Mr Justice Mostyn:
- The central question that arises in this case is how trusts should be treated in the division of assets following divorce. Trusts have always aroused controversy in this exercise. This is because assets held in trust are not legally owned by either party. They are owned by third parties – the trustees.
- An interest under a trust may be fixed or discretionary. A spouse who is a beneficiary may have an indefeasible life interest, a fixed interest in remainder or he may be a discretionary object of capital and/or income. In the former instance, the spouse has identifiable property which belongs to him, is capable of being valued and included in the pool of assets to be divided, without further consideration of the position of the trustees. In the latter instance the spouse has no more than the right to be considered by the trustees in the exercise of their discretion.
- Analysis of the authorities shows that the Family Division has always brought to these cases a "a judicious mixture of worldly realism and of respect for the legal effects of trusts, the legal duties of trustees and, in the case of off-shore trusts, the jurisdictions of off-shore courts" (per Sir Mark Potter P in Charman v Charman (No.4) [2007] 1 FLR 1246, CA at para 57).
- I will now examine the various types of trusts which are commonly encountered in proceedings for a financial remedy following divorce.
Cipher trusts
- If the trust is obviously a "Dear Me" trust (an aphorism memorably and aptly coined by the late Mr James Comyn QC when at the Bar), that is to say a purportedly "discretionary" trust set up by a spouse where the trustees (either because the settlement is a sham, or because they act in breach of trust, or because the trust is the husband's alter ego) have historically been totally compliant to his wishes and where he has had unfettered access to the capital and income of the trust in a way indistinguishable to assets in his direct ownership, then the assets are properly to be regarded as his, and the trustees to be seen as mere ciphers. Here the court simply ignores the trust structure. An example of this phenomenon is Minwalla [2005] 1 FLR 771.
Trusts of land
- Equally, when the trust is a fixed trust such as a trust of land (or an old "trust for sale"), where the parties are the only beneficiaries and their interests are defined, the task for the Court is uncomplicated. Examples of such cases include Brown v Brown [1959] P 86 and Smith v Smith [1970] 1 All ER 244, [1970] 1 WLR 155, CA where the husband had deserted the wife and gone abroad to work; the sole asset was the matrimonial home which was in joint names, and which constituted a post-nuptial settlement. The Court of Appeal varied the settlement by extinguishing the husband's interest in the house as if he were then dead and the wife had survived him, but ordered that she should forego any claim to future maintenance, lump sum, or secured provision. The trust asset (as one would expect with a trust of property in joint ownership) was to all intents and purposes in the direct ownership of the parties.
Nuptial settlements
- For bona fide trusts, a key distinction is between nuptial and non-nuptial settlements. If the trust is a nuptial settlement then notwithstanding that the assets are legally held by third parties as trustees, and that yet further third parties may be beneficiaries along with the husband, the trust assets fall within the court's dispositive powers under s24(1)(c) Matrimonial Causes Act 1973. This power to vary is one of the oldest in the canon finding its origin in s5 Matrimonial Causes Act 1859. The trustees are entitled to be heard (FPR 2010 r9.13(1) and (4)) and any children beneficiaries must be represented (r9.11). The variation powers extend to making outright provision to the applicant, and may even be exercised where the trust is offshore, although, following well-established principle, the court will be unlikely to make a variation order where both the trust and its assets are overseas unless it is satisfied that the order would be implemented by the court exercising effective control over the trust (Goff v Goff [1934] P 107, Hamlin v Hamlin [1986] Fam 11). If, however, the Court is satisfied that the variation order will be effective against the husband in personam, then the order is more likely to be made (Razelos v Razelos [1969] 3 All ER 929).
- It has been said that the court will exercise caution before making a variation order. The authorities were summarised by Munby J in Ben Hashem v Al Shayif [2009] 1 FLR 115:
[290] Surveying all this learning, identifying what is of enduring significance whilst ruthlessly jettisoning what has become more or less irrelevant in modern conditions, I can perhaps summarise matters as follows:
(i) The court's discretion under s 24(1)(c) is both unfettered and, in theory, unlimited. As Miss Parker put it, no limit on the extent of the power to vary or on the form any variation can take is specified, so it is within the court's powers to vary (at one end of the scale) by wholly excluding a beneficiary from a settlement, to (at the other end) transferring some asset or other to a non-beneficiary free from all trusts. She points to E v E (Financial Provision) and C v C (Variation of Post-Nuptial Settlement: Company Shares) as illustrations of property held on trust being transferred free from any trusts to the applicant, in E v E a sum of £50,000 and in C v C shares in a Cayman company.
(ii) That said, the starting point is s 25 of the 1973 Act, so the court must, in the usual way, have regard to all the circumstances of the case and, in particular, to the matters listed in s 25(2)(a)–(h).
(iii) The objective to be achieved is a result which, as far as it is possible to make it, is one fair to both sides, looking to the effect of the order considered as a whole.
(iv) The settlement ought not to be interfered with further than is necessary to achieve that purpose, in other words to do justice between the parties.
(v) Specifically, the court ought to be very slow to deprive innocent third parties of their rights under the settlement. If their interests are to be adversely affected then the court, looking at the wider picture, will normally seek to ensure that they receive some benefit which, even if not pecuniary, is approximately equivalent, so that they do not suffer substantial injury. As Sheldon J put it in the passage in Cartwright which I have already quoted: 'if and in so far as [the variation] would affect the interests of the child, it should be permitted only if, after taking into account all the terms of the intended order, all monetary considerations and any other relevant factors, however intangible, it can be said, on the while, to be for their benefit or, at least, not to their disadvantage.
- The statement in (iv) is surely of wider application than cases about variation of settlement alone. A respondent's property rights obviously should not be interfered with by way of lump sum or property adjustment order in favour of a claimant further than is necessary to achieve a fair and just result. So I do not read this proposition as importing an extra degree of caution specifically for variation of settlement cases.
