Divorce Court Clamps Down on Hidden Assets
Nicola Furmston Solicitor at Kerseys looks at how Divorce Court clamps down on hidden assets.
‘Happy Families are all alike: every unhappy family is unhappy in its own way.’ This Tolstoy quote featured in the judgment given by Mrs Justice Knowles in the High Court in the widely publicised divorce case of Mr and Mrs Ahkmedova, in which assets had been transferred away to avoid payment of £453m to Mrs Ahkmedova.
The Ahkmedova case included a super-yacht worth £340m and an art collection worth £110m and attracted attention due to the unfortunate involvement of the parties’ adult son to whom the husband had transferred enormous sums. The result was an order that Mr Ahkmedova, his son and a network of companies hand over millions of pounds to Mrs Ahkmedova.
Clients often contemplate handing over or transferring assets away from their ownership in order to thwart a divorce settlement, and some have already done this. The Court will fully investigate such actions and has extensive powers to ensure that those assets are firmly in the marital pot for distribution between the parties.
In cases where one party tries to transfer ownership of an asset to a family member, the court can grant a party an injunction or even transfer an asset back into the ownership of a party. The court can also make an order that a lump sum is paid by one party to the other on the basis that the family member will be likely to meet that award. This is called a ‘judicial encouragement’ order.
In the Ahkmedova case, the husband had a network of companies and may have assumed that, as in the UK a company has a separate legal identity to its owner, the corporate veil could not be pierced and assets owned by the company could not be distributed to his wife.
However, in the landmark case of Prest v Petrodel Resources Ltd  UKSC 34 the court found that although there were very limited exceptions to the doctrine of the corporate veil it may not always be necessary to pierce it in order to distribute company assets in a divorce. Where it could be shown that the party who owned and controlled the company was the beneficial owner of the assets the company could properly be said to be hold the assets on trust for that party and this would make a distribution on divorce possible.
Of course, a company or trust is not always the issue. Sometimes assets, for example, commercial property, are quite legitimately held within a SIPP or a SSAS type pension scheme. The court has the power to make a pension sharing order against both these types of scheme and will do so.Family, Relationships & Divorce
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