The Supreme Court has unanimously allowed the appeal by Yasmin Prest to transfer assets held by companies and trusts within her former husband’s control to her as part of a £17.5m divorce settlement.
The case had generated a lot of debate before the judgment was given with family law lawyers and experts opining that any decision upholding the appeals court ruling would give rise to rich husbands finding a loophole to avoid paying to their estranged wives.
In a decision on the 12th of this month in the case of Prest v Petrodel the Supreme Court overturned the Court of Appeal’s decision not to pierce the corporate veil.
The court rejected the view that section 24 of the Matrimonial Causes Act conferred a distinct power to disregard the corporate veil in matrimonial cases. The section invokes concepts of the law of property with an established legal meaning which cannot be suspended or taken to mean something different in matrimonial proceedings.& rd quo.
Lord Sumption delivering the judgment said that the lifting of the corporate veil could occur when “a person was under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control.
The court may then pierce the veil, but only for the purpose of depriving the company or its controller of the advantage which they would otherwise have obtained by the company’s separate legal personality. Lord Sumption however said this had not happened in this instance.
A leading family law lawyer has said that the ruling could affect high value cases in the region.
He added that the case, showed that the husband purchased properties in London through various offshore companies, yet the Court of Appeal rejected the wife's claims to have these properties transferred to her as part of her divorce settlement, due to the English law principle that a company has its own legal personality.
On appeal by the wife this week, the Supreme Court, whilst confirming that the divorce court had no special power to defeat a corporate legal personality, said that in the Petrodel case the husband had injected assets into the company from his personal resources and therefore the company held the assets on trust for the husband.
It established that the husband was in effect the owner of the property held by the company and that the court could transfer the asset directly to the wife as if it was legally owned by the husband and rather than the company.