- The statement in (v) must surely be read in the light of the new distributive régime mandated by the House of Lords in White [2001] 1 AC 596 and Miller and McFarlane [2006] 2 AC 618. If the court has decided that the assets of a nuptial settlement amount to matrimonial property which falls to be shared then that sharing may very well be in the form of outright provision which deprives a contingent or discretionary beneficiary down the line of the chance of benefit. In Charman the Dragon Trust's beneficiaries from its inception in 1987 were the spouses, their now adult children, the future children of the husband, his remoter issue, such charitable objects or purposes as the Trustee may determine from time to time, and, finally, such other person(s) or class of persons added under the relevant power to the class of beneficiaries. Accordingly, the class of beneficiaries was not closed. The Trust Period lasted until 2067. There was no protector of the Trust, albeit Mr Charman retained a fiduciary power (subject to the usual strict duties) to remove and appoint new or additional trustees. In 2004 the trustee resolved to appoint the income of the trust for life to Mr Charman. His wife was "relatively fortunate" in that she could make her claim against the non-trust assets (see the discussion about off-setting below). It was argued on behalf of Mr Charman that had she in fact been forced to apply for a variation of settlement she would not have been awarded more than a life interest in part of Dragon, so as not to disturb the rights of other beneficiaries, and that therefore her sharing right to the assets of the trust should be limited to the capitalised value of such a life interest. This was firmly rejected, Sir Mark Potter P stating at para 56(b):
Fifth, we see no reason to accept that, just because after the breakdown of the marriage Codan formally assigned to the husband a life interest in Dragon, the result of an application to vary it would have been provision for the wife only of a life interest, albeit presumably subject to a power in her trustees to advance capital to her; our instinct, on the contrary, is that on the facts of this case outright provision would have been more likely.
- On the other hand, if a trust with authentic third party beneficiaries is set up during the marriage then that may well have been as a result of an agreement, express or tacit, between the parties. In Miller at para 153 Baroness Hale stated:
This is simply to recognise that in a matrimonial property regime which still starts with the premise of separate property, there is still some scope for one party to acquire and retain separate property which is not automatically to be shared equally between them. The nature and the source of the property and the way the couple have run their lives may be taken into account in deciding how it should be shared.
Lord Mance made similar, arguably stronger, observations at para 170. Thus it may be argued that the court should hesitate before overriding a decision or agreement made during a marriage to isolate funds in a separate legal structure for the formal benefit not only of the spouses but also of their children and remoter issue.
- I have mentioned above that on a variation application the trustees are entitled to be heard (FPR 2010 r9.13(1) and (4)) and any children beneficiaries must be represented (r9.11). I take the reference to "a child" in r9.11 to be a living minor child. The scheme of the rules assumes that the interests and views of adult children and the interests of the unborn will be represented by the trustees. However, those interests and views may not be best voiced if the trustees, as here, have, notwithstanding their joinder to the proceedings, refused to participate in the proceedings. In such circumstances I suggest that it is incumbent on the applicant to draw the claim to the attention of any significant beneficiaries explaining that they are at liberty to apply to intervene, or otherwise to make representations. In this case the parties' adult son is a beneficiary and following my suggestion on Day 2 of the trial he was able on Day 4 to make written submissions to me having taken legal advice for that purpose.
- As with so many aspects of financial remedy law, the decision whether to vary a nuptial settlement, and if so how, is both fact-specific and discretionary.
Non-nuptial settlements
- If the trust is not a nuptial trust then the Family Court is left with what has been described as "judicious encouragement" under the Thomas v Thomas [1995] 2 FLR 668, CA line of cases, which I attempted to summarise in my decision of TL v ML [2006] 1 FLR 1263. Since that decision there have been a number of further important authorities including Charman v Charman No.1 [2006] 2 FLR 442, CA; A v A & St George Trustees Ltd [2007] 2 FLR 467; Charman v Charman (No.4) [2007] 1 FLR 1246; SR v CR [2009] 2 FLR 1083; B v B (Ancillary Relief) [2010] 2 FLR 887; D v D [2011] 2 FLR 29; and Whaley v Whaley [2011] EWCA Civ 617. The question is whether all or part of the trust assets can be attributed to the beneficiary spouse.
The likelihood test for attribution
- Although the test has been variously stated it is most directly and clearly expressed by Wilson LJ (as he then was) in Charman v Charman No.1 at para 13:
In principle, however, in the light of s.25 (2)(a) of the Act of 1973, the question is surely whether the trustee would be likely to advance the capital immediately or in the foreseeable future.
- The law on this subject was summarised by Lewison J (as he then was) in Whaley at paras 113 and 114:
113. As I have said, a discretionary beneficiary has no proprietary interest in the fund. But under section 25 the court looks at resources; not just at ownership. Thus whether a beneficiary under a discretionary trust has a proprietary interest is not relevant. The resource must be one that is "likely" to be available. This is the origin of the "likelihood" test. No judge can make a positive finding about the future: the best that can be done is to assess likelihood. What is relevant is the likelihood of the trust fund or part of it being made available to him, either by income or capital distribution. If the husband were to ask the trustees to advance him capital, would the trustees be likely to do so: Charman v Charman [2006] 1 WLR 1053; A v A [2007] 2 FLR 467. The question is not one of control of resources: it is one of access to them.
114. In deciding that question the court must look at the facts realistically. The court will not put "undue pressure" on trustees to exercise their discretion in a particular way, but may frame an order which affords "judicious encouragement" to provide one spouse with the means to comply with the court's view of the justice of the case: Thomas v Thomas [1995] 2 FLR 668. The cases do not say what amounts to "undue pressure". But in Thomas Glidewell LJ said what would not be undue pressure (viz. if (a) the interests of other beneficiaries would not be appreciably damaged and (b) the court decides that it would be reasonable for the husband to seek to persuade trustees to release more capital to enable him to make proper financial provision for his former wife). Even if the court makes such an order the trustees are not bound to comply with the husband's request; but it is "plainly proper for the trustees to take it into account … and commonly it will be decisive": Lewin on Trusts para 29-157.
- Importantly, in SR v CR Singer J recognised that a Court is not hidebound by the say-so of the trustees. At para 60 he stated:
What inferences should I draw from the written evidence in the case and from the oral evidence in particular of H, MR and Mr N? I see this as essentially a question of fact. I do not accept that a judge must simply accept the ipse dixit of a person in the position of MR, or indeed of the trustees, as to what will or will not come H's way if an award leaves him with limited resources. Is it correct as Mr Mostyn invites me to conclude that MR and H are engaged in a deliberately duplicitous complicity and that the truth is that it is more likely than not that trust assets will be released to H, one way or the other, to supply rather more than the needs of a student lifestyle?
