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Supreme Court Plugs Divorce Settlement Loophole
Jennifer Allen, Director at Hughes Paddison and part of the family legal team that advises on marital, separation and children’s law, has expertise in a wide range of family law including marital finances. Jennifer appreciates that going through a divorce can be a stressful and difficult time for all involved. These headaches can get much worse when deciding how to divide matrimonial assets should one of the parties to the marriage seeks to hide assets.
When it comes to the calculation of matrimonial financial claims, as a starting point, the Court takes into consideration what is in the pot of matrimonial assets for division and then, in what proportion these assets should be divided in accordance with the law. Complications can arise when a party acts dishonestly and makes false declarations to avoid paying divorce settlements.
This particular issue was considered recently in the Supreme Court decision of Prest -v- Petrodel Resources Limited 2013. The wife, Yasmin Prest filed for divorce from Nigerian Oil Tycoon, Michael Prest. The wife was awarded a £17.5 million divorce settlement. The husband claimed the assets (properties) that the Judge found to be in the matrimonial pot belonged to his companies. He argued he did not own them. These were owned by separate companies and could not fall within the matrimonial pot.
In a unanimous decision by the Supreme Court Judges, they accepted that Michael Prest did not personally own the properties, but as he controlled the companies, that they did in fact belong to him. As a result of which he was deemed the beneficial owner because he wholly owned and controlled the companies. Hence the properties fell within the matrimonial pot available for division. Furthermore, as evidence of that “beneficial” ownership, it was established that the family’s extravagant lifestyle was funded using money from the companies.
Upon the dissolution of the couple’s marriage, Michael Prest had been caught out trying to deprive his ex-wife with what she is accustomed to. Now, seven investment properties in London are to be transferred to Yasmin Prest as part of the settlement of her financial claims as part of her award of £17.5 million.
The significance of this case is that beneficial ownership of assets could not be concealed behind companies to cheat spouses of their settlement. By lifting the corporate veil in this case, it has prevented the “cheat’s charter”, a concept which would have been detrimental to the justice system. The Court has given guidance to look behind company ownership, referred to as piercing the corporate veil, but this will only occur in specific circumstances, such as in this case, and will not represent a danger to appropriately run and managed companies.
Should you have any questions that relate to your matrimonial financial circumstances and wish to obtain expert legal advice please contact Jennifer Allen, or any of our experienced team of family lawyers, by email or phone for no obligation discussion/or 30 minute free appointment.