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Tchenquiz-Imerman v Imerman [2013] EWHC 3627 (Fam)

During the course of contested financial remedy proceedings adult beneficiaries of a number of offshore discretionary trusts were joined as parties on their application. Subsequently, an order was made that these beneficiaries, as parties, should disclose copies of documents which had been provided to them for the purposes of an application which had been made to the Royal Court of Jersey by the trustee of some of those trusts. The Royal Court had given the beneficiaries permission to make such disclosure, if they were ordered to do so by this court, but, in doing so, the Royal Court expressed a number of concerns and invited this court not to require such disclosure. The financial remedy proceedings have been resolved by a consent order but Mr Justice Moylan had been requested by the parties to give a judgment dealing with his order for disclosure. In the judgment he also explained his decision to order disclosure given the terms of the Royal Court's judgment.

  • Neutral Citation Number: [2013] EWHC 3627 (Fam)

    Case No: FD09D00047



    Royal Courts of Justice

    Strand, London, WC2A 2LL

    Date: 22/11/2013

    Before :


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    Between :

    Elizabeth TCHENQUIZ-IMERMAN (Applicant)

    - and -

    Vivian Saul IMERMAN (Respondent)

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    Mr R Harrison QC and Mr D Hagen (instructed by Withers LLP) for the Applicant

    Mr C Howard QC and Mr H Oliver and Mr J Hilliard (instructed by Hughes Fowler Carruthers) for the Respondent

    Mr C Pocock QC and Ms L Moys (instructed by Mills and Reeve) for the Adult children

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    This judgment is being handed down in private on 22nd November 2013. It consists of 16 pages and has been signed and dated by the judge. The judge hereby gives leave for it to be reported.

    The Hon. Mr Justice Moylan:

    1. During the course of contested financial remedy proceedings adult beneficiaries of a number of offshore discretionary trusts were joined as parties on their application: see my judgment [2012] EWHC 4277 (Fam). Subsequently, I made an order that these beneficiaries, as parties, should disclose copies of documents which had been provided to them for the purposes of an application which had been made to the Royal Court of Jersey by the trustee of some of those trusts. The Royal Court had given the beneficiaries permission to make such disclosure, if they were ordered to do so by this court. But, in doing so, the Royal Court expressed a number of concerns (as referred to later in this judgment) and invited this court not to require such disclosure. The financial remedy proceedings have been resolved by a consent order but I have been requested by the parties to give a judgment dealing with my order for disclosure. I also need to explain my decision to order disclosure given the terms of the Royal Court's judgment, now reported at [2012] (2) JLR 51.

    2. The background to this case is set out in my judgment referred to above. It is sufficient for the purposes of this judgment to give the following summary.

    3. The parties were married in 2001 and separated in 2008. They have one child. The husband was previously married. He has three adult children by that marriage who are the beneficiaries joined as parties to the proceeding pursuant to my earlier order ("the adult beneficiaries").

    4. The husband's admitted wealth consisted of approximately £7 million of assets in his own name and approximately £20 million of assets held within nuptial settlements of which the husband is the principal beneficiary. The wife's financial position is set out in my earlier judgment.

    5. The focus of the wife's claim, in reliance on the sharing principle, was the wealth held within what have been termed the 'Category 3 Trusts' ("the Trusts") - at one point worth £360 million but said to have reduced to £130 million. These Trusts hold significant assets located within this jurisdiction, albeit a relatively small percentage of the total within the Trusts. The Trusts were settled by the husband's father in 2008, the assets deriving from previous settlements which had been distributed to the husband's father. These assets included, in particular, very substantial funds generated during the course of the marriage and previously held within a discretionary trust settled by the husband some years prior to the marriage, the original beneficiaries of which had been the husband, his spouse or widow and his children and remoter issue. In 2005 changes had been effected to this earlier trust (and other trusts) by which the husband and his spouse had been excluded as beneficiaries, the former exclusion being revocable while the latter was irrevocable. The reasoning behind these changes was one of the factual issues in the case.

    6. As referred to above, in 2008 the Trusts were settled by the husband's father. It was the husband's case that this restructuring of the trust structure was undertaken principally for tax reasons. The wife's case was that, even if there were tax reasons, in addition the husband sought to try to appear further to distance himself from wealth which he had generated and which had been held in the trust (referred to above) of which he and, following the marriage, the wife had until 2005 been expressly within the class of beneficiaries. It was her case that this wealth is or could be made available to the husband.

    7. In addition to the adult beneficiaries, the class of discretionary beneficiaries of the Trusts comprise the husband's parents, the parties' child and a child of one of the husband's adult children, a charity and such other persons as may be added as beneficiaries with the consent of the protector. Neither the husband nor the wife is named as beneficiaries but each of them could be added to the class of beneficiaries. If the husband was added as a beneficiary, the wife could not under the terms of all but one of the trusts be made a beneficiary; and vice-versa.

    8. Two of the key issues in the financial remedy proceedings were: (a) whether the Trusts were nuptial settlements for the purposes of section 24 of the Matrimonial Causes Act 1973 and, accordingly, directly subject to the powers given to the English court under that statutory provision (the wife having applied for the variation of all the Trusts on the basis that they were post-nuptial settlements); and (b) whether the assets of the Trusts were financial resources available to the husband within the meaning of section 25(2)(a) of the MCA 1973.

