In the case of Prest v Prest the Husband a successful oil tycoon was estimated to be worth circa £37.5 million. The couple were married for 18 years and had 4 teenage children. They had lived a comfortable lifestyle throughout the marriage with the Husband drawing from his business what he needed as and when he needed it. Unsurprisingly, when it came to the divorce the husband was not very accommodating to the wife’s request for a settlement proportional to his wealth.
The husband was ordered to pay a settlement of £17.5 million to the wife . This was based upon 11 properties held by the companies being transferred to the wife. The judge ruled that he regarded the Husband as entitled to these properties as they fell within his control to be transferred in this way.
This outcome was appealed by the companies and two commercial judges held on the facts of the case the previous Judge had been wrong in concluding the husband was beneficially entitled to the properties. Company law makes it clear that a company is a legal entity is independent of the shareholders. Ownership of the company by the husband did not justify the piercing of the corporate veil to remove assets, even in Divorce! The Courts did recognise a distinction between an asset held by the company on trust or on behalf of a nominated third party .Such as in Prest case the former matrimonial home was held in a trust for the husband and this asset could be transferred to the wife.
The matter has now been further appealed by the wife and the judgement from the Supreme court is expected anytime now.
In the absence of a successful appeal there is a real issue here for wives whose husbands lock up their property assets within the companies they own and run. A company could be a safer vehicle to use for a husband than a pre or post nuptial agreement. The law appears to give a director/shareholder a wall behind to hide or preserve wealth and prevents access through the company wall by arguing that “fairness” shall apply.
Cynically wives need to be warned at the start of their union and husbands will make use of the potential protection a company can offer to them. We await seeing what the Supreme Court decides but this might herald a new age of divorce law. London may well lose it’s title as the wife’s divorce capital of the world if savvy director spouses start to place their property assets within the companies they run.
For more information please contact Ginny Colman a senior associate in the family and matrimonial team of leading East of England law firm Birketts based in Norwich at[email protected]
Ginny undertakes all aspects of family work specialising in high net worth financial cases involving pension and company issues. She also advises on cohabitation disputes and children issues. Ginny has four years experience as a collaborative lawyer giving her clients the choice to resolve their difficulties in a non-contentious manner.
