Nigeria: Using Trust To Thrust The Veil Of Incorporation: A Review Of Prest v Petrodel Resources Ltd & Others [2013] UKSC 34

Last Updated: 20 February 2014
Article by Ayobayo Babade
Most Read Contributor in Nigeria, December 2017

In what will easily pass as a classic case, the UK Supreme Court recently delivered a landmark decision, Prest v. Petrodel Resources Ltd And Ors. [2013] UKSC 34 ("Prest v Petrodel"), the made detailed pronouncements which will have far reaching implications on various aspects of law and certain established Common Law principles. The reach of the decision covers matrimonial causes, trusts, legal personality and company law; for our present purposes however, the focus will be on the law of trusts and the principle of piercing the veil. Right from the decision of the English House of Lords in Salomon v. A Salomon & Co [1897] AC 22, the concept of a distinct legal persona of companies has been firmly upheld as one of Common Law's gifts to global jurisprudence. The case established that a company in the eye of the law is different from its shareholders. Over the years, Courts have faced with situations requiring it to discount the separate legal personality and reveal those in actual control of a company. This is particularly so in matters of apportioning specific findings of civil liability or criminal wrong. In certain cases, company directors and or its officers may be personally responsible for the faults of the company.

A trust, in brief, is a relationship whereby property is held by one party for the benefit of another. A trust is created by a settlor, who transfers some or all of his (or her) property to a trustee. The trustee holds that property for the beneficiaries of the trust. The trustee is given legal title to the trust property, but is obligated to act for the good of the beneficiaries.

In Prest v Petrodel, the Court was faced with a situation which posed the option of disregarding the concept of separate personality. In resolving it, the UK Supreme Court stated the core legal principles behind piercing the veil of incorporation concluding that the Court has a limited power to pierce the veil of incorporation and also highlighted the significant limits to that power. Since the facts of the case did not fall within the enunciated limit, the Court relied on the law of trusts deciding that the companies were trustees of the properties in dispute. The divorced couple were citizens of both Great Britain and Nigeria. Mr. Prest owned a number of companies incorporated in the Isle of Man. The appellant, Mrs. Prest alleged that he had used the companies to hold legal title to properties which belonged to him beneficially. She argued that the corporate veil should be pierced to identify him as the true owner of those properties, so that they could be transferred to her under ancillary proceedings as part of the pool of matrimonial assets.

At the court of first instance, it was held that the veil of incorporation could not be pierced as the husband had not been guilty of any impropriety in relation to the companies. The Court nevertheless concluded that in applications for financial relief ancillary to a divorce, a wider jurisdiction to pierce the corporate veil was available under Section 24 of the English Matrimonial Causes Act. The Court of Appeal by a majority reversed the decision of the trial Judge, holding that unless the corporate personality of the company was being abused for a purpose that was improper or the assets were held in trust for the husband, the Judge should not have made the order to transfer the properties. On further appeal to the Supreme Court, Lord Sumption, delivering the lead judgment, set out the principle regarding piercing the veil of incorporation as follows: "I consider that there is a limited principle of English law which applies when a person is 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. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality. The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil."

The Court unanimously restated the ruling of the Court of first instance, but not for the reasons given by the Judge. The Court approved the Court of Appeal's reasons for not piercing the veil, but held that the companies were bare trustees of the properties in dispute. The assets were held by the companies but they were held on trust for the husband. Thus, the Supreme Court held that the properties be transferred to the appellant, Mrs. Prest.

In Nigeria

Here in Nigeria, the decided of cases on piercing the veil of incorporation have generally been based on fraud. Our courts have recognised that the veil of incorporation can be pierced where the justice of the case so requires, especially where there is impropriety or wrongdoing on the path of the alter ego of the company. This can be seen in the relatively recent Nigerian Supreme Court case of AKIN-WUNMI ALADE V. ALIC NIGERIA LTD [2010] 19 NWLR (Pt. 1226) 111 where Per Galadima J.S.C stated that:"The consequences of recognizing the separate personality of a company is to draw a veil of incorporation over the Company. One is therefore generally not entitled to go behind or lift this veil. However, since a statute will not be allowed to be used as an excuse to justify illegality or fraud it is a quest to avoid the normal consequences of the statute which may result in grave injustice that the Court as occasion de-mands have to look behind or pierce the corporate veil."

The "statute" referred to above is the Companies and Allied Matters Act in which Section 37 codifies the common law decision in Salomon v A Salomon. However, the point to note is that the element of fraud is a similar instance wherein the veil of incorporation can be lifted. The law of trusts has been given judicial impetus in a number of cases. In KOTOYE V. SARAKI (1994) 7 NWLR (PT357) 414 the law of trusts was applied in a commercial dispute relating to the shares of a company. The decision of the Supreme Court in UGHUTEVBE V. SHONOWO (2004) 16 NWLR (PT.899) 300 show that the Courts desire to utilize the law of trusts to disputes brought before them.

In Conclusion

Contrary to what it might seem, the doctrine of separate legal personality has not be rendered obsolete by the decision in Prest v Petrodel neither has the principle of piercing the veil been widened beyond limits. What the court simply did was to utilize the law of trusts, based on the facts of the case, to provide a remedy for the appellant.

The case is interesting particularly as it might have important consequences on the law of trusts, family law and company law which the facts touch upon. However, it should be noted that the Court stated that whether assets legally owned by a company are beneficially owned by its controller is a highly fact specific issue. It will be interesting to see the principles applied by the UK Supreme Court in this case being applied by the Nigerian courts in similar situations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions