It also means that the parties have a duty, not only to one another but also to the court, to make full and frank disclosure of all the material facts which are relevant to the exercise of the court's powers, including of course their resources: see Livesey (formerly Jenkins) v Jenkins  AC 424. Those cases and articles appear to me to suggest that (i) there is not a single instance in this jurisdiction where the doctrine has been invoked properly and successfully, (ii) there is doubt as to whether the doctrine should exist, and (iii) it is impossible to discern any coherent approach, applicable principles, or defined limitations to the doctrine.65. The judge described this as "puzzling" but made no finding as to whether it was true. However, as in the recent decision of this court in VTB, it is not necessary to decide whether there is a principle that it is open to a court, without statutory authority (or, possibly, in the absence of the intention of contracting parties), to pierce the veil of incorporation ("the doctrine"), and, if it is, the scope, or boundaries, of the doctrine.64. The judge's findings about the ownership and control of the companies mean that the companies' refusal to co-operate with these proceedings is a course ultimately adopted on the direction of the husband. For present purposes the claim which matters is a claim for an account of a secret profit which Mr Dalby procured to be paid by a third party, Balfour Beatty, to a BVI company under his control called Burnstead. The lack of any coherent principle in the application of the doctrine has been commented on judicially in many of the major common law jurisdictions. Decisions in which it was assumed that the doctrine existed, and it was wrongly concluded that it applied on the facts;iii. However, I can see considerable force in the view that it is appropriate for us to address those matters now. There is no longer any issue about that property, which is apparently in the process of being transferred to the wife. All the disclosed accounts are now very much out of date. I also agree that Munby J was correct in Ben Hashem v Al Shayif  1 FLR 115 to suggest that the court only has power to pierce the corporate veil when all other more conventional remedies have proved to be of no assistance. Nor do I doubt that the object is to achieve a proper division of the assets of the marriage. In A v A  2 FLR 467, paras 18-19, he drew attention to the robust approach which had always been adopted by judges of the Family Division in seeing through sham arrangements designed to hide the ownership of assets of the marriage by vesting them in relatives or companies which were in reality holding them as their nominees. There were originally seven companies involved, all of which were joined as additional respondents to the wife's application for ancillary relief. JUSTICES: Lord Neuberger (President), Lord Walker, Lady Hale, Lord Mance, Lord Clarke, Lord Wilson, Lord Sumption. b�!U� �X��IC%��ӯ�v�Qk�_e]��9��+�r3����6 In Trustor, as in Gencor, the analysis would have been the same if Introcom had been a natural person instead of a company. … There may have been good reasons for not imposing such terms, but on the face of it the possibility was not even considered.Conclusion55. But of course such property can be taken into account when computing that party's resources for the purpose of section 25(2) of the 1973 Act, which lays down a non-exhaustive list of factors to be taken into account by the court when deciding how to exercise its various powers to make financial and property adjustment orders.89. He could justly have added that it is not just legally but economically fundamental, since limited companies have been the principal unit of commercial life for more than a century. I agree that there is such a doctrine and that its limits are not clear. Apart from that, and from cases turning on the wording of particular statutes, it held at p 536 that, "the court is not free to disregard the principle of Salomon v A Salomon & Co Ltd  AC 22 merely because it considers that justice so requires. But it has been applied altogether more generally, in cases which can be rationalised only on grounds of public policy, for example to justify setting aside a public act such as a judgment, which is in no sense consensual, a jurisdiction which has existed since at least 1775: Duchess of Kingston's Case (1776) 2 Smith's LC, 13th ed, 644, 646, 651. On that footing, the company received the money on Mr Smallbone's behalf. If they do not do so, the court is entitled to draw such inferences as can properly be drawn from all the available material, including what has been disclosed, judicial experience of what is likely to be being concealed and the inherent probabilities, in deciding what the facts are.86. In some instances the properties had been That leaves the two London properties (Flat 310, Pavilion Apartments and 11, South Lodge, Circus Road) which were acquired in the name of Vermont for substantial consideration, in July 2001 and January 2004 respectively. The attempt failed in the Court of Appeal because the court was not satisfied that that would be the consequence of piercing the corporate veil even if it were legitimate to do so: see paras 90-91. However, both members of the court suggested, obiter, that the result might have been different had it not been for the position of the minority shareholders. The background to these proceedings is extensive and, indeed, is well known to those who practise family law, in consequence of an earlier sequence of appeals which brought the case before the Supreme Court (Prest v Petrodel Resources Ltd.  UKSC 34;  2 AC 415). I agree that the appeal should be allowed for the reasons given by Lord Sumption, supplemented in their essence by Lord Neuberger.98. In fact, he dismissed the claim on the ground that the restrictive covenant was void. The authorities show that there are limited circumstances in which the law treats the use of a company as a means of evading the law as dishonest for this purpose.19. First, they said that it was not necessary in order to pierce the corporate veil that there should be no other remedy available against the wrongdoer, and so far as Munby J suggested that it was, he had set the bar too high. �|@"��*��
