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The Supreme Court has found in favour of a divorced wife and ordered that her former husband transfer properties held by companies owned and controlled by him, as part of a £17.5m divorce award.
BACKGROUND
This Judgment arises out of proceedings for financial remedies following a divorce between Michael and Yasmin Prest. In 2011 the High Court had ordered Mr Prest (founder of the Petrodel Group – a Nigerian energy company) to pay £17.5m to Mrs Prest. At the same time the Court acknowledged that he was unlikely to comply with this order. The Court therefore, ordered Mr Prest to transfer properties held by Petrodel and other companies owned by him, to Mrs Prest as part payment of her award. Petrodel challenged this order in the Court of Appeal who reversed the decision, ruling that companies owned by Mr Prest could not be made to hand over these properties. Mrs Prest decided to contest this decision and take it to the highest authority in the land. The Supreme Court were asked to decide whether the court has power to order the transfer of properties, despite the fact they do not legally belong to the husband, but to his companies.
THE DECISION
The Supreme Court unanimously allowed Mrs Prest’s appeal, declaring that the properties in question were held by Petrodel on trust for the husband, and were therefore his to hand over to his ex-wife. The court decided that it was necessary to ‘pierce the corporate veil’, in other words, look behind the fact a company is a separate legal entity, where the company has been set up to evade the law or its enforcement. In this case, the court inferred that these properties were actually the husband’s and therefore also owned beneficially by his spouse.
THE REACTION
Many family lawyers have welcomed the decision and marked it as a ‘victory for common sense.’ This ruling may have come as a surprise to many with the Supreme Court seemingly going out of its way in order to establish a fair decision. Fairness however, has been achieved and this decision should make spouses think twice before attempting to use company structures to try and hide their assets.
Whilst some believe the court has “delivered a chink of light” through the corporate veil, commentators have been quick to point out that piercing the corporate veil in this way will be strictly limited to family law cases, where parties deal on less of an equal footing compared to commercial arrangements where most deals happen at arm’s length.