CoA delivers shock verdict in big-money divorce case
The Court of Appeal (CoA) has delivered a shock verdict in a hotly anticipated big-money divorce case, ruling that companies belonging to oil tycoon Michael Prest should not be forced to hand over assets totalling £17.5m to his former wife.
Jeremy Posnansky QC
Divorce lawyers today said the ruling would have a negative impact on wives and effectively created a “cheat’s charter” for wealthy husbands looking to escape their financial obligations to the family.
Withers partner James Copson commented: “The decision is a disappointing one for many wives who confront on divorce a tangled web of companies used to shelter their husbands’ wealth.
“This ruling puts the genie back in the bottle. The court has effectively sanctioned for other cases the use of what could be perceived by the general public to be a cheat’s charter.”
At the High Court last year Mr Justice Moylan ordered Mr Prest, founder of Nigerian energy company Petrodel Resources, to hand over £17.5m to his former wife of 15 years.
However, the first instance judge said that as Mr Prest was unlikely to hand over the assets given that he had flouted court orders, he should transfer 14 properties in the UK and abroad that were held by Petrodel Resources and other companies owned by him to his ex-wife as part payment.
Today the CoA reversed that decision following an appeal by the companies.
In a split judgment in which Lord Justice Patten and Lord Justice Rimer, both commercial judges, disagreed with family judge Lord justice Thorpe, Patten LJ stated: “Married couples who choose to vest asset beneficially in a company for what the judge described as conventional reasons including wealth protection and the avoidance of tax cannot ignore the consequences of their actions in less happy times.”
Thorpe LJ strongly dissented, however, stating: “I emphasise that all judges who have endeavoured to achieve fairness in big-money cases at first instance, including Munby J, have followed the pathway marked by Cumming-Bruce LJ, himself a former judge of the division.
“I myself followed this path in the eight years that I sat in the division and I have not questioned it in the more years I have sat in this court. If the court now concludes that all these cases were wrongly decided they present 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.”
The companies, which Thorpe LJ said were “wholly owned and controlled by the husband”, instructed Queen Elizabeth Buildings’ Tim Amos QC, a family silk, to lead the challenge.
Mrs Prest turned to Farrer & Co partner Jeremy Posnansky QC, who instructed Richard Todd QC for the appeal.
Posnansky commented: “It’s a great pity that years of case law and practice which have enabled family law judges to do justice between divorcing couples have been overturned by this non-unanimous decision of the Court of Appeal.
“Lord Justice Thorpe was right to say that if the law permits husbands to use company law measures to achieve their irresponsible and selfish ends, in other words to avoid making a proper payment to their former wives, it defeats the court’s overriding duty to achieve a fair result.”
A further family lawyer said that in effect the judges had applied commercial law to a family case creating a “bad law” principal.
It is understood that the wife will appeal the case to the Supreme Court.
Jeffrey Green Russell instructed Amos for Petrodel.
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Readers' comments (12)
John Smith | 26-Oct-2012 2:33 pm
A win for MANkind
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Anonymous | 26-Oct-2012 3:13 pm
This is a ridiculous judgment and one which highlights again the need to have more women in the higher civil courts.
Effectively the judges have applied commercial law to a private client case, I understand that has to be universal but this clearly goes against the spirit of the family law.
I hope the Supreme Court agrees and throws out the appeal - and quickly.
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Interested Observer | 26-Oct-2012 4:40 pm
We don't need more women in the Court of Appeal - we need more good lawyers. Until the Supreme Court rules, the advice to husbands must be "stash the assets in a company."
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Anon | 26-Oct-2012 11:18 pm
@3.13. Why is this a ridiculous judgment? The wife was divorcing the husband, not the companies. Otherwise, where would you draw the line? if a limited company goes bust, on your logic the directors/shareholders (whichever or both) would be liable for the company's debts. Novel!!
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Anonymous | 28-Oct-2012 2:39 am
Good! Another gold digger loses out to common sense. I love it. I realise that lawyers and Thorp and other PC maniacs around the country, plus every man hating feminist in the land will be dissapointed, but that is just another reason to love it.
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David Sheard | 28-Oct-2012 9:16 am
.....and as usual - coining it in ....the legal Cabal.
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Anonymous | 29-Oct-2012 3:37 pm
as a man about to go though a divorce I welcome this judgment. I just wish I had some wealth to hide...
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Anonymous | 31-Oct-2012 2:19 pm
'We don't need more women in the Court of Appeal - we need more good lawyers. Until the Supreme Court rules, the advice to husbands must be "stash the assets in a company."'
???
Nothing in this judgment says 'stash the assets in a company and you're OK.' You haven't understood the point. BTW, there is no prospect whatsoever of the Supreme Court reversing the judgment.
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Anonymous | 2-Nov-2012 12:21 pm
"Stashing the assets in a company" specifically to escape a division of assets on divorce would surely provide sufficient evidence of iniquity to justify piercing the corporate veil on standard company law principles - the company would be being used as an instrument of fraud.
That was not the case here, however. The companies pre-dated the divorce and were used by both parties for purposes other than hiding assets from divorce proceedings. There is no justification for pursuing the companies (which are of course separate from their shareholder) here.
If the husband fails to pay up, the wife could presumably seek a transfer into her name of the shares in the companies, as part of a seizure of the husband's own assets? That way she would obtain the property in the companies through the more legally appropriate route?
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Anonymous | 4-Nov-2012 8:55 pm
Anonymous - 31-October-2012 2:19 pm
WHY do you think there is "no prospect whatsoever of the Supreme Court reversing the judgment?"
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