Since the decision in Salomon, there have been a number of cases where the courts have considered "piercing" or "lifting" the corporate veil. In British Railways Board v Herrington  AC 877, 930-931, Lord Diplock, dealing with the liability of a railway undertaking for injury suffered by trespassers on the line, said: "The appellants, who are a public corporation, elected to call no witnesses, thus depriving the court of any positive evidence as to whether the condition of the fence and the adjacent terrain had been noticed by any particular servant of theirs or as to what he or any other of their servants either thought or did about it. Mr Le Breton said that from about 2001 PRL was engaged in a limited way in oil trading and shipping, and from 2006 moved into oil exploration and production in Nigeria and West Africa. There is a range of situations in which the law attributes the acts or property of a company to those who control it, without disregarding its separate legal personality. In an age of internationally mobile spouses and assets this is a more significant problem than it once was, but such cases remain the exception rather than the rule. The evident absence, under the close scrutiny to which Lord Sumption has subjected the case-law, of authority for any further exception speaks for itself.LORD CLARKE103. Judgment details. In these circumstances it is not strictly necessary for this Court to add further general comments on the vexed question of piercing the corporate veil. The issue requires an examination of evidence which is incomplete and in critical respects obscure. However, this was not a distinction that was discussed in the course of the argument and, to my mind, should not be definitively adopted unless and until the court has heard detailed submissions upon it. And in Kremen v Agrest (No 2)  2 FLR 490, para 46, Mostyn J held that there was a "strong practical reason why the cloak should be penetrable even absent a finding of wrongdoing."24. He considered that he was piercing the corporate veil. In my view, the principle that the court may be justified in piercing the corporate veil if a company's separate legal personality is being abused for the purpose of some relevant wrongdoing is well established in the authorities. The result would have been exactly the same if Burnstead, instead of being a company, had been a natural person, say Mr Dalby's uncle, about whose separate existence there could be no doubt.32. Other factors included the circumstances and the source of the receipt, and the nature of the company's other transactions if any.33. They were Petrodel Resources Ltd ("PRL"), Petrodel Resources (Nigeria) Ltd ("PRL Nigeria"), Petrodel Upstream Ltd ("Upstream"), Vermont Petroleum Ltd ("Vermont"), Elysium Diem Ltd, Petrodel Resources (Nevis) Ltd ("PRL Nevis") and Elysium Diem Ltd (Nevis). But I venture to suggest, however tentatively, that in the case of the matrimonial home, the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company. Vermont was and possibly still is a trading company. The trial judge, Farwell J, found that the company had been set up in this way to enable the business to be carried on under his own control but without incurring liability for breach of the covenant. Jones v Lipman  1 WLR 832 was a case of very much the same kind. It describes the process, but provides no guidance as to when it can be used." At some stage, it is unclear when or how, the lease was transferred into the name of the wife, and she must have signed the transfer when it was conveyed to PRL, but she had no recollection of being involved or of ever having owned it. What he held was that the assets of the companies were "effectively" the husband's property, because he treated them as such. But what it is important to appreciate (and too often, I fear, is not appreciated at least in this division) is that the relevant legal principles which have to be applied are precisely the same in this division as in the other two divisions. Thus was the legal structure of modern business born.91. Anyone of common sense would realise the danger that the state of the fence so close to the live rail created for little children coming to the meadow to play. The wife petitioned for divorce in March 2008. This analysis is not affected by section 25(2)(a) of the Matrimonial Causes Act 1973. The background to these proceedings is extensive and, indeed, is well known to those who practise family law, in consequence of an earlier sequence of appeals which brought the case before the Supreme Court (Prest v Petrodel Resources Ltd.  UKSC 34;  2 AC 415). It is also clear from the cases and academic articles that the law relating to the doctrine is unsatisfactory and confused. The trial judge's reasoning cut across the statutory scheme of company and insolvency law which are essential for protecting those dealing with companies .It follows that the only basis on which the companies could be ordered to convey properties to the wife is that they belong beneficially to the husband, by virtue of the particular circumstances in which the properties came to be vested in them . The section invokes concepts of the law of property with an established legal meaning which cannot be suspended or taken to mean something different in matrimonial proceedings . They were liable to account only if the true facts were that the company had received the money as their agent or nominee. Lord Sumption gives the leading judgment and Lord Neuberger, Lady Hale, Lord Clarke and Lord Walker add concurring judgments.REASONS FOR THE JUDGMENTThere are three possible legal bases on which the assets of the companies might be available to satisfy the lump sum order against the husband: (1) that this is a case where, exceptionally, the Court may disregard