case Prest v Petrodel Resources Ltd [2013] 2 AC 415 addresses the issue of whether, and if so in what way, the court is competent to pierce the corporate veil save any specific By classifying veil-piercing as evasion, his Lordship suggested that concealment cases were not truly veil-piercing. More importantly, the HL emphasised that “it is only appropriate to pierce the corporate veil where the circumstances indicate that the company is merely a façade concealing true facts. There has been extensive discussion as to whether a court can ignore the principle of separate legal personality and treat a company’s property, rights and obligations as belonging to a person who owns and controls the company. When taking into consideration how the law has developed in this area, Cheung describes that it is evident the House of Lords decision in Woolfson came to be source for guidance in subsequent cases. Provided that the principle was to be properly established then there is one thing that all decision makers would agree upon which would be that “the company was used in an attempt to immunise himself from the liability of wrongdoing”  This is consistent in DHN just as much as it is in Gramsci. Furthermore, this can be mirrored in Prest where Lady Hale and Lord Wilson doubted whether it is possible to classify all cases “neatly into cases of either concealment or evasion”  Therefore, even to this day there are a lot of question marks as to when and how the doctrine is applied; there are still a lot of unanswered questions which have not been dealt with. For some the most helpful case is the decision in Pennyfeathers limited v Pennyfeathers property company limited. %���� This could perhaps create more clarity in the sense that decision makers would know what is not meant to be included in the doctrine. Empirical analysis can facilitate our It would possibly be applied in conjunction with other laws which would have the same effect and outcome as piercing the corporate veil. 22nd Dec 2020 Law Reference this. All rights reserved. There is one basis which all judges approve which is that the veil is only to be pierced in exceptional circumstances. June 2013 - Prest v Petrodel [2013] UKSC 34 6. The case is highly relevant in the Channel Islands and across the common law world, where it will have persuasive effect even where it is not binding, because of the high regard in which the Supreme Court is held. This could create further confusion as to what the doctrine of piercing the corporate veil originally intended to do. On the other hand, Lord Neuberger who had initially been in favour of giving the doctrine its quietus because it had been misapplied in the eighty years indicates that the obiter by Lord Sumption is very influential and could prove to be important in future cases. 4 Prest, above n 3. Hence, this further indicates that there are still many uncertainties within the doctrine itself. %PDF-1.7 Prest v Petrodel Resources Ltd & Others [2013] UKSC 34 Introduction. The relatively short and significant judgment in the Supreme Court case of Prest v Petrodel Resources Ltd has gathered vociferous interest from academics and practitioners. Contrarily to the above, despite there not being a set doctrine, it seems that the Lordships all agree on one aspect. This article examines the judicial approach to the corporate veil post-Prest v Petrodel Resources Ltd. It was of key interest as it was a legal cross over between family law and company law. It could be considered that an alternative approach would be to put the doctrine on a statutory basis so that the courts would have a guide to follow instead of consistently establishing conflicting views between themselves. The whole concept of lifting the veil was derived from Salomon v Salomon where corporate veil was established. The article offers an evaluation on whether the judgment in Prest, has indeed, provided much needed clarity on the judicial approach to the concealment/evasion … Prest brings a new kind of uncertainty. 