Divorce: Which Side Are You On?

Warring couples frequently make the newspapers but very few disputes actually reach the Supreme Court. Their Lordships' decision in Prest and Petrodel (Prest v Petrodel Resources Ltd and others [2013] UK SC34) was especially eagerly awaited because it highlighted the tension between those on the one hand who felt that family judges should have all the tools necessary to achieve a 'fair' result between parties on divorce and, on the other hand, those who considered that limits needed to be imposed to ensure that family judges did not overstep the mark.

The financial dispute following the breakdown of the marriage between Michael and Yasmin Prest has a long and well publicised history. The detailed circumstances are complicated but for present purposes the background to the appeal to the Supreme Court can be stated simply.

The husband, Michael Prest, wholly owned and controlled various companies belonging to the Petrodel Group. One of those companies was the legal owner of five residential properties in the UK and another was the legal owner of two more.

Mrs Prest brought financial claims and these were initially dealt with by a High Court judge, Moylan J. He had available to him a number of powers contained in the Matrimonial Causes Act 1973 ('the 1973 Act'). His main difficulty was that the properties that he wished to transfer to Mrs Prest were owned by the two companies. He concluded that there was no general principle that entitled to him to reach the companies' assets by 'piercing the corporate veil' but he went on to conclude that there was a wider jurisdiction available to him under Section 24(1)(a) of the 1973 Act. By that section, the court may order that 'a party to the marriage shall transfer to the other party...such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion'. He therefore made an order that the various properties be transferred to the wife. In the Court of Appeal, three of the companies challenged that decision on the ground that there was no jurisdiction to order their property to be conveyed to the wife. The majority in the Court of Appeal agreed and criticised the practice of the Family Division of treating assets of companies substantially owned by one party to the marriage as available for distribution under Section 24 of the 1973 Act.

Mrs Prest then appealed to the Supreme Court. Somewhat unexpectedly, the Supreme Court unanimously upheld her appeal.

The main points to come out of this important decision would seem to be as follows:

The court confirmed that the decision in Salomon v A Salomon & Co Ltd [1897] AC 22 ("Salomon") remained good...