Non-participation by trustees: inferences
- In this field the Court is therefore engaged in a fact finding exercise as to whether the trustees will likely benefit their beneficiary if called on to do so. Of course, the court is not making a judgment about facts which have happened; it is making a judgment about the likelihood of the eventuation of future facts. It is undertaking the task specifically set for it by Parliament in s25(2)(a) MCA 1973 of judging what resources the party in question "is likely to have in the foreseeable future". It will make its judgment on the available evidence, which will include evidence deriving from the trustees. If the trustees have refused to participate meaningfully or helpfully in the inquiry then neither they nor their beneficiary can complain if the court draws robust conclusions as to the likelihood of future benefit. In Whaley, as it happens, I conducted the pre-trial review and recorded in the preamble to the Order a recital expressing the Court's expectation that the principal trustee, Mr Hess, attend in person to give oral evidence at the final hearing. Mr Hess did not do so, and Baron J found that "Mr Hess was/is prepared to do the husband's bidding". In her judgment at para 35 Black LJ stated:
The views to which Baron J was led by the rest of the evidence were plainly bolstered by Mr Hess not being available to give evidence despite the fact that the order made by Mostyn J at the pre-trial review included in the preamble a recital of the court's expectation that he attend in person to give oral evidence at the final hearing.
- To similar effect Moylan J stated in B v B (Ancillary Relief) [2010] 2 FLR 887 at para 77:
I must be cautious in what I say in response to the line taken by and on behalf of the trustees because they have not made themselves available to answer questions which arise from the information and documents provided by them. However, as a general point, trustees must consider whether co-operation with this court is in the interests of their trusts. However cautiously the court approaches its statutory task, there must be an increased risk that the court will obtain or might obtain the wrong picture in the absence of all the information. Why should trustees consider it in their beneficiary's or the trust's interests to take a risk that this court might obtain an inaccurate picture? I would hope they would decide that it is not.
- I am aware that overseas trustees sometimes take a highly defensive and limited position in their participation in the court's inquiry for fear that anything more active will be construed as a submission to the court's jurisdiction. In Mubarak v Mubarik [2009] 1 FLR 664, Birt DB sitting in the Royal Court of Jersey stated at para 67:
Significantly, in neither case had the trustees submitted to the jurisdiction of the English court. As we have seen, the enforcement of a foreign judgment is based upon the foreign court having had jurisdiction (for the purposes of enforcement of that judgment overseas) over the person against whom enforcement is now sought in Jersey. The position in relation to an order varying a trust is somewhat more complicated than a conventional civil action between A and B. In the latter case, it is merely a question of whether A and/or B has submitted to the jurisdiction of the English court. In the case of the variation or alteration of a trust, those affected are likely to include all the beneficiaries as well as the trustee. The effect of any variation order is not usually confined to the husband and wife. Other beneficiaries may be affected. Furthermore the trustee has legal title to the trust fund and is responsible for holding the trust assets in accordance with the terms of the trust deed. Quite apart from other beneficiaries, a trustee is clearly someone who will be substantially affected by an order of an English court altering a trust. Accordingly, unless a trustee of a Jersey trust has submitted to the jurisdiction of the Family Division, it is very hard to see how any judgment of the Family Division varying or altering a Jersey trust can be enforced in Jersey under the ordinary rules of private international law because the Family Division will not have had jurisdiction over the trustee for the purposes of the enforcement of foreign judgments in accordance with r 36 of Dicey.
- I can therefore see why overseas trustees may not want to submit to the jurisdiction of the English Court. They may prefer to keep their powder dry and to wait to see what judgment emerges before deciding whether or not to resist enforcement proceedings in their local court. I have to say, however, that I find it hard to see why participation by the trustees in a helpful or meaningful way in this court's inquiry qua witness could be construed as a submission to the jurisdiction.
Judicious encouragement
- Once the judgment as to the likelihood of future benefit has been made the scale of the resources will be established, which will then be divided in accordance with the familiar distributive principles of needs, sharing and compensation.
- Although the exercise is said to be one of "judicious encouragement" this is often a misnomer. In two trust scenarios the court can find the facts and apply the distributive principles and then make an award effectively expressing its decision. The first scenario is where the trust is nuptial and an effective order for variation can be made, for example where this court is satisfied that its variation order will be enforced by the overseas court, or where the trust assets are within the jurisdiction of this court and are subject to its enforcement powers. In this latter situation the trustee is likely not to be criticised by his local court for "bowing to the inevitable by complying with an order of the court in whose jurisdiction the real property in question is situated" (see Mubarak v Mubarik at para 79).
- The second scenario is where there are sufficient assets outside the trust, but within this court's powers, for it to be able to make its full award out of the non-trust assets by offsetting. In this way the majority, sometimes the overwhelming majority, of the non-trust assets go to the claimant, leaving the respondent to collect the benefit from the trustees which the court has judged he is likely to receive. Thus in Charman 87% of the non-trust assets were awarded to the wife (£48m). In SR v CR 80% of the non-trust assets were awarded (£6.25m). In Whaley the court awarded 94% of the non-trust assets to the wife (£3m). In this scenario the court is not judiciously encouraging the trustees to make money available to the claimant; rather, it is by its award indirectly encouraging it to provide for its own beneficiary. But it can make an effective award.
- The only truly problematic situation is where the trust is not nuptial and where there are no or scant assets outside the trust. In such a circumstance the court might find that its findings as to the likelihood of advancement are frustrated by a refusal by the trustees to do what the court expects them to do. In such a case a deal of worldly realism is called for.
This case: background
- The facts are largely agreed. I have drawn on the written submission of both counsel in setting out the background.
- The husband (H) and the wife (W) are both 65. They married on 16 August 1980. They are Mauritian by birth but have lived here for many years. H asserts that he is domiciled in Mauritius for income tax purposes, but he accepts he is deemed domiciled here for inheritance tax purposes because he has been resident here for more than 17 of the last 20 years. W's domicile is less clear. She may or may not be domiciled here for income tax purposes but will certainly be deemed domiciled here for Inheritance tax purposes. They have one child, C, who is 25. H was the main breadwinner during the marriage and is now retired. W's role during the marriage was principally that of mother and housewife.
- The former matrimonial home, known as "Green Farm", is a substantial property set in 72 acres in Kent which was purchased in April 2000.
- W moved out of Green Farm in May 2009 into a flat which she is renting.
- C and his girlfriend live in the annex at Green Farm. C and his parents are involved together in a leisure business, CJ Ltd, although W's participation is passive. H and W jointly have 48.56% of the shares; C has 46.7% and a third party has 4.74%. The business owns two premises in Kent which were purchased in December 2006 for £675,000 which was provided by means of a loan in the joint names of H and W from HSBC but which was marked in the books as a directors' loan from H. The loan has been reduced to £439,747 by payments from the business, although at present the business is only covering the interest. The director's loan now stands at £645,391.
- H has in recent years suffered serious ill health, suffering a stroke in 2005 and undergoing two major operations recently. He has been afflicted by periodic severe ill health during these proceedings.
- The family's wealth derives predominantly from H's former interest in a company called ABC Ltd (ABC).
