Shadow directors beware: M v M and the application of Prest

The recent decision of the High Court in M v M EWHC 2534 (Fam) saw the award of £53 million to the wife, an award thought to be the highest to date in a contested divorce.

The case involved assets of over £107 million and provides family lawyers with a lengthy and descriptive judgment, applying the principles set out in the recent Supreme Court decision of Prest v Petrodel Resources Ltd and Others UKSC 34.

M v M concerned an application for financial relief under Part III of the Matrimonial and Family Proceedings Act 1984, made by the wife following an original petition for divorce in Russia, unaware that the courts of England and Wales had jurisdiction.

Throughout the judgment, Mrs Justice King was unrestrained in her assessment of the husband’s behaviour and character, stating that the case had “been a fantastic charade with the husband a shady puppet master in the background”.

Mrs Justice King found the husband in contempt of Court “many times over” for his breach of court orders and repeated failures to disclose his assets. She referred to the husband’s Form E as “a travesty” which was “largely blank” and “makes no reference” to properties of substantial value beneficially owned by the husband. The wife’s legal advisers, faced with such limited disclosure, “crossed and re-crossed the globe in an attempt to trace the husband’s assets, every penny of which had been acquired during the course of the marriage”.

As with Prest v Petrodel, M v M highlighted the importance of full and frank disclosure in proceedings, and the adverse inference that the courts could make due to a party’s failure to disclose their asset base fully.

The issues considered in the M v M judgment include:

• orders for financial relief under Part III
• failure to conduct full and frank disclosure
• adverse inferences
• assets held under a resulting trust/common intention constructive trusts
• implied intentions of a shadow director.