The Supreme Court has held that a husband cannot defeat his wife’s claim against his assets in a divorce by hiding them in companies.
Michael Prest, an oil tycoon, was ordered by the High Court to transfer properties to his ex-wife Yasmin as part of a divorce settlement of £17.5 million. He appealed against the decision, arguing that the properties were not owned by him, and were in fact owned by a number of companies owned by him. The Court of Appeal (made up of 3 judges, only one of whom was a family law judge) agreed with him, and overturned the High Court judgement, stating that the assets belonged to the companies which were separate legal entities. The “corporate veil” could not be lifted.
Family lawyers were startled by that decision. It was, they argued, wrong to allow a husband to construct his financial affairs in such a manner so as to defeat his wife’s claim for a fair share of their assets. The Court of Appeal decision would create a “cheat’s charter”. Commercial lawyers on the other hand tended to take the view that the decision was correct.
Mrs Prest appealed. The seven Supreme Court justices unanimously upheld the original High Court decision and their decision has been hailed as a “victory for common sense” and a blow against husbands (or wives) who attempt to conceal assets behind a corporate façade.
This is not a case which is going to make a great deal of difference to the vast majority of divorcing couples; very few people have the opportunity to try to hide their assets in this way. In my view, it was the only likely outcome and is the latest case where the courts have curtailed attempts to deny wives a fair share by frankly blatant attempts to defeat spouses’ claims. The case of Charman v Charman a few years ago was another example, where a husband ordered to pay his wife £48 million in assets argued that they were held on trust in Bermuda for for future generation of the family and therefore she could not have any of them; not so, said the Court.
When people divorce, it can sometimes be tempting to try to employ tactics designed to defeat a spouse’s claim. The Prest decision emphasises that such tactics are futile. Anyone who is tempted to do this should think twice. In the word of Mrs Prest “It would have been so much better if my husband had been sensible and we could have sorted it all out amicably and privately”.