- In 1990 H and two fellow directors achieved a management buy-out of ABC. Each of them acquired a 33.33% shareholding.
The floatation, the CGT mitigation scheme and the formation of the trusts
- In 1994 an IPO of ABC was proposed and riches were on the horizon. In anticipation of the floatation H and his two fellow shareholders made arrangements to mitigate tax on future capital gains which may accrue to their respective shares of the proceeds. In H's case, being non-domiciled, the arrangements were perhaps less necessary than for his partners, as (subject to any change in the law) he would have been able to have put his money offshore and suffer no tax on the gains save insofar as they were remitted onshore. The arrangement involved the creation on 27 February 1994 of two Jersey trusts (No.1 and No.2) and a company incorporated in the British Virgin Islands – Giloch Investments Ltd, later renamed Giloch Ltd (Giloch). I shall examine later the trusts and their interests in Giloch to explain how the tax avoidance scheme was designed to work.
- At the same time that the trust structure was established an off-the-shelf company (Driveany) was acquired. H subscribed personally for about 20% of its shares and Giloch for about 20%. Each of the members of ABC then sold their shares in ABC to Driveany which changed its name to DEF. DEF's shares were then floated in about 1996 on the Stock Exchange with a placing of 25% of its share capital. Giloch provided about 3.2m shares towards that 25% placement; H did not provide any personally. The placed shares sold well and large sums, around £3m, flowed into Giloch. The shares in DEF of which H was a direct owner outside the trusts were subsequently lost when DEF later went into insolvent liquidation.
- As originally created on 27 February 1994 the No.1 Trust was a discretionary trust for a class of beneficiaries comprising H as settlor, W as his spouse, their child C (then aged 8), H's siblings, any employee of ABC and the Charities Aid Foundation. The trustees are now HSBC in Jersey.
- In August 2000, by a deed made in exercise of the trustees' power of appointment, the whole of the capital of the No.1 Trust was re-settled to provide the income to H for life (with power to appoint capital to him) and thereafter to W, as his spouse, for her life (with power to appoint capital to her), and thereafter their child, siblings and siblings in law and the Charities Aid Foundation. I was not told why this change was made, but it is obvious that it was for fiscal reasons. Perhaps it was to avoid the Inheritance Tax treatment of discretionary trusts.
- In a letter of wishes dated 12 July 2006, H stated that the trustees should look to H as the principal beneficiary during his lifetime and then W during her lifetime and then after their deaths C should benefit from the remainder.
- The No.2 Trust was also created on 27 February 1994. H and W and C are specifically excluded persons from the class of beneficiaries. The beneficiaries are grandchildren, remoter issue, the Charities Aid Foundation, siblings and siblings in law and employees of ABC. The purpose of the No.2 Trust was fiscal, and forms the key element of the capital gains tax mitigation arrangements.
- Giloch has two classes of shares. There are 10 ordinary shares all owned by the No.1 Trust and 1,000 deferred shares all owned by the No.2 Trust. The ordinary shares belonging to the No.1 Trust are entitled to all of the declared dividends of Giloch which can include a dividend in specie of all of the assets of Giloch. The deferred shares belonging to the No.2 Trust are not entitled to a dividend but are entitled to the capital of Giloch on a winding up. Neither class of shares carries voting rights applicable to the potential benefits of the other. Put another way, the No.2 Trust cannot vote on the question of a dividend and the No.1 Trust cannot vote on a winding up.
- This structure represents a very clever piece of architecture which has the effect of sheltering from tax capital gains made by Giloch. This is best explained by a note of a conference held with tax counsel on 28 June 1995. It states:
(i) Capital gains made in Giloch are attributed to the No.2 Settlement by s13 TCGA 1992. However, no UK tax liability will arise on capital gains made by or attributed to the trustees because they are non-UK resident. Also, no UK tax liability will arise on either the Settlor or the beneficiaries because ss86/87 TCGA 1992 cannot apply when the settler is non-UK domiciled as is the case here.
(ii) Capital gains made by the No.1 Settlement are also not taxable by virtue of [H's] non-UK domicile status.
(iii) Capital gains made by both the No.1 and No.2 Settlements could be distributed to the beneficiaries by way of capital appointments without giving rise to UK tax liabilities even if the sums were remitted to the UK.
- Although ingenious and effective from a fiscal point of view this share structure has caused considerable problems in this divorce case when analysing to which trust the value of Giloch should be attributed.
- The conference with tax counsel was to discuss a reordering of the trust structure, although in the event nothing was done.
- No-one should criticise H for seeking to mitigate the impact of tax, even if his scheme has come home to roost in these proceedings. As long ago as 1934 Justice Learned Hand stated "anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes" (Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934)). To similar effect Lord Tomlin stated in 1936 "every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax" (IRC v. Duke of Westminster (1936) 19 TC 490, [1936] AC 1). But what is unacceptable is reliance in divorce proceedings on ingenious avoidance schemes to obscure the reality of the scale of a party's resources.
- In her evidence, under cross-examination, W stated to me that she was aware of H's intention to put the ABC shares into trust. While she thought that it was to avoid IHT she admitted that the objective was "to pass on as much money to C as possible after our deaths". She went on to state, however, that H told her that "whenever we need money from the trust it will be available". W's admission was inconsistent with what she had stated in her principal affidavit:
The trusts, incorporating the majority of our assets were created for tax reasons. I do not recall of a time, prior to the hearing on 7 December 2010, when these trusts had been referred to as "dynastic" by [H], Mr M or anyone else. At the time the trusts were established, C was 8 and so far as I was aware there was never any consideration of what would happen to any wealth remaining when we died.
- H stated in his evidence that the reasons for the arrangements was to "was to set up a family trust for me, my wife and my son". This was consistent with what he had stated in his principal affidavit:
Following the sale of my shares, a fellow board member, Mr P counselled me on the benefits of settling assets on trust in order to mitigate potential tax liabilities and to preserve assets in perpetuity for the whole family. I was not financially sophisticated nor had I had any experience of managing such significant assets but I was attracted with the potential benefits of a trust and in particular I was keen to preserve assets for C's benefit, as was [W]. … It is fair to say that I was not familiar with the nuances of the trust structures. In very broad terms, I understood that the intention of the trusts was to mitigate tax and, crucially, to preserve assets for C and his future generations, together with our wider family members if necessary and appropriate. I knew that by settling the assets on trust I could not direct how the trustees operated the trusts and that I was only able to make requests for financial benefit but that such requests could be refused by the trustees. Ultimately it was their decision as to how to manage the trusts. I was aware that assets were split between the Trusts.
