Prest ruling a 'welcome relief'
The eagerly awaited outcome in a landmark divorce case came for many family lawyers in June as the Supreme Court ruled in favour of Mrs Yasmin Prest in the landmark Prest v Petrodel Resources divorce case. To the relief of many family law practitioners, the ruling, which reversed a Court of Appeal decision, found that the seven properties held by oil tycoon Mr Michael Prest’s companies were beneficially owned by him and consequently could be transferred to Mrs Prest and showed the Supreme Court’s willingness to look at the realities of the situation in order to arrive at a fair and rational outcome.
In 2008, at the first court hearing, Mr Prest had claimed that he was £48 million in debt, but after failing to provide sufficient financial information and documentation the Judge concluded that he was worth approximately £37.5m and subsequently Mrs Prest was eligible to receive £17.5m. The case, which aroused much debate concerning the difference in approach between the family and commercial courts, went on to highlight the difficulty in determining whether the Court had the power to order the transfer of property beneficially owned by the husband to the wife.
It was contested that the seven properties owned by Mr Prest’s company could not be handed over to his wife due to the fact that they legally belonged to the company, and not to Mr Prest. Whilst Mr Prest was not formally a shareholder of the company, he had originally supplied the funds for the purchase of these properties, which were then held in trust for him by the company. Despite Mr Prest’s lack of cooperation and attempts to hide evidence that he owned the company beneficially, the Judge found that this company structure entitled Mr Prest to utilise and dispose of company assets, as if it were his personal piggy bank. Due to these findings, the Court was able to transfer the properties to Mrs Prest, fulfilling the £17.5m divorce settlement to which she was entitled.
The majority of the arguments put forward on behalf of Mr Prest’s company, based on the structure of corporate law, were upheld by the Supreme Court and this case does not mean that family courts will simply be able to give company assets to wives just because their husband is the controller or owner. Nevertheless, the result, which highlights that putting assets into corporate structures for wealth protection reasons will no longer protect that wealth against divorce settlements, will prevent unscrupulous spouses from hiding assets behind a corporate façade and could see a rise in the number of claims (usually by wives) that assets are in fact beneficially owned by their spouses and not the company. The decision is extremely valuable, especially for spouses worried about protected or hidden assets.