Petrodel v Prest: Supreme Court allows appeal
The 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.
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Marilyn Stowe is the senior partner in Stowe Family Law, which has offices in Yorkshire, Cheshire and London. With more than 30 years’ experience handling divorce cases and family law proceedings she is regarded as one of the most formidable and sought after divorce lawyers in the UK. In 2012, Marilyn became one of the first solicitors to qualify as a family law arbitrator.
All persons mentioned in the scenarios are fictitious: details have been deliberately changed in order to protect identities and other confidential circumstances of my clients. All advice and information on this blog including posts written by guest authors, is given only as a general guide to the operation of the law on the date of publication. Readers must place no reliance whatsoever on the content of this blog and must always obtain their own legal advice. Marilyn Stowe, Stowe Family Law LLP and guest authors accept no liability whatsoever arising as a result of reliance upon its content.
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