WALES/ENGLAND – Family lawyers divided over Prest decision

The Supreme Court’s decision to order an oil tycoon to hand over assets held by his companies to his former wife has been hailed as a victory for fairness and justice by lawyers.

 

But family practitioners are divided on the implications of last week’s judgment in Prest v Petrodel Resources Limited & Others [2013] UKSC 34.

A seven-strong court, led by Lord Sumption, used trust rather than company law to resolve the matter, declaring that the seven disputed properties were, in the particular circumstances of the case, held on trust for the husband and could therefore be passed to his wife.

William Healing, family partner at London firm Kingsley Napley, felt that the court had ‘parted the corporate veil’ and claimed that the decision is a blow against cheating spouses.

However Richard Lane, head of corporate at commercial firm Farrer & Co, warned of a danger of overreacting to the judgment.

‘The ruling has effectively bypassed the corporate veil, rather than driven a coach and horses through it, as had been feared by company lawyers. The judgment has been carefully developed to achieve the judges’ desired result in this particular set of circumstances, but we do not consider that it will have a significant effect on companies in general.’

Jo Edwards, vice-chair of family lawyers’ group Resolution, argued that the Supreme Court effectively said that any spouse with significant wealth can tie up their assets in a business to protect themselves in the event of marital breakdown.

‘This could give the economically powerful even more power during the divorce process and lead to greater financial imbalance in many post-separation outcomes,’ she said.

Collyer Bristow partner Michael Drake said the case raised issues in other fields. He said shareholders, lenders, insolvency practitioners and auditors may need to look far more rigorously at corporate property portfolios to establish whether there might be competing claims from a spouse.

 

SOURCE: Law Society Gazette

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