Prest v Petrodel Resources Ltd: A Landmark Case in Company Law

Running head: COMPANY LAW
Company Law
Name of the Student
Name of the University
Author Note

1COMPANY LAW
Table of Contents
Question 1..................................................................................................................................2
Introduction............................................................................................................................2
Facts of the case.....................................................................................................................2
Critical Evaluation of the decisions of various Courts...........................................................3
Decision of the Family Court.............................................................................................4
Decision of the Court of Appeal........................................................................................5
Decision of the Supreme Court..........................................................................................5
Conclusion..............................................................................................................................8
Question 2..................................................................................................................................9
Issue 1.....................................................................................................................................9
Issue 2...................................................................................................................................10
Issue 3...................................................................................................................................11
Issue 4...................................................................................................................................13
Reference..................................................................................................................................16

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Question 1
Introduction
Prest v Petrodel Resources Ltd is a famous company law case in England where the
supreme court of the United Kingdom held a landmark judgement on the attributes of the
doctrine of piercing of corporate veil in context of trusts and equitable remedies under
English law1. In the landmark case of Solomon v Solomon, it was discussed that a company
being a separate legal entity separate than that of its members, cannot be held liable for
paying the debts of its members or in other words the members of the company cannot be
made liable to pay the debts of the company which are beyond their official capacity and
initial contribution2. However, in certain cases the courts have pierced the veil of the separate
corporate entity of the company e for holding the members liable for the debts and the
subsequent condition of the company3. Nevertheless there are decisions of the Supreme Court
that strictly holds and respects the doctrine of corporate veil and permits the piercing of such
veil only under limited and exceptional situations. The case of Prest v Petrodel is one such
example where the court explained the Limited and exceptional situations where it is would
be necessary to pierce the corporate veil, where the creditors and other people are at stake for
the performance of the company and the corporate veil acts just as a facade concealing the
truth4.
Facts of the case
Mr and Mrs Prest owned a home in the UK and another at Nevis. Mrs Prest inform the
code that her husband’s properties were even more than what he is agreeing to. She presented
1 Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415
2 Salomon v A Salomon & Co Ltd [1896] UKHL 1
3 Kraakman, Reinier, and Henry Hansmann. "The end of history for corporate law." Corporate Governance.
Gower, 2017. 49-78.
4 Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415

3COMPANY LAW
before the court that there were several properties that her husband held millions of pound
hidden within a corporate structure that included that jointly owned home along with
different other properties. On court’s order, the husband failed to provide full disclosure of
his properties, therefore breaching the court’s order.
The case was instituted by Mrs Prest in the family court asking for or an ancillary
relief for reversing her spouse. In this case, Moylan LJ held that although corporate veil can
rarely be pierced as there are no general principles for it, however it could only be done under
the Matrimonial Causes Act 19735. In context to this order of the family court, three
companies Mr Prest was the majority shareholder filed for an appeal to the court of appeal,
criticizing Moylan LJ's order on the points that it was incorrect of the family court to peers
the corporate wheel using the Matrimonial Causes Act. In addition they also a appealed on
the fact that in the absence of the abuse of the principles that were held in the Solomon v
Solomon case, it was not right on the part of the court to uplift the corporate veil6.
The Court of Appeal was approached by the dependent where Patten LJ held that
matters relating to corporate wheel should be dealt by a separate legal system that deals with
company law and not family laws. On such order, Mrs Prest appealed to the Supreme Court
which ultimately helped her to receive her ancillary relief from her divorce suit.
Critical Evaluation of the decisions of various Courts
To have an understanding on the concept of corporate veil, the decisions of the three
courts must be taken into consideration in detail for gathering knowledge about each of their
perspectives on the doctrine of corporate veil. Each of these courts have laid down different
5 Matrimonial Causes Act 1973, s 24
6 Salomon v A Salomon & Co Ltd [1896] UKHL 1