Petrodel – A closed road and a broken down car to evading divorce settlements?

Paul Lancaster

Paul Lancaster

In October 2012 the Court of Appeal gave its decision in the Petrodel Resources v Prest  case. The companies had successfully appealed an earlier decision when the Wife was awarded £17.5 million upon her divorce.

Moylan J had initially decided that he could make Orders directly against the Husband’s companies and Ordered that eleven London properties held by the companies be transferred to the Wife together with three properties in Nevis and shares in a Nevis company. However, there was an Appeal and it was argued that the companies have separate legal personalities to the Husband and as such they should not be Ordered to transfer assets belonging to them to the Wife. The Husband initially won that argument, although one of the Judges went as far as saying that this presented “an open road and a fast car” to those seeking to evade complying with Court Orders.

The Wife asked for the case to be reviewed and today the Supreme Court ruled in favour of the Wife.

The Husband, who has also been criticised for not disclosing the extent of his true wealth had argued that the properties were not personally owned by him but by off-shore companies. However, the Judges have ruled that seven properties could be counted as assets of the Husband as they were held on trust for the Husband by the companies.

Daniel Lightman, who appeared as a junior for Mrs Prest, said: “The Supreme Court has made clear that assets which are held in the name of a company but which in truth are owned beneficially by a spouse can be accessed by the family court – and has encouraged family judges to draw adverse inferences against spouses who fail to disclose relevant documents or provide pertinent information”.

The implications of the Petrodel case are therefore potentially far reaching. The case has now turned and a Husband who seeks to frustrate his Wife’s divorce claims and ties all of his wealth up in a limited company may be ordered to transfer assets “held on trust” by the company to his wife upon divorce.

Paul Lancaster
Family Law Department        
0113 227 9233

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