Corporate Veils and Gender Wars - A Reply to Richard Todd QC

In the August issue of Family Law, I wrote a short article about the Supreme Court ruling in Prest v Petrodel [2013] UKSC 34. That article was, in turn, a slightly expanded a more 'academic' version of my post on this blog about the ruling. Petrodel, for those who don't know, was a matrimonial finance dispute. The massively wealthy husband held a large part of his wealth in a number of companies entirely owned by him. During the marriage, he used these companies to provide a lavish lifestyle for himself and his family, yet somehow once divorce proceedings began he found himself unable to access any funds and unwilling to disclose large swathes of relevant information to enable the family court to assess the extent of his wealth and make a fair award to the wife. So far, so fairly unexceptional as big money divorce cases go. The cases ended up in the Supreme Court on the question of whether the family court is entitled to 'pierce the corporate veil' to gain access to assets held by the companies in order to transfer them to the wife.

As with my blog post, the article in Family Law gave a summary of the decision, and then moved on to discuss some of the possible bigger questions arising from the judgment. In particular, since there was something of a dispute between the way that family lawyers and company lawyers saw the issues in the case, I said this:

'...two aspects [of the case] combined to give the initial impression that family law might have won the day. However, it seems more like a case where Mrs Prest won her battle but family law lost the war.' 

As I went on to say, the main way in which the case marks a 'loss' for family law is that one of the tools that had been used to ensure that family financial arrangements were fair after divorce was lost - the family court can no longer get at assets that are held by companies when one of the spouses has complete control of that company.

Anyway, I don't want to re-hash that argument here. My reason for coming back to the matter is that Richard Todd QC, who acted for the wife in the Supreme Court, wrote a short piece for Sweet&Maxwell explaining why my Family Law article was wrong about this, and I thought that it was interesting. (Also, what better way to tempt a response than with the sweet words 'Rob George is wrong'? No seriously, it's interesting, and flattering that someone as senior as Richard Todd QC spent time thinking about my article and replying to it.)

So first a quibble. Richard Todd has a dig at me for saying - in his words - that 'Mrs Prest (probably) won her battle' because, as he says, 'there is no "probably" about it'. Well, I agree, which is why I never said probably - I said she won. I quoted a cautionary point from Lady Hale's judgment about whether there might be difficulties ahead still in realising those assets (Todd says not, which is good news), but there wasn't any doubt that she won. The question for me is whether the way in which the Supreme Court reached that conclusion might be less useful for wives in future cases. The only place I can see that I can be mistaken for saying 'probably' is in the sentence quoted above, but as a matter of construction (!) I think that it's reasonably plain that I am contrasting my conclusion (she won but family law lost) with the initial impression given in the preceding sentence (family law won).

Anyway, that's by the by. A much more interesting point, where I truly hope that I am wrong, is about whether family law did indeed lose the day. Accepting my premise that the 'war' being fought is for gender equality, Richard Todd's argument is that since the Petrodel ruling he has been contacted by 'many troubled bankers' and companies wondering how secure their financial position is, but not one wife has been in touch to ask the equivalent questions. He goes on to give three reasons why this shows that wives will be better off after the Petrodel ruling.

Would that it were so, but I'm not convinced by the 'casual and unscientific illustration' (Richard Todd QC's words). I find it entirely unsurprising that after a big money court decision affecting company assets, the companies and men who run them would go running to expert lawyers to ask about their financial position. The companies have reason to be reading law reports and the money to get legal advice, and the men are the ones who know that they are siphoning off their assets into those companies - of course they're the ones going to specialists like Richard Todd. The wives, on the other hand, are unlikely to read Supreme Court judgments about piercing the corporate veil, and if they do they are unlikely to be aware that it is an issue which affects them. Meanwhile, the men - with the advice from lawyers that we now know they are already getting - are busy using the helpful guidance from Petrodel to make sure that the assets are indeed safe behind the veil.

So yes, I hope that I'm wrong and that Petrodel is indeed 'a triumph' for family law - but I'm not holding my breath.

