The Supreme Court has just handed down its judgment in the landmark case of Prest v. Petrodel.
The case concerned a very high value divorce. The value of the judgement was not in question, as the courts had already ruled the husband – a Nigerian oil tycoon – would have to pay his wife £17.5m, largely due to his conduct during the case, and he was not arguing over this. What was in dispute, and what led to this becoming a significant case, was how the wife would actually physically receive the settlement.
Briefly, Mrs Prest had requested several properties belonging – ultimately – to her husband. He had argued that since he did not technically own the properties himself, as they were actually owned on paper by companies he had set up, the courts had no power to grant them to his wife: in effect, the properties were not his to give away whether he wanted to or not.
When the parties first went to court, the judge found in the wife’s favour, stating the court had the power to “pierce the corporate veil” and award the properties to her. The husband appealed to the Court of Appeal, whcih surprisingly overtuned that initial decision, instead agreeing with the husband that he did not “own” the properties and therefore could not be ordered to transfer them to his wife. Mrs Prest then appealed to the Supreme Court, the highest court in the land, to overturn that decision.
The Court has now come down firmly and unanimously in favour of the wife, albeit only on the facts of this particular case, rather than as a general principle to be used whenever assets were owned by a company rather than an individual (as suggested by the judge in the first trial).
Giving judgment, Lord Sumption said the case meant the recognition that there was “a small residual category of cases where the abuse of the corporate veil to evade or frustrate the law can be addressed only by disregarding the legal personality of the company is consistent with authority and long-standing principles of legal policy.”
The Court was careful not to imply that this could be done in every case, but rather only in “very limited circumstances” where the ‘ownership’ of assets by a company was simply a convoluted way of holding them on trust for the real owner.
“The only basis on which the companies could be ordered to convey properties to the wife is that they belong beneficially to the husband, by virtue of the particular circumstances in which the properties came to be vested in them,” read a statement from the Court.
Lorraine Watts, Associate at Wendy Hopkins Family Law Practice, says the case was being watched with interest.
“If the wife’s appeal was rejected, it would be a major departure from the existing approach,” said Lorraine.
“We always include company assets in divorce situations, so the point of this case was not whether the amount of the award to the wife would stand, but rather whether the courts had the power to order those physical company assets to be signed over to make sure she actually gets her hands on the money she is awarded.”
She said the outcome had been in some doubt, but that the judgment reflected an extension and confirmation of existing guidelines, rather than a new concept in family law.
“A large number of high-profile lawyers had wondered which way the Supreme Court would go on this, as a decision either way could have had a huge impact on current and future cases,” said Lorraine.
“At Wendy Hopkins Family Law Practice, we have been monitoring developments in this case, and advising our clients as to what the result might mean for them. The judgment today gives us some much-needed clarity on what can and cannot be included when drawing up a financial settlement.”
The Supreme Court’s judgment can be read here: http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2013_0004_Judgment.pdf
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