Can a Husband hide behind a company?

The judgment of the Supreme Court in Petrodel Resources Ltd v Prest gave some clarity for those involved in family and company law. There has been particular practice followed in the family courts; where a spouse was the only shareholder of a company, which held assets but did not have third-party creditors, those assets could be transferred directly to the other spouse in settlement of his or her claims. That the practice ‘must now cease’. The Supreme Court’s judgment confirms that there should be no such practice – the rock of separate corporate personality must be respected. Mrs. Prest’s appeal was allowed on the basis that, on the particular facts of the case, the companies held the properties on trust for Mr Prest. He was thereby ‘entitled’ to them, and so there was no difficulty with their being transferred to his wife. This was against the background of his ‘persistent obstruction, obfuscation and deceit’ and repeated refusal to comply with orders. The judgment includes full guidance into when and how the ‘corporate veil’ might generally be pierced. In the same vein, Sir James Mumby, president of the Family Division, has been telling us to get in line for years. His analysis in A v A in 2007 that ‘there is not one law of “sham” [trusts] in the Chancery Division and another law of “sham” in the Family Division’ was quoted by Lord Sumption with approval. Sir James has also remarked on the contrast between the seeming readiness of judges in matrimonial cases to grant ‘without notice’ freezing orders as compared to Chancery judges. In 2000, the House of Lords held in White that the appropriate objective was ‘fairness’. This might be an equal division of the assets, but it might well not. Their lordships tried again in 2006 in Miller v McFarlane. They explained that there were three justifications for redistributing assets on divorce: need, sharing and compensation. But they declined to hold that, for example, inherited property should always be retained by the recipient, or to create a formula for the quantification of maintenance. Will English law retain a ‘bespoke’ approach, where judges with decades of experience in high-value divorces provide their ‘feel’ for fairness in a particular case? We should consider whether matrimonial matters fit comfortably into the ‘ordinary’ civil framework, even at the exalted level of the Supreme Court. Lord Sumption recognised that the burden of proof cannot apply to family proceedings in the same way, because parties and the court depend on candid disclosure from the other side to ascertain the extent of their claim. He tentatively suggested ‘many, perhaps most’ cases where a matrimonial home is held by a ‘one man’ company would be difficult to justify as being in the company’s interest, and so a finding that a spouse was beneficially entitled to the property might have a greater chance of success.