- In his written submission C stated:
My understanding is that a major focus when setting up the No.1 Trust was to ensure that assets contained therein are preserved. The idea as communicated to me has always been that my father and my mother can enjoy the income from the trusts for their lifetime and thereafter I will be effectively in the position of principal beneficiary, and the expectation on me would be that I as a beneficiary would continue to be sensible in relation to the No.1 Settlement's assets with a view to preserving them in the trust for the benefit of my children, and beyond. I have always been told that I would be able to live comfortably off the trust and if I was careful my children would also be able to have a good life as a result of this structure. My preference is to work, earn my living and build a successful enterprise of my own, but the trust's being there enabled me to start and try to build a business in a field which genuinely interest me, and I value that greatly.
It is right that I should treat C's submission with caution as it was not sworn and he did not appear to give oral testimony.
- Having considered the matter carefully I conclude that while the primary focus or objective of the arrangements was to avoid CGT there was a clear collateral understanding between H and W that the trust arrangement was established to benefit all of the members of the family, including C, and for future generations.
The end of the marriage and the litigation
- Although W states that in her mind the marriage was breaking down from 2003 it is invidious to examine the quality of a marriage prior to actual separation, which in this case occurred on 14 May 2009. The first solicitor's letter was written on her behalf on 8 July 2009 and her petition was issued on 13 July 2009, followed by Form A on 15 July 2009. Decree Nisi was pronounced on 24 November 2010. The First Appointment was held on 11 January 2010 when the trustees were joined to the proceedings[1]. The FDR was held on 7 December 2010 when H was ordered to pay the costs thereof by virtue of his very late disclosure of Dr Masters's first report (see below). The PTR took place on 18 July 2011. The final hearing commenced before me on 17 October 2011 with a time estimate of 5 days.
Add-back
- On 1 July 2009 H gifted C £18,000 and this was followed by further gifts of £57,010 on 3 July 2009, £50,010 on 10 July 2009 and £15,010 on 12 August 2009; a total of £140,030. W seeks that these sums be added back to the pool of divisible assets as a wanton dissipation. I attempted to summarise the principles applicable to this technique in my decision of N v F (Financial Orders: Pre-Acquired Wealth) [2011] 2 FLR 533 where I stated at para 39:
In this country we have separate property. If a party disposes of assets with the intention of defeating the other party's claim then such a transaction can be reversed under s 37 of the MCA 1973. Similarly, where there is 'clear evidence of dissipation (in which there is a wanton element)' then the dissipated sums can be added back or re-attributed (see Vaughan v Vaughan [2008] 1 FLR 11 at para [14]). But short of this a party can do what he wants with his money. What is not acceptable is a faint criticism falling short of either of these standards. If a party seeks a set aside or a re-attribution then she must nail her colours to the mast.
- Although intellectually pure, the problem with this technique is that it does not re-create any actual money. It is in truth a process of penalisation. In my judgment it should be applied very cautiously indeed and only where the dissipation is demonstrably wanton. I am not satisfied that here the gifts to C are to be characterised in this way. True, the timing is suspicious, but other than that there was no evidence that the gifts were anything other than bona fide. They would represent sensible IHT planning anyway. I therefore decline to add the gifts back. Generally speaking, I suggest that it would be altogether better where a reversal of a transaction is sought, that it is made pursuant to s37 MCA 1973, where the disponee can be heard and where strict statutory criteria must be met.
H's litigation conduct
- On 14 June 2009 H's financial adviser Mr M wrote to W setting out H's then proposal that W should receive a home costing £400,000 and an annual income of £36,000. In that letter Mr M wrote:
What I am quite certain of is that if your demands substantially exceeded what he is prepared to provide you with, in order to obtain those demands you will almost certainly have to file for a divorce. In the event of such course of action, it would become very protracted, taking maybe several years and very costly for both of you, with no guarantee as to the outcome. I am aware that according to the Norwich Union the average cost of divorce is in the region of £28,000. As the Trust would be involved the costs would probably be greater than this. I also understand that the Trust is governed by Jersey Law not English Law which further complicates the issue. In the event of filing for a divorce, [H] would do all in his power to draw the proceedings out for the longest period of time.
In his evidence H asserted that he knew nothing of this; it was Mr M acting off his own bat. I reject that evidence entirely. Even allowing for a fierce determination to win this sort of threatening behaviour is unacceptable. The fact is that this case has been drawn out at significant costs to final trial. H's costs are £184,231; W's £123,614. Although costs will be dealt with separately it is distinctly possible that H's conduct will have adverse costs consequences for him.
- On the most recently available figures the assets of the No.1 Trust are as follows:
| Green Farm, net of sale costs |
1,552,000 |
| BR House, net of sale costs |
315,250 |
| Quoted shares |
181,173 |
| Dividend receivable |
42,238 |
| Others |
1,498 |
| |
2,092,159 |
| Owed by H |
100,000 |
| loan from Giloch |
(2,318,515)
|
| |
(126,356) |
The No.1 Trust also owns the 10 ordinary $1 shares in Giloch. The No.2 Trust owns the 1000 deferred shares in Giloch and nothing else.
Giloch's position is:
| Investments, cash |
2,217,962 |
| Loan to No.1 Trust |
2,318,515
|
| |
4,536,477 |
- On 20 August 2009 HSBC in London wrote to Dr Colin Masters, a tax specialist, sending him a deal of documents and asking him specifically for advice in these terms:
[W] has filed for divorce. The advice that the client requires is therefore:
(i) How to access the value in the trusts in case the assets need to be distributed as a result of any divorce settlement?
(ii) What would the tax consequences be on the extraction of the trust's assets?
(iii) Which would be the most tax-efficient method of extraction?
- The report from Dr Masters in the court bundle is dated 20 December 2009, which is a Sunday. It is likely that this is a date generated by the word processing program automatically and that H had the report considerably earlier. In an email from Dr Masters to a lady at HSBC dated 9 November 2009 Dr Masters speaks of his "November 2009 report". It is likely that this is the same report which is in my papers and dated 20 December 2009. In that report Dr Masters wrote:
6.1 From the above analysis it will be seen that I feel that the most tax-efficient method of extracting value would be:
6.1.1 The trustee of the No.1 Settlement exercises its rights to after the rights attaching to the shares to reallocate the rights to assets to the ordinary shares. The trustee of the No.2 Settlement must not have any hand in this process.
