Supreme Court decision hailed as end to ‘cheat’s charter’
The landmark divorce battle between Yasmin and Michael Prest came to an end last month as the Supreme Court on 12 June ruled Mr Prest should hand over properties held by companies under his control.
The ruling – the most significant divorce case to reach the UK’s highest court since the 2010 judgment in Radmacher v Granatino – has been touted as instrumental in establishing whether London remains a key forum for resolving big-money divorce cases. The case has also been watched for its impact on the court’s treatment of the corporate veil, which protects company assets.
The background to the long-running dispute – Prest v Petrodel Resources – is well trodden. In 2011, the High Court ruled that wealthy oil trader Mr Prest was worth at least £37.5m and should pay his ex-wife a £17.5m settlement. Included in that settlement was a £4m house in west London owned by one of Mr Prest’s companies, which Mr Justice Moylan ordered to be transferred in part payment of the settlement. However, last October Lord Justices Rimer and Patten allowed an appeal by the oil trader’s companies, ruling that on principle shareholders are not entitled to treat their companies’ assets as their own.
June’s decision in favour of the appeal by Mrs Prest (pictured)– represented by Farrer & Co and 1 Hare Court’s Richard Todd QC and Stephen Trowell, alongside Serle Court’s Daniel Lightman – saw seven Law Lords find unanimously that the disputed properties could be counted in the divorce settlement.
Farrer partner Jeremy Posnansky QC commented in a statement: ‘This is a great result for Mrs Prest and for others who might find themselves in a similar position. The Supreme Court’s decision will ensure that dishonest husbands can’t cheat their wives and flout court orders by hiding behind a web of deceit and a corporate façade. It puts reality and fairness back into this area of family law.
‘The court has made clear that the fact that properties are held in the name of a company doesn’t always mean that they’re owned by the company. At the same time, the Court has adhered to established company law principles which will preserve the sanctity of the vast majority of corporate structures which are used for normal and legitimate purposes. I’m delighted that Mrs Prest’s calm determination to achieve a fair and realistic outcome has been rewarded.’
Giving the leading judgment, Lord Sumption ruled that while the Court was entitled to disregard the corporate veil in limited circumstances, in this case that principle did not apply and the only basis on which the companies could be ordered to convey the disputed properties to Mrs Prest is that they were held by the companies on trust for Mr Prest, who was represented by Jeffrey Green Russell and QEB’s Tim Amos QC.
Mr Prest paid for the properties with his own money and delivering the ruling Sumption said: ‘The court is entitled to draw all proper inferences against a party whose conduct shows that he has something to hide.’
The corporate veil is one of the underpinning principles of company law and means that directors cannot ordinarily treat company assets as their own.
The decision will be seen as preserving London’s status as a key centre for resolving high value family disputes as well as protecting the fundamental principles of company law.