Mr and Mrs Prest were married in 1993 and had four children before Mrs Prest commenced proceedings for ancillary relief in 2008. After protracted proceedings, Mrs Prest was awarded a lump sum payment of £17.5 milllion, which included provision for 7 properties to be transferred to her. The properties were registered in the names of two companies. Mr Prest argued that the properties could not be transferred by him to the wife, as they were assets of the companies and not his personal assets. Following the appeal, the Supreme Court unanimously decided last week that the properties were actually held by the companies on trust for Mr Prest, and that the beneficial interest in the properties could therefore be transferred to the wife in satisfaction of the original order.
The case is relevant to company and insolvency, as well as matrimonial lawyers, because the Court was required to consider a number of issues, including:
- What powers are there for the Court to deal with assets held in corporate structures, particularly where such assets have been placed in those structures for legitimate business and/or tax planning reasons, and not in an attempt to defraud potential claims by a spouse or, conceivably, a creditor?
- In what circumstances can the Court look to such assets to satisfy an award?
- When can the Court “pierce the corporate veil”?
Given the principle that a company is a separate legal entity from its constituent directors and shareholders, commentators have been quick to point out that this decision does not mean that assets of a company should be assumed to be those of the shareholders – whether or not they are considered to be held on trust will very much depend on the circumstances of each matter. In this case, Mr Prest had provided the funds for the original purchase of the properties, and was said to treat the cash and assets of the businesses as his own. The properties had however been registered in the names of the companies quite some time before there was any breakdown in the marriage, and so the vesting of the properties in the company name could not have been said to be for the purpose of defeating the claim by the wife. Had the activities of the companies, or the timing of the purchase of the various properties been different, the Court may very well have reached a different decision.
This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information.