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The Court of Appeal has given permission to Yasmin Prest to appeal to the Supreme Court against its decision in Petrodel v Prest [2012] EWCA Civ 1395

The background

The parties were both aged about 50. They married in 1993 and had four teenage children. The husband was a prominent and successful businessman who worked in international oil development and trading. Throughout the marriage the family lived in London but also had properties in Nigeria and the Caribbean. They had a very high standard of living and came from affluent backgrounds. Three main companies owned various properties in London (including the former matrimonial home) and elsewhere.

The key issues in the case were:

  1. The extent of the husband’s wealth including the nature and extent of his interest in the respondent companies and;
  2. Whether the court had the jurisdiction to make orders directly against properties and shares held in the name of some of the respondent companies. Were the assets owned by the companies effectively the husband’s property or not?

The High Court

Mr Justice Moylan concluded that the assets held within the companies were effectively the husband’s property. After assessing an award to the wife of £17.5 million, he ordered the husband to transfer or cause to be transferred to the wife the London properties held by the companies along with three properties in another company. The £4 million former matrimonial home was found to be held on trust for the husband and it therefore formed part of the matrimonial assets. The companies appealed (although permission was not given to appeal the finding regarding the former matrimonial home).

The Court of Appeal

In October 2012, the Court of Appeal allowed the companies’ appeal against the order of Mr Justice Moylan.

Thorpe LJ dissented and rejected the arguments made on behalf of the companies. He stated that the question was whether the individual is entitled to the property held by the companies within the meaning of the Matrimonial Causes Act 1973 s24 (1)(a). This statutory provision states that the court may make an order that a party to a marriage shall transfer such property as may be specified, being property to which that party is entitled, either in possession or reversion. To be entitled to property, that person must be the beneficial owner. Thorpe LJ stated that the judges of the Family Division have frequently stressed the need to look at the reality of the ownership of assets and Mr Justice Moylan had achieved justice for the Mrs Prest. He concluded that

“in this case the reality is plain. So long as the marriage lasted, the husband’s companies were milked to provide him and his family with an extravagant lifestyle. That was only possible because the companies were wholly owned and controlled by the husband and there were no third party interests.”

Rimer LJ (with Patten LJ concurring) allowed the companies’ appeals. He held that Mr Justice Moylan was wrong to find that the husband’s sole control of the companies as their 100% owner enabled him to deal as he wished with the companies’ assets and that it followed that the husband was therefore the beneficial owner of such assets and so ‘entitled’ to them within the meaning of MCA 1973 s.24(1)(a). Section 24(1)(a) had no application to the properties and gave the court no jurisdiction to make the orders. This was because a company’s assets are owned by the company in its own right. The company is a distinct legal entity its assets belong to it and not to anyone else. Rimer LJ held that these legal principles apply as much to ancillary relief proceedings as they do to any other types of proceedings. After a detailed review of the family authorities he concluded that once the court was satisfied that there was no impropriety as a means of piercing the corporate veil it was left with no choice but to reject the claim made against the companies that the properties were or could be regarded as properties to which the husband was entitled. Patten LJ agreed and stated that the approach of the Family Division judges whereby there was almost a separate system of legal rules regarding companies law must now cease.

What about fairness?

Following the Court of Appeal’s decision, Jeremy Posnansky QC of Farrer & Co, acting for Mrs Prest, commented that “devious men who want to avoid making fair provision for their wives will rejoice at this decision” because it means that unless the company is being used as a façade and there is impropriety in order to defeat the other party’s claim, the court cannot pierce the corporate veil. The legal community awaits the Supreme Court decision next year with baited breath…..

 

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