The Supreme Court has today delivered its long-awaited judgement in the case of Petrodel v Prest, finding a ‘back-door’ route to achieving a fair outcome on divorce where assets are held by companies controlled by one spouse, while also upholding the importance of the principle that a company is a separate legal personality with its own assets.
Kelly Perks, a specialist family lawyer at Higgs & Sons, says that although it is a surprising decision, the judgement delivers a welcome clarification and brings the family courts more in line with the civil courts.
“This is a long-running divorce battle between Michael Prest and Yasmin Prest. Today, the Supreme Court has overturned the decision of the Court of Appeal, resulting in an order that assets sitting on a company balance sheet must be transferred to satisfy a divorce settlement,” explains Kelly.
“The husband Michael Prest is a wealthy oil dealer who is the co-founder of Petrodel Resources and was found to be conservatively worth £37.5 million. Most of Michael Prest’s assets are tied up in offshore companies, belonging to a group known as the Petrodel Group, which the judge found to be wholly owned and controlled by Michael Prest. The company owns a large number of properties in London and abroad.
“The court initially ordered that his wife Yasmin Prest should receive seven properties owned by the Petrodel group in part satisfaction of her £17.5 million divorce settlement.
“However, on appeal by the companies, the Court of Appeal overturned the initial order by stating that the Court had no ability to order the companies to transfer the properties as these were owned by the companies as separate legal entities and not by Michael Prest.”
In heavily contested financial remedy proceedings Yasmin Prest sought an award of £30.4m on the basis that her husband had assets of tens if not hundreds of millions of pounds held within a corporate structure, including the matrimonial home plus seven other properties.
Kelly says that today’s move is a landmark decision: “The Supreme Court has today overturned the Court of Appeal’s decision. It ruled that the Court needs to look at the source of the assets on the Company’s balance sheet, finding that the properties had been purchased with funds directly sourced from Michael Prest rather than company money. There was, in this instance, a trust of land in place which means that Michael Prest is, the beneficial the owner of the properties and ordered that the properties be transferred to Yasmin Prest.”
Property held by a company can be ordered to be transferred to a spouse if there is some impropriety (in very limited circumstances) or if it can be found that the property is, in fact, beneficially owned by the spouse who controls the company.
Concluding, Kelly said: “Yet again, this case highlights the need for proper advice to ensure that wealth protection measures are in place from the outset to ensure that that company property remains as company property.”
To find our more or for advice from Kelly call 0845 111 5050 or email Kelly.perks@higgsandsons.co.uk.