Family Law v Company Law

Is it fair that one party to divorce proceedings should be allowed to conceal their assets in companies in order to prevent their former spouse from receiving a share of those assets?

The Court of Appeal (in Petrodel & Others v Prest & Others [2012] EWCA Civ 1395) has recently ruled that companies belonging to an oil baron were not required to give any of their assets to his former wife, as the companies should not be considered his own property. ‘Fairness’ is an important aspect of family law and this ruling goes against that.

The starting point of the majority of disputed cases is to establish what the assets and liabilities to the marriage are. This needs to be done before the parties can effectively negotiate or battle over the division of this ‘pot’. If parties are now to be permitted to hide their assets from the other, then any division of what is left is simply not going to be a true representation of the circumstances and there is real risk that one party is going to leave the marriage significantly better off than the other, which flies in the face of family law principals.

Company law has been successfully used in a family law case to enable one party to achieve a result that does not sit comfortably with the principles on which family law is practised and on which it is based.

It is significant that the ruling was made by two to one, with a family division Judge being out ruled by two commercial Judges. Family lawyers are suggesting that following this case, the law needs to be clarified.