Relocation Research - first paper now available

In my last post, I published the Executive Summary from my new paper, "Relocation Disputes in England and Wales: First Findings from the 2012 Study". The full paper is now available to download free of charge from the Social Science Research Network.

There are two short points I'd like to make about this paper. The first is that it's a working paper. I wanted to get the first findings out as soon as they were ready because this is an important topic, but there's a lot more work to do. So while all of the statistical analysis that is reported in the paper is correct and final, the overall project isn't finished yet, and there will be more information feeding into the overall analysis and conclusions.

The second point is that this paper does not make any comment about legal policy. A lot of people dislike the English law's approach to relocation disputes and there is a respectable view that it needs to be reformed. Indeed, I have made that argument myself on this blog (see here and here), in my academic writing,* and as part of the legal team who sought to appeal a relocation case to the Supreme Court a year ago. That is an important question that needs to be addressed - but it is not the question that I am addressing in this paper. The first thing to do when considering change is to find out more about what is happening now. This paper is about that - it tells us about what the reality of relocation law is in the courts and lawyers' offices of England and Wales. We can add that information to the debate about what if any change needs to be made, but the research does not by itself answer that question. Consequently, no one should read this paper to find out what I think about law reform, but the fact that I do not talk about that in this paper does not mean that I don't have views on change.



* At the moment, a lot of academic writing is difficult for the general public to obtain. Some of my work is on the SSRN network (see here and here), though not all if it is available without charge (this is a policy of the journals, not of mine); I am happy to provide copies on request.

Relocation Disputes: First Findings from the 2012 Study: Executive Summary

This post contains the Executive Summary of a research paper from my study of relocation cases in England and Wales. The full paper is now available to download without charge from the Social Science Research Network.

  

Relocation disputes are cases between separated parents where one of them proposes to move to a new geographic location with their child and the other parent objects to the proposals. This Research Paper reports the first set of findings from a major study of relocation cases in England and Wales based on cases decided in 2012. The data used come from 118 first instance court decisions in relocation cases (96 proposed international moves and 22 proposed moves within the UK) – the CC sample – and 187 responses from family lawyers to a research questionnaire about relocation disputes –the RQ sample. We use statistical techniques to analyse those cases and investigate patterns of outcomes.

Part 1 | Relocation Law in England and Wales: A Summary

The law governing relocation disputes, while different for proposed international moves and for those proposals involving moves within the United Kingdom, is relatively straightforward and can be explained simply. The welfare of the child concerned is the paramount consideration, with guidance then offered by appellate cases as to how the child’s best interests should be ascertained by judges in international and domestic relocation cases respectively.

Part 2 | Previous Research on Relocation Disputes

The simplicity of relocation law belies the extent to which relocation disputes are immensely difficult for all those involved, whether the children, the parents, the lawyers or the judges. Previous research in England and Wales has shown that there are concerns that the law itself, although well understood, may not have struck the right balance in its pursuit of the child’s best interests. However, while this view was shared by many, others thought that the English courts had shifted their approach in the mid- to late-2000s and were now approaching relocation cases more ‘rigorously’. At the same time, researchers in other jurisdictions were investigating case outcomes and patterns of decision-making in a way that, until now, has not been possible in England and Wales because of the lack of access to the relevant materials.

Part 3 | International and Domestic Relocation Disputes: Characteristics of Cases and Families

Cases in the dataset came from all over England and Wales, but there was a clear dominance of cases coming from London and the South East of England. Cases were heard by judges at all levels, with the bulk of international cases being tried by Circuit Judges and most domestic cases going before District Judges. In both domestic and international cases, applicants were more likely than respondents to be legally represented, and those who had legal representation usually had both a solicitor and a barrister.

In both international and domestic cases, most disputes involved a single child, with an average number of children per case of 1.5. In terms of children’s ages, the mean age was around 7 (just under for international cases, just over for domestic ones). International cases more often involved pre-school aged children than did domestic disputes, but in both samples the bulk of children were aged 4 through 9; few children aged 12 or over featured in either category.

