The Supreme Court handed down its ruling on the Prest v Petrodel Resources case today, and restored the original decision for the companies to transfer various properties to Mrs Prest. This ruling means that, in a divorce, people will not be able to withhold their assets from their spouses just because they have previously transferred them into companies.
This ruling will severely limit the availability of this so-called “cheat's charter”.
However, it is important to note that the reason used for the ruling was not the same as that used by the original trial judge. The Supreme Court specifically stated that they were not piercing the corporate veil in this case, and that this principle could only be used in extremely limited circumstances. They were also very firm in their view that family courts cannot simply give company assets to wives just because the sole owner and controller of the company is the husband.
The justification for the Supreme Court's decision was that the husband, and not the companies, had originally provided the funds for the properties to be bought. So, applying trusts law principles, the companies held the properties on trust for him, he was therefore “entitled” to them, and therefore the court could transfer them to the wife.
In this respect, the husband and the companies have got their comeuppance, because although there was no conclusive evidence of him providing the funds for some of the properties, the court said it could draw that conclusion where the husband and the companies had been deliberately obstructive during these proceedings.
This is the result that most people will believe to be the fair outcome - giving Mrs Prest her fair share of the family’s wealth, but at the same time reigning in the family court’s propensity to play fast and loose with company law.