Court of Appeal Rules Corporate Entities Should Not Payout to Spouse

Leading family lawyers say a landmark verdict by the Court of Appeal shows judges are treating family law issues in the same way as commercial courts representing a ‘serious threat to fairness’ in divorce proceedings.

An original High Court ruling had ordered Michael Prest, the founder of a Nigerian oil business Petrodel Resources, to transfer 14 properties which were tied up in his businesses to his ex-wife as part of a £17.5m payout.

But the Court of Appeal has now ruled that these assets should not be paid because they are technically owned through corporate entities claiming they are not liable and shouldn’t have to pay the spouse.

Leading family lawyers at Irwin Mitchell say it now paves the way for others to ‘hide’ their assets in businesses and corporate structures to protect them in future in the event of a divorce.

Elizabeth Hicks, a partner in the family law team at Irwin Mitchell, said: “For years the single aim of family and divorce law in this country has been to create fairness in the decisions made and to ensure fair provisions for both partners. Unfortunately this latest ruling is a serious threat to achieving fairness and could make it much harder for partners to get an appropriate resolution in similar cases.

“There are often cases where UK assets are owned through corporate entities and the Court of Appeal has made the decision that these corporate structures should not pay out to the other party.

“In the last few years, there have been a number of cases decided which appear to try and bring family courts more in line with civil and commercial courts – and this case is another example of this.

“This is fine when you have upstanding members of the community who take responsibility for their spouses and are happy to share their wealth on divorce – but not if there are partners who use complex off shore corporate and tax arrangements to try and prevent their spouse from having their rightful share.”

The Court of Appeal ruling was a majority judgment from two commercial Judges, Justice Patten and Lord Justice Rimer, who found in favour of the companies .Experienced family judge Lord justice Thorpe strongly disagreed saying he said he had spent eight years striving for fairness as a family law judge.

Mrs Prest and her legal team are now seeking permission to bring an appeal at the Supreme Court.