The vast majority of applications were brought by mothers (around 95%). In terms of care arrangements, a small minority of cases (around 5%) involved equal shared care arrangements, while a larger minority (7% in the CC sample, 38% in the RQ sample) involved 65/35 shared care arrangements. Conversely, in the CC sample overnight contact cases account for well over half of all cases, whereas in the RQ sample only around a quarter of cases were reported to be in this group. In both samples, a small minority of cases involved direct contact not including overnight stays or no direct contact at all.

Looking at parents’ relationships statuses, we see that parents in the international sample were more commonly married to one another previously, whereas the domestic cases involved a higher proportion of former cohabitants. In terms of each parent’s current relationship status, applicant parents are more likely to have remarried (35%, compared with 7% of respondents), whereas respondents are more likely to be in a cohabiting relationship or to be single (23% and 59% respectively, compared with 10% and 42% for applicants).

Some 70% of applicants in the international sample were foreign nationals seeking to leave the United Kingdom, most (though not all) proposing to return to their original home country. In terms of destinations for the international cases, the biggest category involved proposed moves to other EU countries (around 40%), with ‘North America’ and ‘Australia/New Zealand’ each accounting for around a quarter of cases. Domestic cases had an average travel time between the current location and the proposed destination of around 2.5 hours, though with a range from 1 hour to 11 hours.

Part 4 | International Relocation Disputes: Outcomes and Patterns

The overall success rate for litigated international relocation cases in the CC and RQ samples combined (N=141) was 66.7%. Given that English law was said to be ‘pro-relocation’, it is interesting to compare this figure with the equivalent data from Canada (68%) and New Zealand (68%), which are respectively ‘neutral’ and ‘anti-relocation’. Of course, court outcomes are not the whole story because pre-litigation advice is an important filter, but the similarity is noteworthy.

We then go on to identify factors which appear to be important in influencing case outcomes, which we divide into three broad groups. The first group relates to courts, judges and lawyers. The data suggest that courts in London and on the South East (1) Circuit are more likely to refuse relocation applications than courts elsewhere in England and Wales (around 62%, compared with 85%). There is also a difference based on the type of judge hearing the case, but the data suggest that this difference may be accounted for by case allocation: different judges hear different types of international relocation case. While most cases involved both applicants and respondents with legal representation, the data suggest that if one side does not have a lawyer then his or her chances of getting the desired outcome are substantially reduced (though this is correlation, not causation).

The second group of factors focuses on families and their biographical characteristics. In terms of children’s care arrangements, the overall picture suggested by the data is that applications where the respondent parent does not have overnight staying contact with the child are more likely to be allowed (around 75%) than cases which do involve staying contact (around 55%); but the amount of staying contact (whether amounting to shared care or not) does not make a significant difference. There is some suggestion from the data that cases involving multiple children are less likely to be allowed than cases involving a single child, but the small number of cases with several children makes it impossible to be sure of any pattern. In the international cases, the ages of the children made no apparent difference to case outcomes. In terms of the parents’ relationship statuses, we saw that the parents’ previous relationship with each other made no difference to case outcomes, and the same was true of the respondent parent’s current relationship status; but applicants who were now married had a significantly higher chance of their relocation application being approved than did applicants who were single (just over 80% for those who were married, compared with 50% for those who were single).

The third group of considerations looked at proposed destinations and the applicant parents’ motivations for seeking to relocate. The overall picture in terms of destinations seems to be that the shorter the proposed move, the more likely it is that the relocation will be allowed – so moves within the EU are allowed more often than moves to North America, which are in turn allowed more often than moves to Australia or New Zealand (in the CC data, 80%, 71% and 52% respectively). Consistently with previous research, we see that most applicants have several reasons for seeking to relocate, but we focus on four key groups: ‘going home’, ‘new job’, ‘lifestyle’ and ‘other’. The findings here are not straightforward, but the overall picture seems to be that cases involving a return home or a specific job offer have a greater than average chance of being allowed (72% and 70% respectively), while those seen as lifestyle decisions are significantly less likely to be allowed (48%). Most opposition to relocation applications was based on the child’s loss of relationship with the respondent parent; but in those cases where the respondent argued that the proposed move was poorly planned or that it was brought in bad faith, the application was less likely to be allowed (56% and 50% respectively).

