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Family Law

The leading authority on all aspects of family law

24 JUN 2013

Robin Charrot: The End of the Open Road

The Supreme Court's eagerly awaited judgment in Prest (Appellant) v Petrodel Resources Limited & Others (Respondents) [2013] UKSC 34 was handed down on 12 June. The result surprised many commentators in two significant respects:

  • The seven Lords Justice unanimously restored Moylan J's original order that various offshore limited companies (whom Moylan J had decided were controlled by Mr Prest) transfer seven properties, legally owned by them, to Mrs Prest in partial satisfaction of a £17.5m lump sum order.
  • More importantly, the Supreme Court was able to achieve what almost all would see as a fair result without extending the principle of piercing the corporate veil, and whilst making it very clear that family courts cannot simply give company assets to wives because the sole owner and controller of the company is the husband.

How did they do this? In retrospect, the answer was easy. They applied the same reasoning to the seven properties as Moylan J had applied to the matrimonial home. He decided that this property was held by one of the companies on trust for Mr Prest, and that Mr Prest was therefore the beneficial owner.

In relation to the other seven properties, the Supreme Court therefore looked at how the properties had come to be owned by the companies. The evidence was far from complete or clear, but because of the obstructive way that Mr Prest and his companies had conducted their case, the Court decided that it could make sufficient presumptions against them to arrive at the view that Mr Prest, and not the companies, had effectively funded the purchase of those properties. This enabled the Court to decide that the properties were held by the companies on trust for Mr Prest, and that he was therefore ‘entitled' to them under s.24(1)a of the Matrimonial Causes Act. Therefore, the Court had the power to order the companies to transfer those properties to Mrs Prest.

Is this case important for the future? In the average value case, probably not. For example, if the husband's company owns the matrimonial home, that will not defeat the wife's claims to that property. In higher value cases, there are likely to be other non-company assets that the wife can go for, or in most circumstances she can seek a transfer of shares in the company rather than the property owned by it.

However, if you do find a situation where company assets have to be attacked, the lessons are:

1. Do not treat the company's assets as if they are those of the husband, even if he is the sole owner, and even if he has used the company as his own ‘piggy bank'.

2. Look at how the assets were acquired by the company, and apply trusts law considerations to see whether the husband could be said to be ‘entitled' to those assets.

3. Piercing the corporate veil is very much a last resort, and only available in very limited circumstances (see Ben Hashem v Al Shayif [2008] EWHC 2380, [2009] 1FLR 115).

Robin Charrot is a Partner and specialist in family law at national law firm Mills & Reeve

The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing and should not be considered as legal advice.

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