Divorcing husbands with businesses beware; Supreme Court orders Oil baron husband to give wife substantial share of his business assets in his divorce settlement!
This week, the Supreme Court overruled the recent Court of Appeal’s decision that dis-allowed a wife to obtain a significant portion of a husband’s company (Petrodel Resources Ltd & Ors v Prest & Ors). What was an amazing outcome for husbands going through a divorce, has now been back tracked.
The Supreme Court judgement marks the final round of a lengthy and extremely publicised legal cash dispute between the couple over the oil baron husband’s business empire, worth around £40 million.
In October 2012, the Court of Appeal ruled that a High Court judge had earlier wrongly ordered that the oil baron transfer properties, worth millions of pounds and held in the names of companies he wholly owned and controlled, to Mrs Prest.
The Supreme Court’s ruling however re-instates the long standing principle adopted in English ancillary relief proceedings, where the divorce court does have the power to override the basics of company law, by ordering the husband to transfer substantial business assets to the wife, as part of a division of the matrimonial finances! Just as a bit of background for you, in the first round of the battle at The High Court two years ago, Mrs Prest had won an initial £17.5 million settlement which included 14 properties. Mr Prest, in what was a landmark decision, successfully challenged the decision to include these properties in the settlement, claiming that they were commercial assets belonging to his company Petrodel Resources. It was this very decision that was overturned this week.
Many of you entrepreneurs would have built up your businesses from scratch, sometimes, prior to your marriage and through your sheer determination and hard graft. Your business empires will have stood the test of time, even in the current desperate financial climate. However what is clear from this judgment is that your business empire will not be able to stand the test of time of your ‘money grabbing ex!’
So what went wrong in the Prest case? Well, the Court decided in favor of Mrs Prest because of the fact that he was the sole operator of his companies and because although he bought the family home in the name of a company, that company had no resources at that time so in effect it was purchased with his own money. The basic position in law is that the property would have been held on trust for the person who paid for it. The same principle was applied to the investment properties.
Whilst in this case, the complex corporate veil was successfully pierced, it does not mean that this will happen in each and every divorce case: cases will still be very much facts specific. In my opinion, the veil will only be pierced in rare circumstances, where it is clear or there is a strong presumption of concealment of assets behind a company.
Of course many of us do not wish to think of the scenario “what would I do and where would I be if my marriage broke up” and we hope we will live with our spouses in matrimonial bliss until death do us part. However we also need to take a reality check. If it does go wrong you need to be sure that the business empire and business assets you have sacrificed everything for and fought so hard to establish remain as protected from your spouse as possible.
This recent ruling is still fundamental to family law as it re-affirms how the Family Court deals with big money, high value matrimonial cases involving substantial business assets. This ruling makes clear just how significant it will now be for divorcing spouses with business assets, to seize control of their financial divorce matter at an early stage and settle the matter outside of Court where they will not fall foul of the pro-wife principles which are adopted by the Court.
For anyone seeking to protect their businesses and business assets, before or during divorce ancillary relief proceedings, aggressive protection and maintenance strategies of their business assets must be adopted at an early stage.
Bespoke strategies of this kind are what we at Pinder Reaux specialise and pride ourselves in. If you are going through a divorce and are the main breadwinner, be under no illusion – failure to adopt and implement such a strategy will jeopardise your business assets and business empire – it is near enough guaranteed if you end up at Court! Our family team at Pinder Reaux, work with divorcing spouses formulating early out of Court financial settlement offers to the ex on terms favorable to our clients and provide a unique specialist service where financial disclosure is required. Please see the following link: Financial Settlements on Divorce
Whilst it appears the divorcing business-asset-rich husband has been defeated by the laws of the family Court, it still remains possible for divorcing husbands to achieve fair divorce settlements; but this can only achieved if the matter is planned and executed with care: leave it to the law alone and you will find yourself in the same place as Mr Prest.