Part 5 | Domestic Relocation Disputes: Outcomes and Patterns

The overall success rate for litigated domestic relocation cases in the combined sample (N=37) was 70.3%. Given that orders restricting internal relocation are thought to be unusual, it may be surprising that this figure was so similar to that for international relocation (66.7%). However, it should be remembered that many internal relocation cases will not be litigated, so the range of cases before the courts may be different in the two contexts.

Starting again with issues relating to courts, judges and lawyers, the data suggest that courts in London and on the SE-1 circuit may be more inclined to allow internal relocation applications than courts elsewhere – the reverse of the pattern seen in the international data – though this variation may be explained by case characteristics. A finding more in keeping with the international data is that District Judges seem to be more inclined to prevent domestic relocations than are Circuit Judges.

Looking at families and their biographical characteristics, similar patterns are seen as emerged from the international data. Children’s pre-relocation care arrangements appear strongly correlated with case outcome, with the proportion of relocations allowed increasing as the non-moving parent’s involvement in the child’s daily life decreases. In terms of children’s ages, cases where relocation was allowed had a lower mean age of child (7.0 years) compared with cases that were refused (8.3 years), though it is unclear why that would be the case.

Rather than proposed destinations, the focus in the domestic data is on distances of the proposed move. The data show that shorter moves (two hours or less) are less likely to be allowed than longer moves (61.1%, compared with 78.9%). Again, it is unclear why that should be the case, given that on-going contact will be easier to maintain after a shorter move. In terms of reasons for seeking or opposing domestic relocation, the data are equivocal about whether motivation makes much difference. No observed differences were close to being statistically significant, and the differences were in any case marginal.

Part 6 | Discussion and On-Going Work

The statistical data have revealed a wealth of findings, but have also raised many questions. The next stage of analysis will return to the judgments and look qualitatively at judicial reasoning. After that, the project turns to parental experiences. Parents in 30 relocation cases have been interviewed about their experiences, and those interviews will be analysed and the conclusions added to the overall project. 

A Review of a Review of Ideas and Debates in Family Law

There are many ways that one can go about reviewing academic books, but a fairly standard approach is to offer some kind of summary of the main issues or arguments that it raises and then to comment on them in some way. If a book offers an analysis which is problematic, or if it misses or mis-uses evidence, then of course it is appropriate to criticise it. It's also reasonable to point to issues that the author might have looked at but didn't, if they are relevant to the book's content. But I think it's always helpful to keep in mind the realities of how books are written, and to look at what the author says he or she is trying to do when judging whether or not they have succeeded. Also, as my doctoral supervisor once told me, always end with the most positive thing you can honestly say.

With that in mind, I've been trying to decide if it's churlish of me to want to respond to a review of my book, Ideas and Debates in Family Law, that Claire Simmonds has written in the Cambridge Law Journal. It's a compliment when anyone takes the time to read and review something that you've written, bringing their intellect and experience to bear on something you've spent time on - and there are plenty of nice things that Simmonds says, along the way, about IDFL in her review. However, a couple of things have riled me a little, so here we go.

First, the book. IDFL is a small book of about 150 pages, split into eight chapters. It evolved from a series of seminars that I've been running for the last eight years in Oxford with undergraduate family law students. It is categorically not a textbook. It doesn't contain an overview of the law, and its aim is to put forward challenging ideas that open the reader's mind to different ways of thinking about family law issues. Consequently, as I say in the introduction, 'the topics chosen for discussion are sometimes quite narrow', 'many important family law issues are not covered' and 'the topics which are covered ... could have included a number of sub-issues which are either omitted entirely, or receive only passing mention' (pp 1 and 3). In other words, with 60,000 words and the whole of family law to pick from, I deliberately chose things that I thought were interesting and that offered scope for engaging with particular issues that I had been thinking about in my research and with my students over the last few years.

Given that starting point, there are two things that irritate me about the review. One - which is relatively common thing that people do in reviews, to be fair - is that a lot of the criticism comes down to saying that had Simmonds written the book, she would have written about other things. In particular, she would have written about more things. More on the European Convention on Human Rights (ECHR), more on decisions of the European Court of Human Rights, more on the Hague Child Abduction Convention, more 'awareness' of prominent debates (?), more on public law and child abuse, more on domestic violence, more on same-sex relationships... 'as well as the existing chapters expanded'.