6.1.2 The trustee of the No.2 Settlement, in due course, would make a paragraph 126 rebasing election
6.1.3 Giloch is wound up and its assets are distributed to the trustee of the No.1 Settlement on winding-up.
6.1.4 At the appropriate time, the trustee of the No.1 Settlement would appoint the assets to [H] and/or his wife.
- On the balance of probabilities I find that H had this report (but had not shown it to his solicitors) when he swore his Form E on 15 December 2009. In Box 2.14 the Form seeks the following information:
Trust interests (including interests under a discretionary trust), stating your estimate of the value of tile interest and when it is likely to become realisable. If you say it will never be realisable, or has no value, give your reasons.
In response to this H wrote:
The [MJ] No.1 Settlement dated 17 August 2000. I am the settlor of the Trust and a beneficiary. My wife is a secondary beneficiary. The trust owns Green Farm and also BR House as referred to in Section 2.1. The trust also holds quoted and unquoted investments and bank deposits. The unquoted investments include 10 ordinary $1 shares in Giloch Limited. The balance of the No.1 Settlement as at 12 August 2009 was (£558,805). The balance of Giloch Limited as at that date was approximately £4m. The deferred shares in Giloch Limited are owned by the [NJ] No.2 Settlement dated 27 February 1994. I am the settlor of that Trust but I am excluded from it. My wife is also excluded.
H gave as the "total NET value of [his] interest" this statement: "This has not been calculated". It is impossible to conceive that H's solicitors would have known of the existence of this report when they drafted H's Form E. They would never have allowed such misleading representations to have been advanced in it.
- It is a sorry state of affairs that H should have suppressed Dr Masters's advice when making his Form E, which was of course, that all the value in Giloch could be elevated in a tax-efficient way to the No.1 Trust and made available to H and W. The obligation to fill in Form E truthfully is absolute. The integrity of the system depends on it. The obligation is not just to tell the truth, but the whole truth and nothing but the truth. H's default in suppressing this key advice was delinquent. But it gets worse, for when asked in questionnaire to produce documents containing advice about his financial affairs H stated in reply on 18 May 2010 "[H] has obtained legal advice in relation to the trusts from his solicitors and Masters Tax. Such advice is subject to privilege". The report only emerged on 30 November 2010 when a letter was written by H's solicitors in the following terms:
Yesterday evening when I saw you I mentioned that there was a document in our possession in respect of which our client claimed privilege when putting together his Replies to Questionnaire and which I have discovered very recently was in fact disclosed by my client to the Trustees of the No.1 and No.2 Settlements, which necessarily means that as they are parties to the ancillary relief proceedings as Trustee of the No.1 Settlement no such privilege exists. Accordingly, I enclose a copy of the Masters Tax Report prepared for my client dated 20 December 2009
This letter is difficult to understand. The report was not disclosed by H to the trustees; rather, it was commissioned and received directly by them. Further, the trustees had been joined to the proceedings on 11 January 2010, 10½ months earlier. I am at a loss as to how privilege could tenably have been claimed by H in respect of a report about tax commissioned by HSBC, a separate party to the proceedings[2]. This aspect of H's litigation strategy is questionable, to say the least.
Analysis of the trust structure
- The accounts of the two settlements have been all over the place in their representation of the value of the money held in Giloch. Mr Southgate has prepared a table showing the varying treatment:
| Accounting period |
Giloch value included in No.1? |
When disclosed |
| 6 April 2007 – 12 August 2009 (draft) |
No |
H Form E Dec. 2009 |
| Yr to 5 April 2004 |
Yes |
H Replies May 2010 |
| Yr to 5 April 2005 |
Yes |
H Replies May 2010 |
| Yr to 5 April 2006 |
Yes |
H Replies May 2010 |
| Yr to 5 April 2007 |
Yes |
H Replies May 2010 |
| Yr to 5 April 2008 |
No |
H Replies May 2010 |
| Yr to 5 April 2009 (draft) |
Yes |
H Replies May 2010 |
| Yr to 5 April 2009 |
No |
H letter 18 Oct 2010 |
It was only in the week before the final hearing in a letter dated 11 October 2011 that the trustees' Jersey lawyers conceded that:
The Trustees have sought independent advice on the accounting treatment and it is apparent that as a matter of accounting practice there is no single approach that would typically be adopted in the circumstances.
- Dr Masters was later instructed as a SJE. His final report is dated 26 August 2011. It identifies 11 different ways in which value may be extracted from the two settlements and Giloch. He explained that the Trustees have a number of alternative routes by which to enable the resources of Giloch to be made available to the parties, but:
i) The most tax efficient and economical of them is for a dividend in specie of the assets of Giloch to be declared in favour of the No.1 Trust whilst H's life interest in the No.1 Trust is in place so that he would become entitled to them as of right;
ii) This would be tax free in H hands unless and until he decided to remit funds onshore (which he has never done);
iii) H could then make a lump sum payment to W in cash offshore;
iv) W could then bring the cash onshore tax free (which would not amount to a remittance).
- In my judgment, the No.1 Trust is unquestionably a post-nuptial settlement. H, W and C are all excluded from benefit of the No.2 Trust but it is an integral, indeed key, component of the overall scheme. It is the left hand to the No.1 Trust's right hand. In Parrington v Parrington [1951] 2 All ER 916 Pearce J held that two separate but contemporaneous deeds by which a husband and wife divided up their hotel business between themselves was in substance one transaction which qualified as a nuptial settlement between spouses within the meaning of s25 of the Matrimonial Causes Act 1950. Pearce J stated:
The two deeds are one transaction whereby the parties, on agreeing to separate, arranged that the husband should make some provision for his wife by transferring to her the hotel and guaranteeing her future obligations and that in return she should make some continuing (though not permanent) provision for him.
- By way of analogy I would refer to the very well known line of tax cases exemplified by Furniss v Dawson [1984] 1 All ER 530, HL where the court, for the purposes of the taxing statutes, looks at a series of transactions as a composite whole rather than at them individually. In that case Lord Brightman stated:
The fact that the court (in W T Ramsay Ltd v IRC [1981] 1 All ER 865, [1982] AC 300) accepted that each step in a transaction was a genuine step producing its intended legal result did not confine the court to considering each step in isolation for the purpose of assessing the fiscal results. Lord Wilberforce said ([1981] 1 All ER 865 at 872, [1982] AC 300 at 325): "… viewed as a whole, a composite transaction may produce an effect which brings it within a fiscal provision".