the corporate veil in order to give effective relief; (2) that section 24 of the 1973 Act confers a distinct power to disregard the corporate veil in matrimonial cases; or (3) that the companies hold the properties on trust for the husband, not by virtue of his status as sole shareholder and controller of the company, but in the particular circumstances of the case .After surveying the authorities, the Court holds that there is a principle of English law which enables a court in very limited circumstances to pierce the corporate veil. The only explanation proffered for their contumacy was that the information was confidential to the companies' shareholders or "commercial partners". The ratepayers appealed … One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. The wife sought special leave to argue that the companies constituted a nuptial settlement within the meaning of section 24(1)(c) of the Act. Again, there is no evidence to rebut the ordinary inference that the husband was the beneficial owner of the property at the time of the transfer to PRL, and that the company held it on a resulting trust for him. In Mubarak v Mubarak  1 FLR 673, 682C, Bodey J held that for the purpose of claims to ancillary financial relief the Family Division would lift the corporate veil not only where the company was a sham but "when it is just and necessary", the very proposition that the Court of Appeal had rejected as a statement of the general law in Adams v Cape Industries. Section 37 is a limited provision which is very far from being a complete answer to the problem, but it is as far as the legislature has been prepared to go.41. The court, adopting Lord Keith's dictum in Woolfson v Strathclyde, held that the corporate veil could be disregarded only in cases where it was being used for a deliberately dishonest purpose: pp 539, 540. In 2004 Aurora was wound up and thereafter he operated mainly through the Petrodel companies. The judge, however, made extensive findings about this. I am not sure whether it is possible to classify all of the cases in which the courts have been or should be prepared to disregard the separate legal personality of a company neatly into cases of either concealment or evasion. The husband is not party to the appeal in point of form, although he is present in spirit. There is only one law of 'sham', to be applied equally in all three Divisions of the High Court, just as there is but one set of principles, again equally applicable in all three divisions, determining whether or not it is appropriate to 'pierce the corporate veil'". They may simply be examples of the principle that the individuals who operate limited companies should not be allowed to take unconscionable advantage of the people with whom they do business. I am reluctant to add to the discussion but for my part I consider that "piercing the corporate veil" is not a doctrine at all, in the sense of a coherent principle or rule of law. When considering its scope, however, it may be helpful to consider what the purpose of doing this is. Writing extra-judicially, Lord Templeman referred to the principle in Salomon as the "unyielding rock" on which company law is constructed, and on which "complicated arguments" might ultimately become "shipwrecked"- Forty Years On (1990) 11 Co Law 10.67. In addition, PRL was the legal owner of five residential properties in the United Kingdom and Vermont is the legal owner of two more. In particular, (i) it should be of value in the few cases where it can be properly invoked, (ii) it is, I believe and hope, sufficiently clear as to render it unlikely to be raised in inappropriate cases, and (iii) it does not cut across the rule in Salomon because it is consistent with conventional legal principles.83. Thus in a case like VTB Capital, where the argument was that the corporate veil should be pierced so as to make the controllers of a company jointly and severally liable on the company's contract, the fundamental objection to the argument was that the principle was being invoked so as to create a new liability that would not otherwise exist. There is nothing in the Matrimonial Causes Act and nothing in its purpose or broader social context to indicate that the legislature intended to authorise the transfer by one party to the marriage to the other of property which was not his to transfer. But this was inconsistent with the company's financial statements, and the judge rejected it. He used PRL's assets to fund his and his family's personal expenditure, including the substantial legal costs incurred in these proceedings. If, as the judge held, Burnstead was Mr Dalby's nominee for the purpose of receiving and holding the secret profit, it followed that Burnstead had no right to the money as against Mr Dalby, who had in law received it through Burnstead and could properly be required to account for it to ACP. But the consensus that there are circumstances in which the court may pierce the corporate veil is impressive. Lipman and an employee of his solicitors were the sole shareholders and directors of the company, and its sole liability appears to have been a loan of £1500 to a bank (borrowed to meet half the £3000 which it paid for the property). But he adopted, as it seems to me, both the general reasoning of the Court of Appeal and the view of Munby J that any doctrine permitting the court to pierce the corporate veil must be limited to cases where there was a relevant impropriety: see paras 128, 145.27. In Secon Serv Sys Inc v St Joseph Bank & Trust Co, 855 F2d (7th Cir, 1988), 406, 414, Judge Easterbrook in the US Court of Appeals described the doctrine as "quite difficult to apply, because it avoids formulating a real rule of decision. However, I have reached the conclusion that it would be wrong to discard a doctrine which, while it has been criticised by judges and academics, has been generally assumed to exist in all common law jurisdictions, and represents a potentially valuable judicial tool to undo wrongdoing in some cases, where no other principle is