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Landmark Family Law Ruling To Be Handed Down In Petrodel v Prest

Supreme Court To Decide If Assets Contained In Businesses Can Be Used In Divorce


By Dave Grimshaw

The Supreme Court is set to deliver its judgment this week (12 June) in the landmark Family Law case Petrodel v Prest, which experts at Irwin Mitchell say could have 'huge consequences' in future for divorcing couples battling over assets contained within businesses.

A High Court ruling in 2011 had ordered Michael Prest, the founder of a Nigerian oil business Petrodel Resources Ltd, to transfer 14 properties which were tied up in his businesses to his ex-wife Yasmin as part of a £17.5m divorce payout. The pair had been married for fifteen years and there were suggestions at court that he had previously flouted orders to pay his wife and had claimed he was bankrupt.

But the Court of Appeal ruled last year that the assets contained within Petrodel Resources should not be paid because they are technically owned through corporate entities. Under the strict rule of law the Court of Appeal held that the business was not liable and should not have to pay the spouse or transfer any properties to her.

A point of discussion at the time was the difference in approach adopted by the three Judges. Lord Justices Patten and Rimer, both from commercial backgrounds and regular faces in the Chancery Courts were a world apart from Lord Justice Thorpe, who is arguably the most senior family Judge, and  who was outvoted two to one.

Yasmin Prest was given permission to appeal the decision and the Supreme Court heard her case in March this year reserving judgment until this week.

This is an extremely important case, particularly for Britain, as it threatens its unofficial title as the ‘divorce capital of the world’, favoured by those who hope for a fairer outcome than they might obtain elsewhere.

Alison Hawes, an expert family lawyer at Irwin Mitchell, which has offices across the country, said: “This landmark ruling will confirm if the assets contained within a company can be transferred by the court as part of a divorce settlement or whether the business is protected by the corporate veil of commercial law. 

“For more than 20 years family law judges have argued that in certain situations they could tap into the resources of businesses in the interests of awarding a fair settlement, but the Court of Appeal’s decision challenged that and ruled that Petrodel Resources Ltd did not have to pay out.

“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.

“There will of course be company owners who are happy to share their wealth on divorce – but  there are  also partners who use complex off shore corporate and tax arrangements to try and prevent their spouse from having their share.

“Whatever the outcome, there will be major consequences. If Yasmin’s appeal is successful, then many more companies could face exposure in divorce proceedings. However, if the Court of Appeal decision is upheld, we may see many more people like her left out in the cold.

“The Supreme Court is now set to share its Judgment and family lawyers across the country are hoping for clarity as to how the corporate veil and fairness in divorce proceedings will be handled in future.”

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