Corporate property portfolios in divorce settlements
On 12 June 2013 the Supreme Court delivered their judgment in the long running case of Prest v Petrodel Resources Limited. Mrs Prest, in divorce proceedings, was seeking a substantial financial settlement from her former husband and founder of Nigerian energy company Petrodel Resources. The award she received totalled £17.5m and the issue for the Court to decide upon was whether or not properties owned by one of her former husband's offshore companies would form part of the matrimonial pot and would be available to be transferred to Mrs Prest. She argued that her former husband had effective control over the company whereas Mr Prest's position was that the assets were within the company and were not his to transfer to his former wife.
In an unanimous decision, Supreme Court Justice Lord Sumption gave the substantive ruling, finding that the properties in question were held by Petrodel in trust for Mr Prest, he was accordingly "entitled" to them and they were therefore his to be handed over to his former wife. It would seem that Mr Prest had been found in the course of the proceedings to repeatedly flout Court orders and ignored requirements to make full disclosure of his financial position. There had been a history of "persistent obstruction, obfuscation and deceit" by Mr Prest who sought to hide behind "the corporate veil" and denied that he had any control over assets held by his company. The Supreme Court confirmed in allowing Mrs Prest's appeal that the family Courts must respect the separate corporate personality so clarifying rather than fundamentally altering well established family law principles. So how then did Mrs Prest win? By finding that the properties were held in trust by the company for Mr Prest, the Court specifically sidestepped any need to pierce the corporate veil whilst achieving the desired result.
The circumstances in the Prest case were unusual in that the property portfolio Mrs prest sought to be transferred was not an integral part of the oil business and removing the properties from the company would have no effect on the company's core business and accordingly the assets could be separated out. Whether Prest will have widespread application is yet to be seen but the Court have now set out guidance as to how and in what circumstances the corporate veil may be pierced. What is clear, however, is that shareholders, lenders, insolvency practitioners and auditors may need to look far more rigorously at corporate property portfolios to establish whether there might be future competing claims in a divorce from a spouse.
Upon Mrs Prest now falls the task of securing the transfer of the properties she is now entitled to.
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This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.