Company assets in divorce – an update
In June, the Supreme Court handed down their judgment in the case of Petrodel -v- Prest. It was a decision that could have had a considerable impact on family law and so was eagerly awaited by all. The facts are covered in my earlier article but briefly, the case involved an appeal from a group of companies (Petrodel) of an Order requiring them to transfer properties as part of a divorce settlement between their sole shareholder and his wife.
The Companies argued that the properties belonged to them and they could not be ordered to transfer them in proceedings between a husband and wife. In my earlier article, I explained the concern amongst family lawyers that, if the appeal were successful, it would enable spouses trying to defeat their husband or wife’s financial claim to ensure that any assets were owned by the company as opposed to them as individuals. It is important to note that, in this case, there was no suggestion that the properties’ were owned by or transferred to the companies for the purposes of defeating the wife’s claim.
The Supreme Court upheld the original decision and ordered the transfer of the properties but for different reasons. They made it clear that they considered Mr Prest to be the beneficial owner of the properties because he had provided the funds to enable the properties to be purchased in the first place. They applied long established trust principles and determined that the companies were simply holding the properties on trust for the husband and he was therefore ‘entitled’ to them. As such the Court could order a transfer to the Wife.
It is of note that, due to the husband’s conduct within the financial proceedings, the Court inferred that the funds used to purchase the properties came from the husband. They did so because Mr Prest had been deliberately obstructive within the original proceedings.
It seems that the Supreme Court, in restoring the original Order, has avoided a “cheats charter” being established. Much was made of the ‘piercing the corporate veil’, but in the end the Court relied on other legal principles to restore an Order that most would consider to be a fair outcome.
For specific advice concerning your own circumstances please contact Demelza Butler, Family Solicitor at Blocks Solicitors on 01473 343 908 or email email@example.com