Petrodel v Prest: Supreme Court allows appeal

UK Supreme CourtThe Supreme Court has ruled in favour of a woman in a long-running divorce dispute with her wealthy ex-husband.

Yasmin Prest appealed to the highest court in the land last year. The Court of Appeal had just overturned an earlier ruling that Petrodel Resources and other companies controlled by her ex-husband Michael must hand over 14 properties as part of the couple’s multi-million pound divorce settlement. Seven of these properties are in the UK.

Appeal court judges declared that the properties were not Mr Prest’s to dispose of freely, but in fact belonged to the companies as distinct legal entities. But it was a contentious decision. Two of the three appeal court judges – Lord Justices Patten and Rimer, have a commercial background in the Chancery Division of the High Court. The one family judge present, Lord Justice Thorpe, issued a dissenting judgement, saying allowing the appeal would go against some well-established principles of family law.

In a brisk judgement, Supreme Court Justice Lord Sumption has now ruled unanimously in favour of the ex-Mrs Prest. He re-asserted one of the most  fundamental principles in commercial law – that companies are distinct from the individuals controlling them. They have, in other words, their own ‘legal personality’. However, in this particular case, Mr Prest had bought the properties using his own money but in the name of the companies. The properties were therefore held ‘on trust’ for him.

The Supreme Court’s decision is a victory for common sense, but has come as a surprise to family lawyers. The case was heard by five commercial judges, alongside just two family lawyers. We predicted the Supreme Court would uphold what is, after all, a fundamental principle of corporate law.

Company law is relatively rigid, whereas the family courts prefer to take a more practical and flexible approach. In the case of Petrodel v Prest, the Supreme Court arrived at an ingenious way around the problems presented by this case, which leaves England’s reputation as the “divorce capital of the world” for wives intact.

hoto of the UK Supreme Court building by Rwendland via Wikipedia under a Creative Commons licence

Marilyn Stowe

The senior partner at Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers with clients throughout the country, in Europe, the Far East and the USA.

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2 comments

Paul - June 12, 2013 at 3:47pm

Like I said, these are the cases that truly have the legal profession rubbing their hands and getting excited. It’s all about the money.

Rahul Deodhar - June 14, 2013 at 5:51am

My reasoning is different. W is entitled to half of interest belonging to H. If H has interests in companies W should be awarded half of the ownership of those companies. Jurisprudentially this is fair interpretation of the matrimonial law and it also protects against unreasonable lifting (or piercing) of corporate veil. Once the ownership in the companies is so allotted then W can claim winding up or dissolution or whatever remedies Companies law may offer as a shareholder.

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