available. Assuming for the sake of argument that the 'unceremonious' subjecting of Gécamines to the controlling will of the state involved a breach by the State of its duty to respect Gécamines as a separate entity, that might conceivably justify an affected third party, possibly even an aggrieved general creditor of Gécamines, in suggesting that the corporate veil should be lifted to make the State, which had deprived Gécamines of assets, liable for Gécamines' debts. But there is no evidence to that effect, and I would not be willing to presume it in the absence of any. The judge recorded the wife's evidence that the husband had once advised her that if anything were to happen to him, she should sell all the properties, move to Nevis and use the proceeds of sale to meet her living expenses there.47. The judge ordered the husband to procure the transfer of the seven UK properties legally owned by PRL and Vermont to the wife in partial satisfaction of the lump sum order. I find it difficult to understand how that can be done unless the company is a mere nominee holding the property on trust for the husband, as we have found to be the case with the properties in issue here. The companies were joined to these proceedings only because they were alleged to be trustees for the husband of the shareholdings and the properties and because orders were being sought for their transfer to the wife. Mr Smallbone, the former managing director of Trustor, had improperly procured large amounts of its money to be paid out of its account to a company called Introcom Ltd, incorporated in Gibraltar. It is right to add that even where courts exercising family jurisdiction have claimed a wider jurisdiction to pierce the corporate veil than would be recognised under the general law, they have not usually suggested that this can be founded on section 24 of the Matrimonial Causes Act. Flat 6, 62-64 Beethoven Street was transferred to PRL by the husband for £85,000. However, there are three points to be made about that formulation. Lord Neuberger, Lord Walker, Lady Hale, Lord Mance, Lord Clarke, Lord Wilson, Lord Sumption. Partly for that reason, the proceedings although in form adversarial have a substantial inquisitorial element. I fervently hope that the wife will gain some benefit from the outcome of all this litigation, although in the light of the mortgages which apparently encumber the properties I am not optimistic that she will.LORD MANCE97.  UKSC 34 | UKSC 2013/0004 Petrodel Resources Limited and others (Respondents) v Prest (Appellant) That was within his power, in the sense that there was no one to stop him. Of the other five properties owned by PRL, the first category comprises the three properties (Flats 4 and 5, 27 Abbey Road, and Flat 2, 143 Ashmore Road) acquired by the company in December 1995 and March 1996, in each case for a nominal consideration of £1. The husband's evidence was that the company had engaged in substantial agricultural and oil related business in the 1990s, in part in association with his then employer, Marc Rich. The appeal concerns the position of a number of companies belonging to the Petrodel Group which were wholly owned and controlled by Michael Prest, the husband. The matrimonial home, 16 Warwick Avenue, was bought in the name of PRL for £1.4 million and subsequently refurbished at a cost of about £1 million. Moreover, in awarding costs to the wife, the judge directed that PRL, Upstream and Vermont should be jointly and severally liable with the husband for 10% of those costs. It is not an abuse to cause a legal liability to be incurred by the company in the first place.  The principle has no application in the present case because the husband's actions did not evade or frustrate any legal obligation to his wife, nor was he concealing or evading the law in relation to the distribution of assets of the marriage upon its dissolution . This is because I think that the recognition of a limited power to pierce the corporate veil in carefully defined circumstances is necessary if the law is not to be disarmed in the face of abuse. Subject to any contrary submissions as to costs, I would also restore paragraph 14 of the judge's order so far as it dealt with the costs payable by PRL and Vermont, and would order them to pay the costs of the appeal to the Court of Appeal and to this court. A court is accordingly entitled to infer from the inaction of the appellants that one or more of their employees decided to allow the risk to continue of some child crossing the boundary and being injured or killed by the live rail rather than to incur the trivial trouble and expense of repairing the gap in the fence.". It had been bought in March of that year for £48,650 in Michel's name. In Nicholas v Nicholas  FLR 285, the Court of Appeal (Cumming-Bruce and Dillon LJJ) overturned the decision of the judge to order the husband to procure the transfer to the wife of a property belonging to a company in which he held a 71% shareholding, the other 29% being held by his business associates. In this case, the husband's conduct of the proceedings has been characterised by persistent obstruction, obfuscation and deceit, and a contumelious refusal to comply with rules of court and specific orders. This appeal arises out of proceedings for ancillary relief following a divorce. Turning to what is known about the acquisition of the disputed properties, PRL acquired the legal interest in six London properties (including the matrimonial home) between 1995 and 2001. The decision of the International Court of Justice in In re Barcelona Traction, Light and Power Co, Ltd  ICJ 3 recognises the doctrine; however, that is in the context of a civil law system which includes the principle of abuse of rights, and begs the question whether, in a common law system, the doctrine should be applicable by the courts in the absence of specific legislative sanction;ii. She said that her husband had led her to believe that he had paid for it. 72. 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