On Wednesday the Supreme Court handed down the eagerly awaited judgement in the case of Prest v Petrodel. The Supreme Court have produced a handy two page case summary, which can be found here.
Yasmin and Michael Prest married in 1993, and Mrs Prest petitioner for divorce in 2008. The decree absolute was finally granted in November 2011. They have four children together. The issue concerned a number of companies owned by the Petrodel Group, which is a company owned and controlled by Mr Prest. The first instance judge in November 2011 ordered the husband to transfer of the matrimonial home to the wife, to make a lump sum payment to her of £17.5 million and to pay maintenance to her at the rate of 2% of that sum while it remained outstanding. He also made maintenance and school fees orders for the children, and made a costs order against the husband. In order to satisfy the lump sum order, the judge ordered the husband to arrange for the transfer of seven UK properties legally owned by his companies to the wife. The companies successfully challenged the decision in the Court of Appeal, saying that there was no jurisdiction to order that the properties be transferred to Mrs Prest.
Mrs Prest took the case to the Supreme Court in March 2013, where the key issue was whether the Court has the power to order the transfer of these seven properties to the Mrs Prest, as legally they belong to the companies and not to Mr Prest.
One of the central points was whether the Court should be allowed to pierce the corporate veil. In commercial law, it is established that a company is independent of its shareholders. Whilst the Court found that the corporate veil could not be lifted in these circumstances, it was held unanimously that the properties were held by the husband’s companies on a resulting trust for the husband. Lord Sumption gives the leading judgment stating that “the only basis on which the companies can be ordered to convey the seven disputed 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.” The acquisition of the properties was analalysed by the Court and it was held that they were, and that the properties really therefore belonged to Mr Prest and not to the companies. The first instance judge found that Mr Prest had failed to comply with Court orders and had been obstructive in his evidence. Adverse inferences could therefore be drawn against him. The properties could be transferred to Mrs Prest.
The ruling clearly does not go so far as to allow the corporate veil to be lifted in these circumstances, as this is an essential safeguard to prevent companies’ assets being attacked. However, it is being hailed as an important decision to prevent spouses hiding their assets within a company to defeat matrimonial claims.
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