I mean, give me a break. You're basically saying that I should have written about the particular issues in family law that interest you, rather than the ones that interest me. Oh, and none of those issues is small, so I should also have written a book that was twice as long, which I don't think my publisher would have been too happy about.

My other niggle is about being told so many times that I have 'failed' to address issues or to notice issues. When talking about the welfare principle, Simmonds says that I don't talk about the ECHR, for example. Well, first, I do, a bit. I don't refer to the Convention by name, but my discussion on pp 117-119 is all about the inter-relationship between a welfare analysis and a rights analysis, and the way in which adults' and children's rights are, or could be, incorporated into the welfare principle. But leaving that aside, my gripe really is that, as Simmonds herself says, 'this issue has formed one of the central debates in this area in the last 15 years'. I agree, so why, in a short book which tries to look at less obvious issues, should I give space to that? Students will be getting that debate from their main readings and they don't need yet another summary of it from me.

Much the same reasoning explains my 'failure' to address various other issues. Same-sex marriage, for instance. I deal with it in a single footnote on p 75 - though, to be honest, that footnote really sums up the issue for me. There are two reasons for this 'failure'. One is that I don't actually find the debate about same-sex marriage legally interesting. It's a socio-political issue, but the legal aspects of it don't excite me much. The other, again, is that any family law student will know all the possible angles on this debate already and be seeing plenty of it in their reading.

Incidentally, this is what I mean when I say that the book should be used 'alongside a textbook' (cover blurb). Simmonds notes that family law textbooks rarely stick with black letter law these days which, she says, 'somewhat lessen[s] the impact' of IDFL as a companion book. With respect, that misses the point. I am perfectly aware that textbooks go beyond black letter law. My point is, IDFL is a companion to the modern family law textbook because, while it is true that the socio-legal sources that I draw on are commonly featured in textbooks these days, what I am doing with those materials is quite different, and the point is to let students see how we can use sources in less conventional ways.

Anyway, leaving all that aside, I'm quite willing to say that there are plenty of things that could be improved in IDFL. Nothing is perfect, and I'm open to criticism of the book, some of which has helped me develop my ideas so that if I write a second edition I already have lots of thoughts about what I'll do differently. But what I won't be doing is trying to write about everything, trying to force issues into my narrative that don't really fit there just so I can say that I've covered them, or writing massively more. That isn't what I set out to do, and it's not really a fair criticism of the book that it didn't do that.

The Perils of Criticising a Criminal Sentence for "Undue Leniency"

The Attorney General has announced that the 15-month jail sentence given to Stuart Hall following his conviction for child abuse offences years ago will be reviewed. That is one of the AG's functions: to consider and, if necessary, review sentencing decisions. There is certainly considerable public dismay at the sentence passed, but it is a little surprising to find so many commentators pre-judging the outcome of this review. After all, the review may yet uphold the judge's decision. Moreover, from what I have seen, none of the commentators knows about the detail of the case in the way that the judge did, and none of them that I have seen has a background in or experience of criminal sentencing.

Jonathan Freedland's article in the Guardian might be a good example. Freedland is an excellent commentator on political matters, but I'm not convinced by his critical comments on this purely legal matter. One of the things about sentencing for criminal offences is that the decision is taken in line with the law, and not on the basis of political pressures, public opinion, or the views of victims or their families. The policy which underpins sentencing law is independent of these factors for obvious reasons - the avoidance of mob mentality, basically. It is the judge who heard the case, and who knows all the evidence, who makes the decision about the sentence within the general guidelines issued.

I'm not trying to make any comment about the Hall case in particular. Maybe the judge did give undue weight to various mitigating factors. No judge is infallible, and that is why we have reviews and appeals against sentence. But at the same time, the judge is the one tasked with making the decision, and when there are choices to make they are his to make, and it makes me uncomfortable that people would publicly criticise the decision without apparently giving any credit to the judge's expertise or to the fact that the review has yet to take place.

