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Lloyd's Maritime and Commercial Law Quarterly

LIFTING THE VEIL ON PIERCING THE VEIL

Prest v Petrodel

It was long feared that the area of law involving piercing the corporate veil would be unable to survive a stress test, and this appeared to be confirmed by the Supreme Court decisions in Prest v Petrodel Resources Ltd 1 and VTB Capital Plc v Nutritek International Corp.2 In VTB, Lord Neuberger of Abbotsbury PSC (who was the only Justice addressing this point, on which the other Justices agreed), thought that “the precise nature, basis and meaning of the principle are all somewhat obscure, as are the precise nature of circumstances in which the principle can apply”.3 He was moved to mention the much maligned “interest of justice” test for piercing the veil4 that had been rejected in Adams v Cape Industries Plc.5 The feeling was that some public policy was at work,6 but this has even more recently been doubted by Beatson LJ (with whom the other judges agreed) in Antonio Gramsci and Alliance Bank JSC v Lembergs.7 Indeed, Lord Sumption in the leading judgment in Prest stressed that, “if it is not necessary to pierce the corporate veil, it is not appropriate to do so, because on that footing there is no public policy imperative which justifies that course”.8
However, the decision of the Supreme Court in Prest may in fact have set things on the right path, even if the Justices did not speak with one voice in relation to veil piercing. The case itself actually involved a matrimonial dispute. The wife argued that the husband sought to hide some of his assets by vesting them in companies that he controlled, and asked that those underlying properties be transferred to her by way of an order under the Matrimonial Causes Act 1973, s.24(1)(a), as the husband was “entitled … in possession” to them. One issue was whether an order could be made without piercing the corporate veil. At first instance, Moylan J (having found that the veil could not be pierced as there was no impropriety) thought, however, that this was possible.9 However, the majority in the Court of Appeal10 disagreed (for, per Rimer LJ, “once the judge had rejected the impropriety assertion, he had no choice but to reject the claim that [the] properties were or could be regarded as properties to which the husband had any entitlement"11).

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