Prest v Petrodel Resources Ltd was a Supreme Court case where accessing UK residential properties held through offshore companies was vital to the wife’s claim, because they were the only assets based in the UK and the only ones she was ever likely to actually receive.

The Court of Appeal refused to make orders in respect of six of the seven properties because the court had to respect the 'corporate veil', which could only be lifted or pierced in the case of fraud. The Supreme Court reiterated the importance of separate legal entities and questioned whether the veil had ever successfully (and legitimately) been pierced

Even so, creative ways were found to put the properties in reach through trust principles:

  • Prop 1 transferred from husband to company for £1 – resulting trust to husband
  • Prop 2 transferred from husband's brother to company for £1 – initial purchase funded by husband – resulting trust to husband
  • Prop 3 transferred to company from wife and third party for £1 – assumed initial purchase funded by husband – resulting trust to husband
  • Prop 4 transferred from husband to company for substantial consideration before company started trading – funds must have come from husband – resulting trust to husband
  • Prop 5 transferred from wife and third party to company for substantial consideration before company started trading – initial purchase must have been funded by husband – resulting trust to husband
  • Prop 6 purchased by company 2 using funds received from company 1 before company 1 started trading – funds must have originated from husband – resulting trust to husband
  • Prop 7 purchased by company 2 using funds received from company 1 after company 1 started training – potentially could have been legitimate but consistent pattern established of husband providing funds to companies to purchase properties – resulting trust to husband

Take away point: courts don’t want to pierce the corporate veil but also don’t like naughty individuals trying to outsmart them, so will be creative in finding ways to track assets back to them if they can. You must document transactions properly.

Here the companies’ undoing was failing to provide any paperwork, allowing court the to draw adverse inferences. It remains to be seen how far the court will go when papers can be provided to show prima facie legitimacy.