Lawyers have branded as a ‘cheat’s charter’ a Court of Appeal landmark ruling that an oil tycoon need not hand over to his wife £17.5m in assets held by his companies.
In Petrodel Resources Ltd & Ors v Prest & Ors  EWCA Civ 1395 the court, by a majority, allowed an appeal by companies owned and controlled by Mr Prest against a High Court order requiring them to transfer assets to his wife of 15 years.
In a case described by the court as ‘extraordinary’, two commercial judges, Lord Justice Patten and Lord Justice Rimer, agreed to allow the appeal. Patten said: ‘Married couples who choose to vest assets beneficially in a company for what the judge described as conventional reasons including wealth protection and the avoidance of tax cannot ignore the legal consequences of their actions in less happy times.’
But, in a robust dissenting speech, family law judge Lord Justice Thorpe said the ruling represented a radical departure from the principles established by the courts in big money cases.
He said: ‘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.’
In commercial cases, there is a long established principle that a company is independent of its shareholders and that ownership of a company will not entitle piercing of the corporate veil in legal proceedings to get at assets unless there has been fraudulent or dishonest use of the company. Family judges traditionally take a more liberal view, especially where companies are owned and controlled by one spouse, there were no third party interests and the companies were used during the marriage as vehicles for the family’s lifestyle.
Lawyers reacted with surprise to the judgment. Jeremy Posnansky QC of Farrer & Co who acted for Mrs Prest said: ‘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.’
He said: ‘Devious men who want to avoid making fair provision for their wives will rejoice at this decision.’
James Copson, partner at Withers, said: ‘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’.
It is understood that Mrs Prest intends to appeal.