In ancillary relief proceedings, where a respondent company director conceded that the assets and income of a company could be treated as his own, it could be proper to draw aside the veil of incorporation. Nevertheless the court should be careful to ensure that there were no third parties whose position could be prejudiced by the making of such an order. The power to lift the corporate veil is less clear in the Family Division. Here, however, there were genuine third party rights, including the commercial creditors and directors with fiduciary duties, who opposed the ceasing of the company’s trade. ‘[C]ompany law is predominantly concerned with parties at arm’s length in a contractual or similar relationship’ but family law is ‘concerned with the distributive power of the court as between husband and wife applying discretionary consideration to what will often be a mainly, if not entirely, family situation.’ and ‘it is quite certain that company law does not recognise any exception to the separate entity principle based simply on a spouse’s having sole ownership and control.’
Bodey made several comments about the situation: ‘Looking at the totality of the husband’s presentation, it was, in my view, sufficient to amount to a concession that he was to be treated for the purpose of the proceedings as the ultimate owner, not only of the company shares but also of the assets belonging to the companies. However, that concession cannot, in my view, be binding on the companies: he was not a director of DIL at the material time and did not, on the evidence, have the authority to bind either Board of Directors in saying that company assets could be seised and used for the satisfaction of his personal liabilities towards the wife.’ and
‘The fact that the husband purported and appeared to be able during the various ‘stay’ hearings to use and control company assets as if his own and the fact that the directors may in practice not have objected to that course whilst a stay was in place or in the offing, does not prove that in the last analysis he was able to establish and enforce against the companies the right in law to do so.
So although the earlier findings based on the husband’s concession that he was the owner of the companies are res judicata against him, they are not binding on the companies.’ and
‘Mr Aiyer has been described on behalf of the wife as a mere cipher of the husband, the implication being that he is masterminding the companies’ intervention and opposition to the seizure of its jewellery simply to assist the husband in avoiding his proper obligations to the wife. However, having seen Mr Aiyer, albeit briefly (and whilst I do not doubt he has discussed with the husband the tactical advantages of the companies fighting to retain the stock and that he is acting in line with the husband’s wishes) I conclude that, nonetheless, he is also genuinely concerned with his duty as a director to safeguard company assets.
I did not get the impression from him that the board’s resistance to the order is driven purely by instructions from the husband, nor purely by the board’s wish to help the husband in resisting payment of the lump sum order.’
Bodey J concluded: ‘At the end of the day, both companies are bona fide trading companies incorporated well before the matrimonial difficulties of the husband and wife. DIL is indeed incorporated outside this jurisdiction and the husband is not a director. It is not suggested that they are as such being used as a sham or device, albeit that their existence is very convenient to the husband. In my judgment, there do exist genuine third party rights and interests which ought to be respected, namely the interests of bona fide commercial creditors (one of them secured on the jewellery) and the position of directors who have fiduciary duties and who oppose the seizure of stock in trade. The facts of this case are far away from those of Green v Green [1993] 1 FLR 326 which Mr Pointer asks me to follow.
Applying the above proposed approach as regards lifting the corporate veil to the evidence now before me and having heard full legal argument, I come to the conclusion that this case does not fall within the necessarily circumscribed circumstances in which lifting the veil would be acceptable. However much the court may wish to assist a wife and children where a lump sum has not been paid, I am satisfied that doing so here, whensoever it may be permissible, would be a step too far in all the circumstances.’
Judges:
Bodey J
Citations:
Times 30-Nov-2000, [2001] 1 FCR 193, [2001] 1 FLR 673
Cited by:
Cited – Corbett v Corbett CA 28-Feb-2003
After an order had been made for periodical payments to the wife, the former husband entered into a new relationship, but began to get in financial difficulties, and arrears. Over the course of time, he did not make effective disclosure of his . .
Cited – Ellis v Ellis CA 24-Jun-2005
The defendant appealed a suspended committal order in respect of his failure to pay maintenance. The husband had unilaterally reduced payments at the same time as withdrawing his application to vary the order.
Held: The defendant simply piled . .
Cited – G v G and Another FdNI 25-Oct-2003
There had been a long but argumentative marriage, and the parties disputed distribution of the assets on an ancillary relief application.
Held: The husband could not claim to discount shareholdings as a minority shareholding where he also . .
Appeal from – Mubarak v Mubarak CA 2001
A judgment summons, issued was issued by the wife to enforce a lump sum order made against her husband in their divorce proceedings. The judge had performed his statutory duty which included having to satisfy himself under s. 25 of the 1973 Act of . .
See Also – Mubarak v Mubarik FD 9-May-2006
. .
See Also – Mubarak v Mubarik and others FD 12-Jan-2007
. .
See Also – Mubarak v Mubarak and others CA 17-Jul-2007
Application for leave to appeal against ancillary relief order – protracted proceedings. . .
Cited – Child Maintenance and Enforcement Commission v Gibbons; Same v Karoonian CA 30-Oct-2012
Non-resident parents in each case appealed against suspended orders of imprisonment for non-payment of child support. They argued that the procedures used were indistinguishable from those held to be human rights non-compliant in Mubarak.
Cited – Prest v Petrodel Resources Ltd and Others SC 12-Jun-2013
In the course of ancillary relief proceedings in a divorce, questions arose regarding company assets owned by the husband. The court was asked as to the power of the court to order the transfer of assets owned entirely in the company’s names. The . .
Lists of cited by and citing cases may be incomplete.
Company, Family
Updated: 09 April 2022; Ref: scu.84104