Farming and the Law: Nicola Furmston on a recent development in the divorce courts

Nicola Furmston of Barker Gotelee.

Nicola Furmston of Barker Gotelee. - Credit: Archant

It is becoming increasingly common for large and well-organised farming businesses to operate as companies rather than the more traditional partnership business model.

Property belonging to a company, including farmhouses, has traditionally been difficult to deal with on a divorce, as a someone running a business could not be compelled to transfer a property owned by a company to the estranged spouse as it would not personally belong to him/her.

This position often caused triumph on one side and a good amount of frustration on the other. However, the court’s hands were tied; it could not “pierce the corporate veil”. However, in a recent development, established by the case of Petrodel Resources Ltd and others v Prest (2013), the court has opened the door, if slightly, for the transfer of a company-owned property to the estranged party.

The husband, Michael Prest, and his wife, Yasmin Prest, were married in 1993 and Mrs Prest petitioned for divorce in 2008. Mr Prest wholly owned and controlled seven companies, collectively the Petrodel Group. The ownership of seven properties fell to be considered which were wholly owned by the companies. The issue before the court was whether it had power to order the transfer of these seven properties to the wife given that, legally, they did not belong to the husband.

The court declined to go as far as to sanction outright the transfer by the husband of any of these properties to the wife. It cited the prevailing legislation (the Matrimonial Causes Act) and said that nothing in the Act or its wider social context authorised that. Equally it would not pierce the corporate veil.

However, it said that there was a restricted principle of English law that could in some circumstances allow a court to deprive a company or its controller of the benefit they would otherwise have obtained by the company’s separate legal identity, where a person has an obligation or liability which he/she deliberately evades by putting a company in the way.

The judgment in Petrodel v Prest will encourage estranged spouses to challenge any ring-fencing of farm property owned by a company. It remains the case that a well-thought out pre-nuptial agreement is the safest way forward to preserve assets for farming families.

Most Read

: : Nicola Furmston is a partner and family law specialist at Barker Gotelee Solicitors.

Become a Supporter

This newspaper has been a central part of community life for many years. Our industry faces testing times, which is why we're asking for your support. Every contribution will help us continue to produce local journalism that makes a measurable difference to our community.

Become a Supporter