When Mr Prest, a successful oil trader, and his wife of 15 years divorced, the High Court in London ordered that Mr Prest pay Mrs Prest a lump sum of £17.5 million (HK$210 million). Mr Prest did not pay. He claimed not to have the money. He said valuable assets which the wife had alleged were his property were actually owned by the Petrodel group of companies. Accordingly, the assets were protected behind the "corporate veil". Mr Prest controlled the Petrodel group. The court held such control amounted to "effective ownership" of the companies such that Mr Prest was "entitled" to the companies' assets. British matrimonial legislation (the provisions of which are mirrored here in Hong Kong) empower the court to make orders affecting property to which a party is "entitled" and so the court ordered that Petrodel's assets be transferred to Mrs Prest to partly satisfy her financial award. The Court of Appeal said this was wrong. "Control" of a company does not equate to ownership of the company's assets, which remain shielded behind the corporate identity. That shield can be penetrated only when fraud can be established. This long-established principle of corporate law applies equally in all courts, even the family court. Accordingly, the Court of Appeal concluded Mrs Prest could not have Petrodel's assets. The final word from the Supreme Court The Supreme Court has now given the company assets back to Mrs Prest despite endorsing the Court of Appeal decision that corporate-held assets are immune from attack except in cases where fraud or abuse justifies tearing away the corporate veil. The Supreme Court also criticised the High Court's interpretation of its statutory power to deal with assets to which a party was "entitled". Entitlement has a strict legal meaning and is not an interchangeable term for concepts like "control". This is good news for wealthy spouses and their families who hold assets via a corporate structure; it means the powers of a court on divorce are more limited than previously thought. However, the Supreme Court found a way to give back to Mrs Prest the company assets despite the corporate veil that protected them. So how did Mrs Prest win? Mr Prest had armed himself with lots of expensive advisers and lawyers, and then shot himself in the foot. His conduct in the litigation was his undoing. The High Court found that Mr Prest was dishonest about his finances and had failed to comply with the court rules requiring full and frank disclosure. The Supreme Court held it was able to draw adverse inferences against Mr Prest based on his "obstruction, obfuscation and deceit" and refusal to answer questions about how the assets came to be transferred to the companies. The Petrodel group had also refused to answer these questions. The court presumed that Mr Prest was hiding something. It inferred that Petrodel was holding the assets on trust for Mr Prest who was the beneficial owner. Based on that finding, the court had the power to order that such assets be transferred to Mrs Prest. What lessons can we take from what happened to Mr Prest? This case highlights the importance in complex matrimonial cases of a sophisticated, multidisciplinary approach having regard to the nuances of both corporate and family law. High-net-worth individuals and wealthy families whose objectives are to protect family wealth in the event of a relationship breakdown can benefit from a corporate holding structure, provided the assets are transferred in a manner that does not suggest the spouse retains a beneficial interest. A regular audit by a family lawyer of the way in which the company assets are acquired, held and managed is advisable. If divorce proceedings are issued, the family needs to appreciate that the instinct to resist engaging with the court process is not always the best strategy. Controlled co-operation can be a more successful tactic to avoid the risk that adverse inferences about asset ownership will be drawn by the court. A properly prepared prenuptial agreement can provide valuable collateral support to clarify that corporate assets are not on the table for division on divorce. WRITE TO US Send your legal questions to firstname.lastname@example.org .