Company Held Assets – Supreme Court Decision
In October last year I posted an article regarding the Court of Appeal decision in the case of Petrodel Resources Ltd and Others v Prest and Others  EWCA Civ 1395 that held that properties owned by a company of which the husband owned did not 'belong' to him and therefore his wife had no claim against them in their divorce proceedings.
The wife appealed to the Supreme Court and their judgment has been delivered today. The question of the appeal is whether the Court has power to order the transfer of these properties to the wife given that they legally belong not to the husband but to his companies. The Court held that the Matrimonial Causes Act 1973 confers a distinct power to disregard the corporate veil in matrimonial cases. The properties were held by the husband's companies on a resulting trust for the husband and were accordingly "property to which the husband is entitled either in possession or reversion". The wife's appeal has been allowed unanimously.
The Supreme Court has therefore ruled in the wife's favour in her long running divorce battle with her wealthy ex-husband. This ruling may come as a shock to many including some family lawyers who expected the Supreme Court to uphold the Court of Appeal's ruling as the concept of the corporate veil is a fundamental principle of corporate law.
See below for previous article - Company Held Assets - Not Matrimonial Assets?
The Court of Appeal has given judgment in the case of Petrodel Resources Ltd and Others v Prest and Others  EWCA Civ 1395 with a decision that many family solicitors have found disappointing.
When the case was first heard the Judge ordered the husband to transfer to his wife as part of the divorce proceedings, several properties in London. The Judge found that the London properties were 'property' to which the husband was entitled to as the assets held within the companies were effectively the husbands property.
The Court of Appeal did not share the same view as the first Judge and allowed the husbands appeal. The Court of Appeal held that the fact that the husband was nearly a 100% shareholder in the companies did not mean that the companies' property belonged to him. One judge Rimer LJ stated that it is not open to the Family Division Judges to make an order against company-held property unless there exists relevant impropriety justifying the piercing of the corporate veil.
Another judge disagreed with the ruling and Thorpe LJ stated that the Court's decision gave 'an open road and a fast car to the money maker who disapproves of the principles developed by the House of Lords that now govern the exercise of the judicial discretion in big money cases.'
This case is disappointing as it now allows one spouse to shield his shareholding (assets in a company) from becoming matrimonial assets. However this is not the last we have heard about this case as the husband has been given permission to appeal to the Supreme Court so we will see!