The English Family Courts' Approach In Cases Involving Offshore Trust Assets

Trustees' discretion and poor liquidity in tough times are not enough to dissuade a still robust implementation of Thomas v Thomas-style 'judicial encouragement'

The decision in M v W (Ancillary Relief) [2010] is an interesting example of the extent to which offshore trustees can be 'judicially encouraged' by the English Family courts to realise and distribute capital on divorce, including where there are relatively few liquid assets among the trust's property. The case also involved a post-marital/nuptial agreement which was a relatively minor feature in the decision. It should be noted that the decision in M v W was post-Macleod and pre-Radmacher.

Facts

The wife, at the time of the final hearing in early 2010, was aged 42 and the husband was aged 66. She was domiciled and resident in England. He was domiciled in New Zealand (he claimed) but habitually resident in England. The parties had one son, aged 4, born in 2005. The parties had married in April 2002 in New Zealand but had been in a relationship since 1994.

The nature and extent of the parties' pre-marital cohabitation and whether there was a 'seamless' transition to marriage was a matter of dispute between them. The parties had met in May 1994 when the wife moved into the husband's home as a lodger. By July 1994 the parties had started a relationship. It was the husband's case that they did not truly cohabit until after the marriage and, in saying so, he relied on a separation of three months in 2001 due to an argument caused by the fact that the wife wanted to marry and have children whereas the husband did not. He had previously been married and had two adult children from that relationship. The wife maintained that they had been living together since July 1994 and that their cohabitation moved in a seamless transition to marriage.

Throughout the above period the wife had no assets and very little income. Prior to the marriage she had worked in the wine trade for a period, earning c.£35,000 p.a. gross. The husband also had very few assets in his own name. However he was, already by 1994, the managing director of a travel company which he had founded years earlier ("the Company") and from which he enjoyed many valuable benefits in kind. With the early profits of his commercial success, the husband had contributed extensively to two offshore trusts which had been established by earlier generations of his family in Jersey ("the Trusts"). At one point in the mid-90s the husband had transferred c.98% of the Company's shares to the Trusts in equal shares. The other minor, c.2%, shareholding was left in the husband's sole name. The Trusts had been established by the husband's family but it was notable that from an early stage the majority of the Trusts' assets had come from the husband and his commercial success.

The wife issued a petition for divorce in May 2004. Subsequent negotiations between the parties and their legal representatives resulted in a reconciliation and the drafting of a 'post-marital deed' in August 2004 which sought to regulate the parties' lives going forwards. However it did not deal with what should happen in the event of separation/divorce. Agreements in the deed included:

That the parties would not have children; Provision for or the husband to pay to the wife £100,000 to be invested in a buy to let flat to provide an income for her during the marriage and a sense of security; For the husband to pay to the wife further sums comprising £10,000 for a car and £5,000 towards a proposed wine business; For the husband to provide a monthly housekeeping 'allowance' for the wife and that the husband would meet certain outgoings. The parties reconciled and the deed was executed and implemented in part, although the proposed buy to let property was never purchased. The husband provided the wife with her 'allowance' by way of monthly payments and, in November 2007, he paid a lump sum of £70,600 which he said was intended to cover the allowance in advance to December...