For example, Freedland criticises the judge for choosing to impose concurrent rather than consecutive sentences. Well, who knows what another judge might have done, but if the judge is asked to decide, and he gives cogent reasons for choosing one rather than the other (which this judge did: he expressly acknowledged that consecutive sentences would have been possible, indicating that he considered and then rejected this option), it is questionable whether commentators should then criticise him for that decision.

Successful appeals against unduly lenient sentences are fairly uncommon, I think, not least because there is always a range of sentences that could legitimately be imposed and the judge is the one tasked with picking within that range. In this case the judge was surely aware that the decision he took, whatever it was to be, would be scrutinised by the media. The case was a high profile one, and while that should not have affected the decision the judge took, it no doubt caused him to think particularly carefully about it, and to weigh the options available to him. So let's wait and see. There's obviously a concern here and I don't know yet whether it is justified or not, but as a general principle I wouldn't be surprised if the outcome of an impartial review was to uphold the judge.

Prest v Petrodel: Winning the Battle but Losing the War?

The Supreme Court today gave judgment in Prest v Petrodel. The case is about post-divorce financial arrangements, and asks what happens if one party has significant resources held by a company which he or she controls. The Supreme Court held that these assets should be taken into account by a family court judge when assessing the overall wealth and assets available to the couple. However, the judge is not then entitled to 'pierce the corporate veil' and order the company to discharge liabilities owed by one spouse to the other unless the company had been set up specifically to avoid those liabilities. That was not so on the facts of this case, though as it happened the properties owned by the companies in question were owned on bare trust for the husband, and therefore the court could order them transferred to the wife.

The consequence of that was that the wife won her appeal and the original order of the High Court Judge was restored (having been overturned in the Court of Appeal), but the reasons for doing so were different from those accepted by the High Court Judge. In terms of the legal principles, the Supreme Court unanimously upheld the Court of Appeal, meaning that the practice of some family courts of quietly ignoring the corporate veil must indeed now cease (as the Court of Appeal said at para 161). This seems like a case where the wife won her battle, but family law lost the war.

Piercing the Corporate Veil?

In law, an incorporated company has its own legal personality, and is a different legal actor from any individuals who are involved with it. Consequently, it can follow that the company is liable for things that it does, but the individuals within the company are not personally liable. The corporate veil refers to this divide between the company and the individuals. If the corporate veil is 'pierced', it means, basically, that this divide is ignored, such that either the company is (for example) made to discharge liabilities owed by an individual, or that an individual is (for example) made to discharge liabilities owed by the company.

As Lord Sumption says at para 16, there are many circumstances where similar things happen but which do not involve piercing the veil in the strict sense. So the controller of a company can be personally liable for its actions when acting as the company's agent or as a joint actor; and a company can be said to act on behalf of an individual, or to own property on an individual's behalf, if it acts as his nominee or trustee.

The Supreme Court judgment explains at length about the meaning of the corporate veil and the circumstances in which it may be 'pierced'. A 2009 decision by Munby J in the High Court provided a useful summary of the approach, and Lord Sumption summarised that decision at para 25:

Munby J formulated six principles ...: (i) ownership and control of a company were not enough to justify piercing the corporate veil; (ii) the court cannot pierce the corporate veil ... merely because it is thought to be necessary in the interests of justice; (iii) the corporate veil can be pierced only if there is some impropriety; (iv) the impropriety in question must ... be 'linked to the use of the company structure to avoid or conceal liability'; (v) to justift piercing the corporate veil, there must be 'both control of the company by the wrongdoer(s) and impropriety, that is (mis)use of the company by them as a device or façade to conceal their wrongdoing'; and (vi) the company may be a 'façade' even though it was not originally incorporated with any deceptive intent, provided that it is being used for the purpose of deception at the time of the relevant transaction. The court would, however, pierce the corporate veil only so far as it was necessary in order to provide a remedy for the particular wrong which those controlling the company had done.

