Local legal experts discuss dilemmas that arise for separating couples


Cheat's charter or respecting the autonomy of corporate entities?

When a divorce takes place what are the limits of the court’s powers when it comes to finding and securing spouses ‘hidden’ company assets? This thorny question has been recently examined in the controversial case of Petrodel.

Often in divorce cases a significant proportion of the assets of the family form part of a company or companies in which one of the spouses has an interest. The dilemma for all concerned is to what extent these should form part of the matrimonial pot for division and how far the family court’s powers extend to ‘piercing the corporate veil’ so that assets owned by the company can be transferred in favour of the other spouse.

For some time the family courts have considered that, where appropriate, they can make orders against companies and company assets in a divorce in favour of one spouse to ensure matrimonial assets are fairly divided and to prevent the other spouse from hiding behind a corporate structure.

Some would say that the balance had tipped too far in favour of attacking company assets, leaving legitimate companies vulnerable to commercial uncertainty upon divorce. With the case of Petrodel that balance has, for the time being swung back in favour of respecting separate corporate entities. Unless some impropriety can be shown they are not susceptible to orders against their assets from family courts on divorce.

Is this right? For those with legitimate business assets the threat of court intervention on divorce is a great concern, potentially putting the future viability of the company at risk. Conversely for those with more questionable motives it may be the only check on unscrupulous behaviour. Either way this leads to great uncertainty amongst divorcing couples where there are businesses interests involved.

With the Supreme Court set to hear an appeal by the wife in the Petrodel case in March, watch this space to see which way the pendulum swings next.

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If you have any queries or require any further information please don’thesitate to contact:Emma Collins, Partner, WeightmansT: 0161 214 0530Email: emma.collins@weightmans.com

Solicitors' Comments

Rarely the Court may ‘pierce the corporate veil’ where a company is considered to be the alter ego of a party. The Court need to examine who has control over the business. It is paramount that you have a Solicitor that is familiar with family business cases. It’s equally as important that as much information as possible is given to your Solicitor at the outset so they can determine the appropriate valuation of the business.

For further advice contact Lorraine Harvey, Principal Lawyer (Partner) at Slater & Gordon Lawyers on 0808 175 7761 or LHarvey@rjwslatergordon.co.uk. We offer a free consultation at either our office in Manchester or in our discreet meeting rooms in Bramhall. Late night and weekend appointments are also available.

The findings of the Court of Appeal in Petrodel create further unpredictability for divorcing couples. Some husbands will undoubtedly see the judgment as a green light to use company structures to shelter wealth from the family courts. This may be wealth that has accumulated during the marriage, and in which a wife would properly expect to share. In such cases, achieving a fair outcome for both parties could unfortunately prove harder to reach.

Michelle Ashworth, Solicitor.Laytons Solicitors LLP, 22 St John Street, Manchester M3 4EB DX 14382 Manchester 1Tel: +44 (0)161 214 1600, Fax: +44 (0)161 214 1661Visit our website at www.laytons.com

Unless the pendulum is swung back by the Supreme Court, a non-business owning spouse will have less chance of securing a share of value in any business and possibly a fair divorce settlement. It is therefore crucial to see a specialist family lawyer to present the strongest arguments to secure a bigger share of non-business assets and get realistic advice about the financial award you are likely to secure compared with legal costs you are likely to incur.

Beverley Darwent – PartnerFamily Group, Pannone LLPDirect telephone 0161 909 1579Beverley.darwent@pannone.co.uk

The case of Petrodel highlights the dilemma of the rights and needs of the one spouse against the requirement of corporate integrity. But does corporate integrity hide the true right of the other spouse?

For further information contact Karen M Bennett at Bennett Smith Solicitors on 01248 679000 (North Wales) /0151 244 5442 (Liverpool)/01244 893196 (Chester); email: mail@bennettsmith.co.uk;www.bennettsmith.co.uk

Yet again changes in case law are showing that every case involving the breakdown of a relationship is unique, which is why the Matrimonial Causes Act 1973 makes it clear that a Court has to take into account ‘all the circumstances of the case’ as those circumstances will change every time.

It is vital to seek the expert advice of a specialist family lawyer who, with the assistance, if necessary of other professional such as the accountants or tax advisors, will guide you as to the best way forward in your own unique circumstances.

Louise Richardson and Beverley McCluskeyHague Lambert Knutsford:01565 652411 or Macclesfield: 01625 616480

I agree with the leading judgment of Thorpe LJ when he rejected the arguments made on behalf of the companies in this case. At Fiona Bruce solicitors we try to cut through the legal loop holes and find fairness. At the end of the day that should be the courts view also. In this case the court rightly ask if the other spouse was entitled to the property, regardless of the name it was held in. The court looked at the reality of this relationship and in my view rightly determined the assets should be included.

Phil PorterFiona Bruce SolicitorsJustice house, Trinity Chambers,3 &14 Grappenhall Rd,Stockton Heath,Warrington WA4 2AHTel 01925 263 273Fionabruce.co.uk