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Half of yours is mine (the next chapter)

By Tony Johnson - 21 Jun 2013

The UK Supreme Court recently considered an appeal from proceedings following a divorce. The Court's decision in Prest v Petrodel Resources Ltd & Ors is likely to affect New Zealand company, insolvency, trust and relationship property law. 

A likely consequence is that New Zealand Courts will be more willing to allow a claimant recourse to assets legally held by a company. This is particularly so where an individual essentially "controls" the company. 

In Petrodel, the Court had to decide if it could order the transfer of seven residential properties to the wife, given the properties were legally held by companies that the husband wholly owned and controlled.

In the circumstances, the Court rejected that it could order the transfer by disregarding the companies' separate legal persona. Instead, it ordered the transfer based on trust law principles, finding the companies held the properties on trust for the husband.

The Court noted that the situation of a company holding assets on trust for a controlling beneficiary is highly fact-specific. In Petrodel, it considered how the companies acquired the properties. Three of the properties were acquired for nominal consideration of £1 and a "resulting trust" arose in favour of the husband. Three were acquired for substantial consideration, but it was inferred the husband funded the purchases himself and he was found to be the beneficial owner. 

The last property was acquired for substantial consideration and it did not appear that the husband funded the purchase. Nevertheless, ownership of the property appeared to have no connection with the holding company's business and no explanation had been given in evidence. The Court found the last property was held on trust by the company, with the husband being the beneficial owner.

In summary, if New Zealand Courts follow the reasoning in Petrodel, another avenue is likely to be opened up allowing access to a company's legal assets.


Tony Johnson

Emma Kemp

Tara Hurley


Prest v Petrodel


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