For Lord Sumption, the 'wrongdoing' in question needed to relate to an attempt to evade liability; in other words, that the company was being interposed in an attempt to protect the individual who controlled the company from having to discharge existing liabilities that he owed. (It may be noted that a majority of the Justices (Lady Hale, Lord Wilson, Lord Mance and Lord Clarke; see paras 92, 100 and 103) were cautious about being too firm in saying that this was the only route to piercing the veil.) That would apply to matrimonial proceedings if, for example, during the breakdown of the parties' relationship, the husband set up companies and moved his assets into them. However, it did not apply to Prest because the companies were genuine and had been up and running for years before the parties' marriage broke down.

Matrimonial Proceedings

The big question underlying the Prest appeal was whether proceedings for financial orders following divorce, governed by the Matrimonial Causes Act 1973, fell outside this general approach or not. In other words, was a judge in the family court entitled to pierce the corporate veil in circumstances that fell outside the general rule?

The clear answer from a unanimous Supreme Court was: no. The MCA allows the court to redistribute any property to which a party is 'entitled'. The whole point of the corporate structure is that the individual is not 'entitled' to the assets within it; they are owned by the company. If the company has been set up as a sham, or the assets have been placed in it intentionally to attempt to avoid liability under the MCA, then normal principles would allow the corporate veil to be pierced. But if, as in Prest, the family has simply arranged their finances in whole or in part using company structures, then the MCA does not offer any way to access those assets.

That does not mean that such assets are ignored by the family court. Quite the contrary: by s 25(2)(a) the court is required to have regard to the 'income, earning capacity property and other financial resources' of each spouse. Consequently, the family judge is entitled to make enquiries into assets held in companies when assessing what the overall wealth of the family before the court is, and thereafter to take into account the existence of such assets when deciding what would be a 'fair' distribution of the parties' resources.

However, if the assets are held by a company then, in the normal run of things, those assets themselves cannot be interfered with by the court. The court will have to use its powers to make orders that achieve 'fairness' as best it can without interfering with that property itself. So it can make orders that affect other property; and it can make on-going maintenance orders that rely, for example, on the husband receiving dividends from his companies in order that he can meet the maintenance requirements to his former wife; and in some cases it could order that shares in the company be transferred to the wife. But property owned by the company itself cannot be interfered with by the family court.

Discussion

The wife in Prest won her appeal, in the sense that the original order in her favour (that certain UK properties be transferred to her name) was restored by the Supreme Court. Looking at the bigger picture, though, the reasoning of the Supreme Court leads to the implication that many similar cases will not end up the same way.

The wife in Prest was able to succeed because the Supreme Court was satisfied that the companies actually held the properties on trust for the husband as bare trustees. The properties had in fact been bought by the companies with the husband's money (rather than with money in the companies), and ordinary trust law principles say that if X buys property with Y's money then, absent other information, X will be held to be a trustee of that property, holding it for Y. With such a straightforward trust (called a bare trust) the beneficiary (the husband) is absolutely entitled to end the trust at any time and take the property for himself. He is therefore 'entitled' to it in the MCA sense of the word, and so the properties were available to be transferred to the wife.

Lord Sumption cautions against making general statements of principle in the application of this doctrine, but nonetheless suggests that as regards the matrimonial home 'the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company' (para 52). That may be so, but it would be overly optimistic to think that this assumption will be of any great help in achieving results which are 'fair' overall.

Of course, the family home is an important asset for most families; but for those with the kind of wealth to be making use of corporate structures for 'wealth management', the home is likely a drop in the ocean. If this is the only asset that, in practice, is available for the family court to transfer to divorcing wives, the overall effect will indeed by, as Thorpe LJ said in the Court of Appeal, to give 'an open road and a fast car' to the spouse attempting to keep assets out of the hands of his former spouse.

Prest therefore leads us to a good result on its facts (though note Lady Hale's caution about whether the wife might still be getting a raw deal: para 96), but it is hard to be overly optimistic about future cases ending up the same way.

More on the Marriage (Same Sex Couples) Bill

The issue of allowing same sex couples the right to marry has featured on this blog a number of times - first in March 2012 when I first argued in favour of this change; then in June 2012 when I took issue with three of the main arguments used against the change; and most recently in February 2013 when I sympathised with the difficult position that the Prime Minister had found himself in, attacked over this proposal from left and right alike. But here we are again.