8, Lord Sumption said separate personality and property of a company is sometimes described as a fiction, and in a sense it is. endobj This could perhaps be a starting point of a well-established doctrine. He argued that there is not much support for the doctrine. Most significantly, Neuberger also found that in cases where piercing the veil was considered, it either did not apply in the facts, or it was applied on the facts but the results could have been arrived at on some other legal basis. It is said to be a better example of facts for giving rise to the principle of piercing the veil. Using this essay writing service is legal and is not prohibited by any university/college policies. The case concerned a very high value divorce . It was of key interest as it was a legal cross over between family law and company law. On these grounds, this could show that the doctrine does not necessarily need to exist as the same outcome can be arrived on some other legal basis. The value of the judgement was not in question, as the courts had already ruled the husband – a Nigerian oil tycoon – would have to pay his wife £17.5m, largely due to his conduct during the case, and he was not arguing over this. This was contrasted with Lord Mance and Lord Walker who are very much in favour of keeping the doctrine. This decision can be derived from another legal basis but, it will have the same outcome. As Patten L.J. short, after Mr and Mrs Prest divorced, Moylan J. awarded Mrs Prest a sum of £17.5 million as a fair division of Mr Prest’s assets. <> Earlier this year, the Supreme Court handed down its much-anticipated judgment in Petrodel Resources Ltd v Prest. It was held that a limited company was viewed “like any other independent person with its right and liabilities appropriate to itself”  The Salomon principle has been the foundation on which company law and business corporations have thrived on for years. Analysis of Prest v Petrodel Resources Ltd The relatively short and significant judgment in the Supreme Court case of Prest v Petrodel Resources Ltd has gathered vociferous interest from academics and practitioners. Then, we will ... Prest v Petrodel rested primarily on section 23 Matrimonial Causes Act 1973. The critical points which would be analysed in this essay would be whether Prest has brought us closer to what the principle of lifting the corporate veil can be defined as, what it entails or whether the whole doctrine should be set aside. In Smallbone,Sir Morritt brought forward the argument that it is uncertain as to which circumstances a company can be considered as a sham or whether the company need to do something illegal for immorality to suffice.  Hence, this suggests that there is no clear structure to be followed. Contrarily, the evasion principle applies where a person is under an existing legal obligation which he deliberately evades by interposing a company under his control.  However, despite the two approaches being somewhat clear; Lord Alcock observes that “care must be taken because none of the other six justices of the Supreme Court agreed with Lord Sumption without some qualifications” He also points out that there is substantial uncertainty surrounding the operation of the evasion principle. It will be argued that the law should not be given its quietus as it seems that judges are somewhat getting closer to an answer. 216 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". A Digman A, John Lowry, Company Law (8th edn OUP Oxford), Birds J, Boyle Clark B et al, company Law (9th edn, Jordan Publishing), Dr Wilde C, Smith and Keenan’s Company Law ( 17th edn Pearson), Lowry J, and Arad Reisberg, Company Law & Corporate Finance (4th Edn, Pearson, Akansha Dubey et al, ‘Family Law’ (2014) 3(1), A Alcock ‘piercing the veil- A dodo of a Doctrine (2013) 25 denning LJ 241,243, A Bowden ‘Concealment, Evasion and Piercing the corporate veil: Prest v Peterodel Resources Ltd [2013], Greens Business law, April 2014, Bull S, ‘piercing the corporate veil in England and Singapore’ [2014] Heinonline, C Hare, ‘Piercing the corporate veil in the supreme court (again)’- The Cambridge Law Journal, 72 [2013] 511-515, Chrysthis N Papacleovoulou, “lifting” or “piercing”, ‘the corporate veil in Cyprus: a doctrine under challenge- an analysis of English and Cyprus case Law analysis’ (2016) 27 (4) ICCLR, D Lightman, ‘Petrodel Resources Ltd v Prest: Where are we now?’ – Trust & Trustees (2013) 19 (9):877, J McDonagh, ‘Piercing the corporate veil in the family division: Prest– the latest from the court of appea’l- Trust and Trustees (2013) 19 (2) 137, J Payne ‘Lifting the corporate veil: A reassessment of the fraud exception’ Cambridge law Journal, 56 (2) July 1997, Mujih E, ‘Piercing the corporate veil as a remedy after Prest V Petrodel resources Ltd: Inching towards Abolition’ [2016] Westlaw 17,17, Pey Woan Lee, ‘The Enigma of Veil- Piercing’ (2015) 26 (1) ICCLR 28, 30, Spear’s, ‘Expert analysis of the Prest Judgement’ (Spear’s ,11 June 2013), Tan Cheng-Han, ‘Veil piecing- a fresh start’ (2015) 1 JBL, Spear’s, ‘Expert analysis of the Prest Judgement (Spear’s ,11 June 2013) <> accessed 8th March 2017, Simon Mcleod- ‘The Corporate Veil And Its Piercing As Clear As…?’, Akzo Nobel NV v Competition Commission [2013] CAT 13, Antonio Gramsci Shipping Corp & ors v Aivars Lembergs [2013] EWCA Civ 730, DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852, Lazarus Estates Ltd v Beasley [1956] 1 QB 702, Prest v Petrodel Resources Ltd UKSC 34, [2013], Trustor AB v Smallbone (No 2) [2001] EWHC 703, VTB Capital plc v Nutritek International Corp [2013] UKSC 5, Woolfson v Strathclyde Regional Council [1978] UKHL 5, French D, Mayson S & Ryan C, Company law (31st edn, OUP) 127, Lowry J, and Arad Reisberg, Company Law & Corporate Finance (4th Edn, Pearson) 35, Birds J, Boyle Clark B et al, company Law (9th edn, Jordan Publishing) 60, Alistair Alcock ‘piercing the veil- A dodo of a Doctrine (2013) 25 denning LJ 241,243, Prest [69] (lord Neuberger) Alistar Alcock (n 18) 250, Piercing the corporate veil in the family division: Prest– the latest from the court of appeal- Trust and Trustees (2013) 19 (2) 137, Piercing the corporate veil in the supreme court (again)- The Cambridge Law Journal, 72 [2013] 511-515, Pennyfeathers limited v Pennyfeathers property company limited [2013] EWHC 3530 (Ch), Bull S, ‘piercing the corporate veil in England and Singapore’ [2014] Heinonline 39,39,   Simon McLeod- ‘The Corporate Veil And Its Piercing As Clear As…?’, Akansha Dubey et al, ‘Family Law’ (2014) 3(1) 214,217, Tan Cheng-Han, ‘Veil piecing- a fresh start’ (2015) 1 JBL 20,21, Chrysthis N Papacleovoulou, “lifting” or “piercing”, ‘the corporate veil in Cyprus: a doctrine under challenge- an analysis of English and Cyprus case Law analysis’ (2016) 27 (4) ICCLR 129,130. In 2013, the United Kingdom Supreme Court handed down a seminal judgment on the law of corporate veil, Prest v Petrodel Resources Ltd and Others UKSC 34, in which Lord Sumption proposed the evasion and concealment principles. It seems that in every case that involves piercing the veil, the defendants always argue that there is “no such thing as piercing the corporate veil” thus, could it be that many wrongdoers have been able to escape liabilities simply because the doctrine was not well established. The fact that none of these questions seem to provide a clear picture further creates problems today as for a doctrine to develop or adapt to the new changes, the reasoning’s behind the past decision needs to be understood thus, if one cannot do that then how can the doctrine be established. This further shows that we are no closer to an answer of lifting the corporate veil. However, these cases are and will remain exceptional. It can be thus shown, that not much has changed and the decision makers are still unsure as to when the doctrine can be applied. Lord Mance argued that “It is dangerous to seek to foreclose all possible future situations which may arise and I would not wish to do so”  Furthermore, it should be considered that Prest only dealt with one specific class of asset which were held by those of corporate entities. In Prest, Lord Sumption argued for a narrower and clearer approach by restricting the circumstances in which the veil may be pierced. It can be indicated that if Prest was successful in providing a set answer as to what piercing the corporate veil entails then there would have been many cases which would have pierced the veil post Prest. Prest v. Petrodel UKSC 34 The Supreme Court has recently issued a decision confirming that English law permits a claimant to ignore the separate legal identity of a company, and " pierce the corporate veil " in certain circumstances. stream Learn How to Order Essay Online. It can be contended that, even if the doctrine is given is quietus, judges would still apply the principles of piercing the veil unknowingly. However, Prest does confirm that the veil would only be pierced in exceptional circumstances. 3 Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415 at [19] per Lord Sumption. The relatively short and significant judgment in the Supreme Court case of Prest v Petrodel Resources Ltd has gathered vociferous interest from academics and practitioners. The recent Supreme Court judgment in Prest v Petrodel has prompted an avalanche of comment in the legal literature ‒ much of it on the implications for corporate rather than family law. 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