Last updated on August 18th, 2015 at 02:42 pm

Previously, when divorce proceedings are instigated, parties with an interest in companies have sometimes been able to say that the company is an independent legal persona, and so the rights and liabilities of that company, and those of its shareholders, are different, i.e., the party with the interest in the company is not necessarily entitled to its property: the company itself is entitled to that.

This has made it very difficult for some spouses seeking a financial settlement; when the other party has interests in companies and says they are not beneficially entitled to the company and therefore it, and/or its assets, should effectively not form any part of the settlement.  It has been historically difficult to obtain full financial disclosure in these cases.

However, things appear to be changing following the result of a recent case involving Mr and Mrs Prest.   In this case the High Court originally awarded Mrs Prest £17.5 million settlement, saying  that properties owned by the company were indeed the property of Mr Prest and should be transferred to Mrs Prest.  Mr Prest did not pay and took the case to the Court of Appeal, which overruled the original decision, saying that Mr Prest could not freely dispose of the properties as they belonged to the company, which had been set up for legitimate purposes and not to avoid Mrs Prest’s divorce claims.

Now, in a landmark ruling, the House of Lords and Supreme Court have overturned that decision and awarded Mrs Prest the financial settlement of £17.5 million, which effectively took into consideration the company’s assets.  One of the companies Mr Prest was involved with owned several residential properties in the UK which he had said belonged to the company and not him, and so he/the court had no ability to deal with them.  However, the Supreme Court found that the company concerned was wholly owned and controlled by Mr Prest and that  Mrs Prest was entitled to a share of the residential properties concerned.

A member of our family law team says “We have followed this case with great interest as it will have such an impact on divorce cases where companies are involved in the future.  It has been a long haul, but the decision will put an end to the so called “cheats’ charter” which effectively allows parties to say that company assets cannot be touched.”