Last Friday, after a fairly short but rocky road, the French equivalent law allowing same sex couples to marry was signed by President Hollande. Here on this side of the Channel, things are less straightforward. Apparently Tim Loughton MP (Con, East Worthing and Shoreham; formerly Children's Minister before he was sacked last autumn) is introducing an amendment to the Marriage (Same Sex Couples) Bill today. The amendment will say that, at the same time that marriage is opened up to same sex couples, civil partnership will be opened to heterosexual couples.

Now obviously proposed amendments to Bills do not necessarily end up being adopted, but this one is said to have the backing of 150 Conservative MPs (the Tory Party has a free vote on this Bill) and, at least possibly, the support of the Labour front bench. Superficially, it might sound like a good idea, but I can't begin to explain the many ways in which this makes me despair. Here's two for starters.

First, and most importantly, this is a wrecking amendment. Loughton is on record as being opposed to equal marriage rights for same sex couples, and this wrecking motion works in two different ways. One is that it makes it less likely that the Bill will be passed into law at all. In this instance, the way in which that is calculated to happen is that those favouring the amendment hope that, with it there, the government will pull the plug on the entire Bill. I'm not sure how likely that is on this occasion, given how committed David Cameron seems to be to the body of the Bill itself, but it's possible.

The other way that the wrecking motion works is that it delays the implementation of the Bill by making it more complicated. I'm not sure how effective this approach is on this occasion either, but it seems to have the government running scared, which says something about its potential. The alleged cost of the amendment is hard to assess objectively, because allowing straight couples to enter civil partnerships doesn't actually add any significant 'cost' unless these are straight couples who wouldn't have married.

There are some such people, of course, because they object to marriage for personal reasons (usually related to either its perceived religious status - which civil marriage doesn't have - or its patriarchal history which the law has long since resolved). But those people are making a personal choice, not having one imposed on them by law. The eligibility criteria for civil partnership are identical to those for marriage. (At the moment they aren't of course - the requirements as to the sex of the people involved are different - but those differences will be removed by this Bill.) So while some people who can marry but choose not to do so may later choose to enter civil partnership, they haven't really gained anything that they didn't have before. The legal consequences of marriage and of civil partnership are identical in all material ways.

That brings me to my second reason for sighing at Loughton's amendment. Civil Partnership was introduced in 2003-04 because the government of the day was led to think that it would be unable to get a same-sex marriage Bill through the House of Lords. Now, whether they were right about that or not, the compromise that they found was to enshrine all the same rights and duties in a status which had a different label. In legal terms, civil partnership is marriage - only the name is different (other than one or two inconsequential details).

It has always baffled me why a heterosexual couple would want a civil partnership, since to me is represents a blatantly discriminatory, lesser status while carrying all the same rights and duties. That lesser status is apparent in international law, for example. Any marriage performed in this country will be recognised as such around the world. A civil partnership, on the other hand, will only be recognised as carrying legal rights in a few places.

The proposal to allow straight couples to enter civil partnerships is absolutely not comparable with the French position of having marriage on the one hand and the PACS on the other - PACS comes with very significantly lesser rights and duties than marriage, and is consequently open to many more people than marriage. (Siblings, for example, can enter a PACS, but would not be able to marry.)

So if this amendment is passed, and if we end up with a situation where any couple, whether straight or gay, can enter either a marriage or a civil partnership, the law will have reached the farcical position whereby a stop-gap measure introduced to grant legal rights to same-sex couples in the face of social opposition will have been extended to create two virtually identical statuses which all couples can pick between.

Ironically, this amendment is being pursued not only by those who are opposed to equal rights for same-sex couples, but by those who are most enamoured with the arguments about protecting 'traditional marriage'. I think it is quite reasonable for Cameron to position his approach as supporting marriage - by extending marriage to same-sex couples, more people can marry and enter this special union. Those who support the amendment, on the other hand, are favouring extending to opposite-sex couples all the legal rights and duties of marriage, but outside marriage. How this fits with their pro-marriage agenda is beyond me.