- Lord Roskill vividly warned against anachronistic historical principles being deployed to impede the journey on the path of justice:
The error, if I may venture to use that word, into which the courts below have fallen is that they have looked back to 1936 and not forward from 1982. They do not appear to have appreciated the true significance of the passages in the speeches in Ramsay's case [1981] 1 All ER 865 at 872–873, 881, [1982] AC 300 at 325–326, 337 of Lord Wilberforce and Lord Fraser, and, even more important, of the warnings in the Burmah Oil case [1982] STC 30 at 32, 39 given by Lord Diplock and Lord Scarman in the passages to which my noble and learned friend Lord Brightman refers and which I will not repeat. It is perhaps worth recalling the warning given, albeit in another context by Lord Atkin, who himself dissented in the Duke of Westminster's case, in United Australia Ltd v Barclays Bank Ltd [1940] 4 All ER 20 at 37, [1941] AC 1 at 29: 'When these ghosts of the past stand in the path of justice, clanking their mediaeval chains, the proper course for the judge is to pass through them undeterred.' 1936, a bare half century ago, cannot be described as part of the Middle Ages but the ghost of the Duke of Westminster and of his transaction, be it noted a single and not a composite transaction, with his gardener and with other members of his staff has haunted the administration of this branch of the law for too long. I confess that I had hoped that that ghost might have found quietude with the decisions in Ramsay and in Burmah. Unhappily it has not. Perhaps the decision of this House in these appeals will now suffice as exorcism.
- In this case I have no hesitation whatever in finding that the three entities "viewed as a whole" constitute a variable post-nuptial settlement. It would be absurd and arbitrary for me not to do so, for the question of whether the value of Giloch ends up in the No.1 Trust or the No.2 Trust is just a question of the timing of a particular meeting. If the Trustees of the No.1 Trust cause a directors' meeting of Giloch to be held which then votes all the assets of Giloch as a dividend in specie then all the value goes to No.1. If the trustees of No.2 Trust (who are the same as for No.1) cause a general meeting to be held and vote to wind up Giloch then all the value goes to No.2. The result of W's claims for a financial remedy surely cannot hang on the fortuity of which meeting comes first.
- It can be seen from the table at para 53 above that the overall trust assets (ignoring internal loans) comprise about £4.31m, of which about £1.87m, being the value of the two houses, is within the jurisdiction and therefore my dispositive powers. I have no evidence as to whether any order of mine dealing with the £2.44m held outside this jurisdiction would be enforced by the Jersey Court.
The stance of the trustees
- The trustees were joined to the proceedings on 11 January 2010. They have declined to submit to the jurisdiction of this court: see the letter from their Jersey lawyers dated 2 March 2010. Nonetheless, they have complied partially, but not fully, with certain orders for disclosure. Although the direct question as to whether they would or would not benefit H or W in whole or in part has not been specifically put to them, it is clear that they will do so. On 7 July 2011 their Jersey lawyer wrote "the trustee remains concerned to provide whatever support it reasonably can to [H] and [W]".
- On 11 October 2011 the trustees wrote a letter to both firms of solicitors in which they stated "it has always been the trustees' stated wish to assist the parties to the proceedings to the extent that it is able taking into account its fiduciary obligations to the beneficiaries of the trusts as a whole as well as the position as a matter of Jersey law." But they went on to state "it is quite improper for the parties to treat the assets of the trusts in the same manner as assets which they hold personally, for the purposes of ancillary relief proceedings". In that letter the trustees made an offer to provide for W by making available either directly from Giloch, or by means of loans on trust assets:
i) £700,000 which would be loaned to W for life for her to buy a home, and
ii) £500,000 outright "to enable [her] income requirements to be partially fulfilled going forwards."
- Plainly this offer shows that that funds can and will be made available to both parties.
The assets
- I tabulate the assets as follows. My presentation of the trust assets disregards internal loans and a loan to H.
|
Assets outside the trust |
|
| Mauritius Property (Joint) |
189,150 |
| Insurance Policies (Joint) |
22,138 |
| Accounts (Joint) |
59,351 |
| Accounts (H) |
70,101 |
| Accounts (W) |
70,552 |
| Other (H) |
2,615 |
| Unpaid costs (H) |
(63,651) |
| Unpaid costs (W) |
(52,835)
|
| |
297,421 |
| of which W's |
153,037 |
| |
|
| Pensions |
|
| Aegon/Scottish Equitable |
1,107,284 |
| Aegon retirement |
199,711
|
| |
1,306,995 |
| |
|
| Trust Structure |
|
| No.1 Trust |
|
| Green Farm |
1,552,000 |
| BR House |
315,250 |
| Dividend receivable |
42,238 |
| Quoted shares |
181,173 |
| Others |
1,498
|
| |
2,092,159 |
| |
|
| Giloch Ltd |
|
| Investments, cash |
2,217,962 |
| |
|
| Total assets in trust |
4,310,121 |
| |
|
| TOTAL ASSETS |
5,914,537 |
- This list does not include the asset and liability referable to C's business referred to above at para 30. Nor does it include, contrary to Mr Castle's arguments, the tax that H would pay were he to receive all the assets and remit them here. This is completely unreal. The whole point of the structure is to avoid paying tax, and H has never remitted any offshore income. Mr Castle argues that not to include it would result in an unfair imbalance as W would be able to remit onshore and would therefore have more freedom with, or at least fewer strings attached to, her money. But in order to have the benefit of the money here H does not need to remit income. Consider Green Farm. This was acquired by the No.1 Trust borrowing from Giloch and then buying the property here. The same issue arose in an unreported case in which I appeared in 2005. There Baron J stated:
In this case the Husband told me that he intended to repatriate funds to the UK and is already considering the winding up of the Jersey trust. Mr Mostyn QC was sceptical and pointed out that this had not been suggested prior to this trial. I do not regard this issue as important to my decision. I remind myself that, although the efficacy of the Jersey trust is much less than it was in 1986, whilst the funds are offshore investment income can be obtained on the gross sum. The Husband has been able remit funds through the mechanism of a loan at a small annual cost in tax terms. This will continue to be an option until the tax law changes and I am bound to apply the law as it is at present. I take into account that the Inland Revenue are clearly concerned to ensure that as much tax as possible is collected. Thus, whilst loans are currently efficacious, this mechanism may not always be available. I consider it unlikely that the Husband will pay £1.6 million in tax if it can be avoided legitimately. Accordingly, I regard the assets (per the schedule) as some £10.7 million but I emphasise that the award which I make in this case would be unchanged if the assets were reduced by a further £1.6 million.
Bodey J made similar observations in K v L [2010] 2 FLR 1467 at paras 57 – 60. The court must deal in realities and it would be absurd for the Court's award to be computed on a false basis.
