Financial & Legal News

Petrodell v Prest: Big Money divorce case ruling causes family lawyers concern

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The Court of Appeal had ruled that businessman Michael Prest would not have to give his former wife, Mrs Yasmin Prest, £17.5m in assets belonging to some of his companies. Now this spilt decision can be challenged by Mrs Prest’s lawyers.

Mr Prest, an international businessman, had, for “conventional reasons including wealth protection and tax avoidance”, established a large and complex network of companies, including Petrodel Resources Ltd. Mrs Prest, in the course of divorce proceedings, sought an appropriate share of those assets saying that the properties, which were owned by Petrodel, were in fact “property to which Mr Prest is entitled, either in possession or reversion".

In October, the Court of Appeal agreed with Mrs Prest that the companies’ assets were effectively the husband's property and that she was entitled to £17.5 million worth of London properties held by the companies along with three properties in another company.

This decision was subsequently successfully challenged in the Court of Appeal on the basis that the husband was not in sole control of the assets. 

Challenge and Counter-Challenge

The position had previously been relatively clear: a long line of authorities in family cases confirmed that in extreme cases, where a spouse has clear control over corporate assets, those assets cannot be hidden behind the “corporate veil” and instead the veil can be “pierced”.  This case has so far been unusual as the court refused to pierce the corporate veil to recover assets for the applicant spouse and declined to order a businessman's companies to yield up their assets to meet his ex-wife's financial settlement.

Following this decision in the Court of Appeal, Jeremy Posnansky QC of Farrer & Co, acting for Mrs Prest, commented:

"Devious men who want to avoid making fair provision for their wives will rejoice at this decision."

However, at the time of writing, Mrs Prest had been given permission to appeal to the Supreme Court. We will report on the case as it develops.

Summary

It means that in cases which are yet to be decided  involving a company run by one of the spouses, a District Judge of the lower family court may well need greater persuasion to order that company assets should be utilised  to meet an award in a financial case ancillary to divorce. This case will no doubt be cited as a reason for them not to do so unless and until it is overturned by the Supreme Court.

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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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