Prest ruling likely to lead to more divorce planning

The Supreme Court ruling allowing a wife to access assets held by her husband's companies will encourage the tying up of assets in business, family lawyers have said

The Supreme Court ruling this morning allowing Yasmin Prest to have assets held by companies owned by her former husband as part of a £17.5m divorce settlement is likely to lead to more 'divorce planning', family lawyers have warned.

Ruling in Prest v Petrodel, seven justices inferred from Mr Prest's conduct that these assets were held on resulting trust for him.

"Several aspects of the judgment represent a significant weakening of the court's powers when dealing with sophisticated wealth structuring in a divorce setting," said Sam Longworth, partner in the divorce and family department at Stewarts Law.

According to Resolution vice chair Jo Edwards: "The Supreme Court has effectively said that any spouse with significant wealth can tie up their assets in a business to protect themselves in the event of marital breakdown."

"This could give the economically powerful even more power during the divorce process and lead to greater financial imbalance in many post-separation outcomes," said Edwards.

The fact the couple have four children, all under 17, has been overlooked throughout the case, she said.

"Whether you're dealing with assets of £37m, £37,000, or no assets at all, it's vital to ensure that the emotional and financial needs of the children come first.

"It is therefore encouraging - and perhaps surprising - to note that the Supreme Court has been able to uphold the justice of the case by making findings of fact in Mrs Prest's favour, enabling her to enforce the orders originally made by Mr Justice Moylan."

Meanwhile, Collyer Bristow partner Michael Drake, said family practitioners will have to take particular care when advising on pre-nuptial agreements to ensure that property-owning structures are not likely to frustrate entitlement of the spouse in the event of breakdown.

Although the number of cases where this will arise was likely to remain a relatively small proportion, Drake said, the case raised issues in other fields, which could cause concern.

"Shareholders, lenders, insolvency practitioners, auditors, may well need to look far more rigorously at corporate property portfolios to establish whether there are competing claims from a spouse, whether it is safe to lend on the security of property held within the company but possibly subject to a resulting trust in favour of the proprietor, and may also feel the need to assess the matrimonial situation generally," he said.

Alison Hawes, a specialist family lawyer at Irwin Mitchell, said: "The ruling confirms that if someone is the sole owner of a company, then if the court is satisfied that those assets are held by that company on trust for one party, they can be used as part of a divorce."

There has been a move in the last few years to bring family courts more in line with civil and commercial courts, and Prest v Petrodel was another example of this, said Hawes.

While this attempt has been partially successful, the courts have the power to look closely at the nature of corporate holdings and make orders based on the reality of the case, even if that conflicts with the strict corporate position, said Hawes.

There will still be cases where assets will be protected from divorce claims by being in corporate ownership, said Hawes, but equally others where that won't deter the court from transferring properties.

"Each claim will need to be carefully examined but the decision is a very useful one for people - usually wives - worried about hidden or protected assets."