The landmark divorce victory for Yasmin Prest in the Supreme Court has been described as the most significant elucidation on how to resolve clashes between company and family law for more than a century.
The landmark divorce victory for Yasmin Prest in the Supreme Court has been described as the most significant elucidation on how to resolve clashes between company and family law for more than a century. This five year divorce struggle ended in June and, according to the leading family lawyer Marilyn Stone, reinforced “England’s reputation as the ‘divorce capital of the world’ for wives.” However, what does this mean for the interaction between family and corporate law? Who is at greater risk as a result?
This case asked the question, what is the court's primary function: enforce the law or deliver justice? In order to transfer the £17.5 million owed to Mrs. Prest under the original judgement, Mr. Prest was ordered by the High Court to give assets from his companies as part payment. However, shareholders like Michael Prest do not have the right to a company’s assets: the properties were not personally owned by him.
However, they were owned by his companies, over which he had control. The judge, Mr. Justice Moylan said that Michael Prest was therefore entitled to the properties. The word used in section 24(1)(a) of the Matrimonial Causes Act 1973 defining what property the court may order a party to transfer in a divorce.
The companies of Michael Prest retaliated and the Court of Appeal reversed the decision, ruling that Mr. Prest did not need to transfer ownership of the properties to his former wife. However, Lord Justices Patten, Rimer and Thorpe did give Mrs. Prest permission to appeal to the Supreme Court over their judgment.
The Supreme Court’s ruling in favour of Mrs. Prest did not technically ‘pierce the corporate veil’. It was made clear that Mr. Prest was the effective owner by the method that he paid for the properties.
Now, what does this mean for family law? During a divorce, each party is required to make full disclosure of all their financial circumstances, including all business and personal assets and trusts and investments in the UK and overseas. For those hiding assets behind a corporate structure, this case presents a vital warning to provide full admission of all assets. For partners of such business owners, it is important to seek specialist family law advice. The earlier the better as it is a complex area of law. Doing so is likely to be key in a swift and amicable resolution to the matter.
However, this decision on Prest V. Prest could have opened a Pandora’s Box. Divorce courts could end up destroying the corporate wall. This could create an impractical situation where spouses are allowed access to information that other creditors are not. The Supreme Court's decision may be praised as the overturning of a “cheats’ charter”, but it could create a “gold-diggers’ charter” instead. The Telegraph’s Social Affairs Editor, John Bingham, has suggested that this would open up family wealth to “smash and grab” raids.
Mrs. Prest insists that the repercussions of the ruling did not just affect millionaires. She emphasised that it is about “getting at the truth.” At the very least, this decision should deter a spouse from using corporate structures in an attempt to conceal assets.
For more information about disclosure of financial circumstances in divorce please email Paul Antoniou