Corporate Veils And Nuptial Settlements - Protecting Assets Within Marriage

Hashem -v- Shayif [2008] EWHC 2380 (Fam)

Facts

This case stemmed from divorce proceedings before the English

High Court in which the wife (the

"Wife") was seeking to obtain financial

provision for herself.

The only relevant assets within the jurisdiction were two

properties which were owned by a Jersey company (the

"Company"). The shares in the Company

were held as to 30% by the husband (the

"Husband") and as to 70% by a number of

the Husband's children from a previous marriage (the

"Children"). The shares belonging to the

Children, however, had been paid for by the Husband and effectively

gifted to them by him.

At the time of this judgement the Wife had apparently broken

into one of the two properties and was now being allowed to live

there by the Company on condition that the Husband paid all

outgoings until the divorce proceedings had been finalised.

Submissions

The Wife argued that the two English properties should be

regarded as being owned by the Husband's and therefore

available to form part of the financial settlement she was seeking

on divorce. She put this claim on a number of different footings,

the most important of which were:

that the Company was simply the Husband's alter ego and the

Children held shares simply as the Husband's nominees, so the

"corporate veil" should be pierced and the Company simply

looked through; and

that the English properties should be treated as having been

settled into a "nuptial settlement" within the meaning of

section 24(1)(c) of the United Kingdom's Matrimonial Causes Act

1973 and that the Court should use its power to vary the terms of

that settlement so as to make the properties available to the Wife

as part of the divorce settlement.

Decision

Dealing first with the submission that it should simply look

through the Company, the Court found that the following principles

applied to any attempt to pierce a corporate veil:

ownership and control of a company by an individual were not of

themselves sufficient to allow the Court simply to treat the

Company as if it didn't exist;

even if no third party rights would be adversely affected, a

corporate veil cannot be pierced solely because to do so would be

"in the interests of justice";

before a Court will pierce the corporate veil it must be

established that some kind of impropriety had been committed which

would justify doing so;

that impropriety must be linked to the use of the company

concerned to conceal or avoid liability;

it therefore follows that...

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