Victory for Nigerian oil tycoon Michael Prest’s wife as ‘cheats’ charter’ overturned in landmark Supreme Court divorce case
Millionaires will not be able to use their businesses to shield their wealth from their spouses
The most senior judges in the land quashed any chance of a “cheat’s charter” when they ordered a millionaire businessman to hand over company properties to his former wife.
The hotly-awaited ruling was greeted as a victory for fairness by lawyers who nevertheless said it was extraordinary and would send a ripple thought the justice system. While family solicitors insisted it was the most important review of company law since Victorian times, some working in the corporate sector warned that it threatened to open a Pandora ‘s Box.
The landmark case, which centred around the £17.5 million divorce of oil tycoon Michael Prest and his wife Yasmin, had pitched the family division and the commercial division of the High Court against each other and many had presumed the more powerful corporate side would win.
But in allowing Mrs Prest’s appeal, the seven justices of the Supreme Court backed the long held belief that family courts could exercise legal discretion when sharing assets.
Today Mrs Prest said she was “delighted and relieved”. She told The Independent: “It’s been tough at times, but I’ve had my faith and I knew I was doing the right thing for myself, for my children, and for others who may find themselves in a similar position. I’ve been quietly confident that justice will prevail.”
Her lawyer Jeremy Posnansky QC, of Farrer & Co, added: “Decent husbands and wives have nothing to worry about. Honest company directors have nothing to fear. But for those who misuse companies to cheat their spouses on divorce and for company directors who hide the truth behind a bogus corporate façade, the Supreme Court has shown that truth and reality will prevail.”
He continued: “The judgements aren’t only important for matrimonial law, but also for company law and entrepreneurs. It’s the most authoritative review and refinement of the law about piercing the corporate veil since 1897.”
“This decision has preserved the sanctity of the corporate structure and supported the Court of Appeal judgment in my clients’ favour,” said Sarah Ingram, representing Mr Prest’s Petrodel companies, adding: “However in trying to find another way to give the wife what she is seeking, the Supreme Court has also left a lot of unanswered questions which may cause problems in the future for family companies. ”
Mr Michael Prest, 51, and his wife, who met twenty years ago in London, enjoyed the fruits of the fortune he amassed, sending their son and three daughters to public school, and alternating their time between a multi-million pound house in London and homes in the Caribbean and Nigeria, where he was born the son of a Itsekiri chief before moving to the UK as a child.
After their separation in 2008 Mr Prest, who lives in Monaco, refused to pay the multi-million pound settlement to his 50-year-old ex-wife – a British-born IT consultant who has dual Nigerian nationality like her husband. The High Court, describing the husband as a manipulative and a “wholly unreliable witness”, ordered the transfer of 13 properties from his companies as part payment.
But the Court of Appeal allowed an appeal by the Petrodel Group companies, representing seven of the properties. While the judges did not reverse the £17.5 million award, they said that Mrs Prest could not claim assets.
Family lawyers insisted that such a situation created a “cheat’s charter” where the wealthy could simply hide assets in companies and ignore court orders. Commercial experts, however, claimed that “piercing the corporate veil” would create an impossible position where spouses were allowed to tread where other creditors are not.
Today, however, the Supreme Court ruled that, on the basis the companies were wholly owned by the husband, Mrs Prest was entitled to the properties. The judges added that there was no evidence to contradict the High Court inference that Mr Prest had deliberately sought to conceal them and failed to comply with court orders because the companies were “beneficially” owned by him. However, they added that the corporate veil could only be pierced in exceptional cases.
“The judgment is a victory for the family courts and fair sharing of assets,” said William Healing, Family Law Partner at Kingsley Napley. “Today the court has parted the corporate veil. The decision is a blow against spouses who seek to evade their responsibilities using company structures.”
Michael Hutchinson, of Mayer Brown, said: “The Supreme Court has handed down a landmark decision in which, for the first time since at least the end of the19th century, it has accepted a general exception to the rule against ‘piercing the corporate veil’.
”This is an extraordinary decision and the implications for corporate governance are potentially huge. Businesses and lawyers will be poring over the judgment for some time to try to understand its limits.“
”Even though the corporate veil has not been pierced, the judgement will have significant ramifications and is likely to open Pandora’s Box when it comes to the overlap of divorce proceedings and company law,“ added Kyri Papantoniou, Corporate Partner at Seddons. ”Only time will tell the true impact of today’s ruling.