The distributive principles
- This case, like all others, will be decided by considering the distributive principles of needs and sharing. The compensation principle is not applicable in this case.
Application of the needs principle
- In her Form E dated 10 December 2009 W put her housing and associated costs at £1m - £1.2m. Her budget, excluding the rent presently being paid by her, was put at £61,715. When W came to make her principal affidavit on 10 October 2011 she put her housing need at £735,000 and her budget at £87,694.
- In her evidence W was not able to give any plausible explanation for why her budget had shot up. Mr Castle was also able to point out that one of the properties, the particulars of sale of which were exhibited to her affidavit, and which was said to justify her ambition of £735,000, was on the market at £600,000 - £675,000.
- I judge the wife's housing need to amount to £700,000 inclusive of costs of purchase. I judge her reasonable annual income need to be £65,000.
- Were W's interest in her new home to be only a life interest (as H proposes) then funds will be needed to pay trustees' expenses and the anniversary IHT charge (the entry charge will not be payable as this is a divorce settlement). I would, on this footing, allow a further £50,000 for these purposes, having estimated that the anniversary charge would amount to about £25,000.
- It is common ground that Wife will receive a pension share of 50%. There will be a pension credit in her favour of just over £650,000. Mr Southgate argues that I should assume that W will buy an annuity with her share. I decline to make that assumption. No-one nowadays seriously would think of buying an annuity. Rather, they would likely drawdown on the pension within the prescribed GAD limits. I calculate that some £26,300 would be available annually in this way on the basis that the full 25% tax free element of £162,500 is now taken[3].
- A Duxbury calculation on a revenue need of £65,000, assuming gross pension income of £26,300 and a full state pension, produces a capital requirement of £626,759. Towards this W would be able to put the £162,500 from her pension share and her own assets of £153,000, leaving a residual capital need of just over £310,000.
- It can therefore be seen that the trustees' proposal, when taken with W's pension share and her own assets, while being £50,000 light in the housing fund, is £190,000 in excess of the sum required to meet W's revenue needs.
- In her evidence W frankly conceded that she did not want, at all, for H to have to sell Green Farm. Given his frail condition and obvious attachment to the property this was both kind and reasonable. I have not undertaken a needs calculation for H on the basis that he lives elsewhere as the order I intend to make will allow him to live at Green Farm with sufficient income to meet his needs.
Application of the sharing principle
- In my judgment, all of the assets in this case, including all of the trust property, amounts to matrimonial property and should, in principle, be shared equally. But the implementation of that equal sharing should reflect the clear arrangement made during the marriage, assented to by W, to set up a trust ultimately to benefit C and future generations.
- An equal division of the assets gives W an entitlement of £2,957,269. The value of the trustees' proposal, when aggregated with W's own assets and her 50% pension share is as follows:
| Housing fund |
700,000 |
| Pension |
653,498 |
| Lump sum |
500,000 |
| W's own assets |
153,037
|
| |
2,006,534 |
There is thus a shortfall of £950,735.
- In her evidence, in answer to questions from me, W accepted that she would give careful thought to an arrangement where any such shortfall would be charged in her favour on Green Farm and released to her on H's death or earlier sale of the property. Actuarial tables and H's medical condition suggest that W has a much longer life expectancy than H. I judge it to be likely that W would receive such a deferred share during her lifetime, were I to go down this route.
My decision and award
- My decision and award is as follows:
i) The assets outside the trust shall be divided equally, so that W receives exactly half of those net assets. The parties must attempt to decide the allocation, and in default of agreement I will make a later ruling.
ii) The assets and liability referable to the business are to be shared equally on a Wells basis.
iii) There will be a 50% pension share in W's favour.
iv) The settlements will be varied to provide:
a) W will be irrevocably deleted as a beneficiary of the No.1 settlement.
b) The sum of £500,000 will be extracted from the settlements and paid outright to W offshore.
c) The sum of £750,000 will be extracted from the settlements and settled on W for life with remainder to C. The trustees will be independent and will have power to advance all the capital to W.
d) A charge will be imposed on Green Farm in favour of the trustees of the new settlement in c) above. It will be for 58.037% of the net proceeds of sale of Green Farm (£1,552,000 x 58.037% = £900,735). It will be enforceable on the earliest of (i) H's death, (ii) sale of the property or (iii) a further order of this court.
v) On implementation of all of the above there will be a clean break in life and death.
- I have allowed for the possibility of enforcement of the charge by an order of this court. This is to cater for unforeseen future events which may well militate in favour of a sale, such as H leaving the property to live in a care home or in Mauritius (which he told tax counsel in 1995 was his ultimate intention).
- The effect of my award is to make available to W £2,957,269 as follows:
| Housing settlement |
750,000 |
| Pension |
653,498 |
| Lump sum |
500,000 |
| W's own assets |
153,037 |
| Charge to new settlement |
900,735
|
| |
2,957,270 |
- Mr Southgate argues that the arrangements in para 82(ii) and (iv)(d) are not compliant with the clean break principle and cause messy long term inter-connections to be endured between H and W. Sometimes in order to achieve fairness the court has to reach for Wells sharing, or contingent lump sums (as in Charman), or deferred interests by way of a charge. These are commonplace. The court has to strive to make the break as clean as is reasonably possible, but I emphasise the qualification. Fairness is not to be sacrificed on the altar of finality.
- By this structure I have, I believe, fairly balanced the equal sharing principle; the trust arrangement made during the marriage; the existing interests of C as an innocent third party; and the parties' respective needs. I have not recited mechanically all the provisions of s25 MCA 1973. The matters stated therein are all, where relevant, reflected in what I have written above. Overarching all this is my complete satisfaction that what I have ordered is fair.
- The trustees' offer is that the sum of £1.2m (£500,000 + £700,000) will be made available from the funds in Giloch of £2.217m. In the light of my judgment I am expecting that £1.25m will be produced. If I am wrong about this, then H and the trustees should understand very clearly that there are sufficient funds within this court's powers to make available the whole of W's entitlement by other means. W already has assets of £153,307. Thus a further £2,804,232 is due to her. There is within this court's powers the sum of £3,318,630 as follows:
| H's assets outside trust |
144,385 |
| Pensions |
1,306,995 |
| Green Farm |
1,552,000 |
| BR House |
315,250
|
| |
3,318,630 |
My order will not be perfected until the stance of the trustees has been ascertained. If the trustees signify that they will not co-operate with my award then I will deal with W's entitlement by way of offsetting against the assets within my power. This will, of course mean that Green Farm will be sold, and that all or most of the pension will be awarded to W.
- I will hear counsel as to costs and as to the form of the order.
