By Tony Johnson - 21 Jun 2013
The UK Supreme Court recently considered an appeal from
proceedings following a divorce. The Court's decision in Prest
v Petrodel Resources Ltd & Ors is likely to affect New
Zealand company, insolvency, trust and relationship property
law.
A likely consequence is that New Zealand Courts will be more
willing to allow a claimant recourse to assets legally held by a
company. This is particularly so where an individual
essentially "controls" the company.
In Petrodel, the Court had to decide if it could order
the transfer of seven residential properties to the wife, given the
properties were legally held by companies that the husband wholly
owned and controlled.
In the circumstances, the Court rejected that it could order the
transfer by disregarding the companies' separate legal
persona. Instead, it ordered the transfer based on trust law
principles, finding the companies held the properties on trust for
the husband.
The Court noted that the situation of a company holding assets
on trust for a controlling beneficiary is highly
fact-specific. In Petrodel, it considered how the
companies acquired the properties. Three of the properties
were acquired for nominal consideration of £1 and a "resulting
trust" arose in favour of the husband. Three were acquired for
substantial consideration, but it was inferred the husband funded
the purchases himself and he was found to be the beneficial
owner.
The last property was acquired for substantial consideration and
it did not appear that the husband funded the
purchase. Nevertheless, ownership of the property appeared to
have no connection with the holding company's business and no
explanation had been given in evidence. The Court found the
last property was held on trust by the company, with the husband
being the beneficial owner.
In summary, if New Zealand Courts follow the reasoning in
Petrodel, another avenue is likely to be opened up
allowing access to a company's legal assets.
Contacts
Tony
Johnson
Emma
Kemp
Tara
Hurley
Judgment
Prest v Petrodel