Separate corporate personality is part of the bedrock on which the global economy is built. It is also a vital component of many frauds and a shield for the proceeds of fraud. Persuading a court to identify a fraudster with a company he controls and which holds the benefit of the fraud can be a vital part of achieving any compensation for the victims of fraud. That process is often referred to as "piercing the corporate veil".

In Prest v Petrodel Resources Ltd [2013] UKSC 34, the UK Supreme Court has recently reviewed the English law in this area, concluding that the Court has a distinct but limited power to ignore separate corporate personality but, whilst highlighting the very significant limits to that power, the Supreme Court pointed out that many other English law doctrines can be used to similar effect.

Background facts

Mr Prest owned a network of offshore companies over which he exercised total management control. The business of those companies was originally limited to owning various residential properties, including the matrimonial home he shared with his wife. Subsequently, the companies were used in his commodity business. When their marriage failed Mrs Prest made a large claim against him for financial assistance based, in part, on the value of the real estate owned by that network of companies. Mr Prest denied they were his. Indeed, although he claimed to be massively insolvent, he refused to comply with orders for full disclosure as to his assets.

Faced with likely difficulty enforcing any claim against Mr Prest personally, Mrs Prest had joined the companies themselves as parties and sought an order that they should transfer the properties to her. The First Instance Judge decided that s.24 of the Matrimonial Causes Act gave the Court power to treat the assets of the companies as if they were the husband's assets and so the companies could be ordered to transfer them to Mrs Prest. The Court of Appeal overturned the First Instance decision leading to Mrs Prest’s appeal to the Supreme Court.

Supreme Court decision

The Supreme Court unanimously agreed that the companies should be ordered to transfer the properties but that the First Instance Judge had reached his decision in the wrong way: the Court could only order transfer of assets actually owned by the husband. The assets were held by the companies but they were held on resulting trust for the husband and so his equitable interest under that resulting trust was actually owned by him.

The unanimous decision that the Matrimonial Causes Act does not create a mechanism for treating assets which do not belong to a party to the marriage as if they did will be of the utmost importance to practitioners of family law but will have little wider interest.

However, the case has received most attention as a result of its treatment of “piercing the corporate veil”. Although it was not strictly necessary for the court to address this point because it was already decided the appeal on the ground that a resulting trust existed, the Supreme Court nonetheless discussed the corporate veil doctrine at length. Whilst there may be some debate about the extent to which the decision will be formally binding on later courts, as a practical matter it is beyond doubt that it will be the starting point of any future argument and, although the ink has been dry on the judgment for less than a month, the Court of Appeal has already indicated[1] that attempts to widen the scope of the doctrine are likely to prove difficult, if not impossible.

There are two limitations upon the Court’s power to pierce the corporate veil. The first, and possibly the most important, is that it will only apply if there is no other legal method of achieving an equivalent result. Lord Sumption said "if it is not necessary to pierce the corporate veil, it is not appropriate to do so"[2] and Lord Clarke put the point more directly: "the court only has power to pierce the corporate veil when one of the more conventional remedies have proved to be of no assistance."[3]

Secondly, if a claimant cannot establish any alternative way of identifying the company with its controller so as to provide him with a remedy, the Court can do this but only if control is proved and the controller was "under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control"

Mr Prest had set up his companies long before his marriage broke down and long before any question of separate financial provision for his wife was considered. As a result the “evasion principle” did not apply and the corporate veil would not be pierced. Furthermore, the existence of the resulting trusts meant that it was unnecessary to pierce the veil.

The "evasion principle" was formulated by Lord Sumption, but even he recognised that "in almost every case where [it] is satisfied, the facts will in practice… make it unnecessary to pierce the corporate veil". Indeed, it is striking that neither he nor Lords Neuburger or Mance described a single example of a case in which it would apply and, whilst four members of the Court expressed the view that piercing the corporate veil should not necessarily be limited to the “evasion principle”, none gave any indication of the principles which should determine what its limits are.


Whilst it will always be necessary for the victim of fraud to consider whether a case may be appropriate based on piercing the corporate veil, in light of the Prest decision it is most likely that a remedy will have to be sought on a different basis. However, Prest and the earlier Supreme Court decision in the VTB litigation[4], provide many illustrations of the alternative legal bases on which an equivalent remedy can be justified. In the vast majority of fraud and corruption cases there will be alternate legal bases for a claim against the ultimate fraudster, including conspiracy to injure, knowing receipt, unjust enrichment and fraudulent mispresentation. Those illustrations are not exhaustive but it is important to note that one such basis, that the company held its assets on resulting trust for its controller, was the basis for the remedy given to Mrs Prest.