Where Family law and Company law meet: Petrodel v Prest revisited

We have written before about the general principles that operate when it comes to the division of assets upon divorce. In broad terms, the principle of a 50:50 split is applied, and parties to the divorce are encouraged to make arrangements for the distribution of shared assets without a court order. The courts are unwilling to make financial orders unless the parties have been first subject to a mediation information and assessment meeting .

We have also observed before on the blog the power that English case law has to extend and refine the content of the statute books, and the arena of Family Law is no exception. So while the Matrimonial Causes Act 1973 generally governs the lines of principle that judges in the family courts take, there is always the potential for individual cases to ‘chart new territory’ and change the landscape for divorcing couples going to court. In this situation, we are often looking to one individual being willing to keep on going, launching appeals and travelling ever upwards into the realms of the higher courts. One such decision has recently reached the Supreme Court, and stands to shape the decisions in many future cases.

Yasmin and Michael Prest received their decree nisi in 2008, and their decree absolute in 2011. Since that time, the ex-couple have taken appeals many steps further, culminating in the ex-Mrs Prest taking her case to the Supreme Court in March 2013 . The case turns on an issue of ownership of a number of properties, and is an interesting meeting of Family law and Company law. A consistent principle, often labelled ‘the corporate veil’, usually prevents the assets of a company owned by a party to the divorce being accessible to the other as part of the financial settlement. Thus companies are seen, along with the tangible assets they hold, as separate ‘legal personalities’. In this case however, the court found that the ‘most plausible inference’ is that seven UK properties, that Mr Prest claimed were assets of his company Petrodel, were in fact held on trust by the company for Mr Prest. Thus they were assets of the marriage and subject to a fair distribution under Family Law. As one senior lawyer, James Copson, has noted  “Putting assets into corporate structures for wealth protection reasons might not now protect that wealth against divorce claimants”

Beyond the point of law, many members of the legal community have expressed satisfaction with this latest ruling, arguing that it has restored a sense of justice to the situation, underpinning London’s reputation as a fair place to determine divorce proceedings. Mr Prest had evaded court orders and had been felt by many to be deliberately uncommunicative, unfairly keeping what were really his assets out of reach of his wife.

Here at Prince Family Law we pride ourselves on remaining up to date with the ever-developing case law of the Family law arena; this landmark decision will have all Family law practitioners revising the advice they give when it comes to the division of assets. We also ensure every spouse who approaches us for assistance during the divorce understands that finding a more conciliatory way through this painful time is often the best course of action. For further information on how we can support you visit our Financial Settlements page here https://www.princefamilylaw.co.uk/services/financial-settlements/