Supreme Court Hands Down Judgment

By Dave Grimshaw

Leading family lawyers say the landmark Petrodel v Prest Supreme Court unanimous ruling is a qualified victory for all those involved in a divorce whose partners are trying to hide assets in companies to stop them from receiving a fair settlement.
 
Alison Hawes, a specialist family lawyer at Irwin Mitchell which has offices across the country, said: “The ruling confirms that if someone is the sole owner of a company, then if the court is satisfied that those assets are held by that company on trust for one party, they can be used as part of a divorce. 

“It means that business people cannot deliberately ‘hide’ their assets in businesses and corporate structures to protect them in future in the event of a divorce.

“For more than 20 years family law judges have argued that where it appeared necessary they could tap into the resources of businesses in the interests of awarding a fair settlement. The law will no longer be drawn as widely as that, but today’s ruling provides clarity on the circumstances in which the courts can lift the corporate veil.

“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 was another example of this. The attempt has been partially successful; the family courts cannot operate on completely different principles from the rest of the legal system. However, the courts have the power to look closely at the nature of corporate holdings and may make orders based on the reality of the situation, even if that appears to conflict with the strict corporate position.

“There will of course be company owners who are happy to share their wealth on divorce – but there are also those who use complex off shore corporate and tax arrangements to try and prevent their spouse from having their share. The court has now ruled that family court judges may make close investigation into the nature of company holdings.

“The decision means that there will still be some cases where assets will be protected from divorce claims by being in corporate ownership, but equally others where that won’t deter the court from transferring properties.  Each claim will need to be carefully examined but the decision is a very useful one for people – usually wives - worried about hidden or protected assets.”

Read more about the background of the Petrodel v Prest case.

Read more about Irwin Mitchell's expertise in Family and Divorce law.