    9. The trustees, none of whom are resident in England and Wales, were joined as parties but none participated in the proceedings following applications made to the Royal Court and the Eastern Caribbean Supreme Court, High Court of Justice British Virgin Islands. In respect of the former, the Jersey trustee applied to the Royal Court for approval of its decisions (a) not to submit to the jurisdiction of the English court and (b) to disclose information about the Trusts' assets to the husband's father in the knowledge that he was likely to disclose it to the husband. These decisions were approved by the court at a hearing in private on 15th July 2011. The court's judgment of 19th August 2011 is not public.

    10. The trustee's applications to the Royal Court and the BVI High Court were supported by the adult beneficiaries. This and the adult beneficiaries' application to be joined as parties to the English proceedings may have been part of the "global strategy" referred to in a letter from a BVI lawyer acting for the adult beneficiaries to the Trusts' BVI lawyer.

    11. During the course of my previous judgment I expressed the view that the trustees were in the best position to assist the court in the exercise of its powers under the Matrimonial Causes Act 1973 ("the MCA 1973"). This was in respect of both the issues referred to in paragraph 8 above but in particular the latter, as the critical question for the court to determine would be whether the trustees were likely immediately or in the foreseeable future to exercise their powers in favour of or in some way for the benefit of the husband.

    12. The trustees provided some information about the Trusts but declined to provide a considerable part of the information and documents sought by the wife and, it appeared, were not willing or were unlikely to be willing to provide evidence as witnesses. It was, therefore, submitted on behalf of the wife that "the court's, now more difficult task, is inferential and it must look at all the circumstances". In support of the wife's more general submissions, the wife referred to Charman v Charman [2007] 1 FLR 1246 in which the Court of Appeal referred to Coleridge J's conclusion, at [45]:

    "(c) the husband had conducted a 'Herculean struggle' to prevent [the trustee] from giving evidence in circumstances in which, had [the trust] been dynastic, it would be likely to have been able to produce evidence from its files to that effect".

    13. Given that the trustees were not participating, I acceded to the application made by the adult beneficiaries to be joined as parties. I did so in part because in my view it would "clearly assist with the investigation and resolution of the issues in the case", in particular those referred to above. The court would be in a better position to deal with the case justly in accordance with the overriding objective and in accordance with its statutory obligations under the MCA 1973. As parties, the adult beneficiaries would be subject to direct disclosure obligations while also being entitled to participate fully in the proceedings.

    14. During the course of the English proceedings, and prior to them being joined as parties, the adult beneficiaries sought and were given permission to attend a Financial Dispute Resolution hearing. As a condition of obtaining permission, they gave the following undertaking:

    "D. AND UPON the above-named "Applicants to Intervene" [the adult beneficiaries] each undertaking to the Court and agreeing with the petitioner [the wife] that:-

    (i) They will not, until further order destroy or dispose of (or permit any other person to destroy or dispose of) any of the documents in their possession, custody or power as have been served upon them, or which they (or any person acting on their behalf) may have received other than by way of service, in relation to any and all applications in connection with the proceedings herein that have been made by the Trustees in overseas courts in their capacity as trustees of the trusts ... including all pleadings (including the Jersey 'Representation' document), orders (including Jersey 'Acts of Court'), transcripts of hearings, skeleton arguments and other advocates documents, statements of position and evidence filed (including any Affidavits sworn by Philippe de Salis) or served in the BVI and Jersey proceedings and all correspondence connected with those proceedings;

    (ii) They will use their best endeavours to obtain personal possession of any of the documents referred to in the previous sub-paragraph that are not already personally possessed by them; and

    (iii) They will have available, to bring to court on 24 hours notice at the hearing that is to take place pursuant to paragraph 2(i) below, [i.e. the FDR] copies of all such documents."

    15. The Eastern Caribbean Supreme Court permitted the adult beneficiaries, pursuant to an application made by them, to disclose in the English proceedings (if ordered to do so) copies of the documents provided to them for the purposes of the applications to that Court. Those documents included the Order made by the Royal Court, partly redacted.

    16. The adult beneficiaries also applied to the Royal Court for permission to disclose to the wife the documents served on them for the purposes of the trustee's application to that court and the documents relating to the beneficiaries' application. This application was determined by the judgment referred to above: [2012] (2) JLR 51.

    17. During the course of its judgment the Court noted that it is common for trustees in Jersey to seek the directions of the Court in relation to matters concerning the administration of trusts under Article 51 of the Trusts (Jersey) Law 1984. In this context the Court identified a general principle of relevance to such applications:

    "15. It is of vital importance that, if such applications are to serve the purposes for which they are intended, information and documents received by those who are convened as parties to such proceedings should be held in confidence. The trustee is under a duty and must feel able to make full and frank disclosure in relation to the application. It must be able to summarise the arguments for and against the proposed course of action, including any weaknesses or possible risks in relation to what is proposed."

    The Court went on to refer to difficulties which would ensue if trustees felt inhibited when making such applications to the court because of a risk that the information provided to the Court might become available to those with "hostile eyes upon the trust or the trust fund".

    18. In these circumstances the Court made it clear that, "because of the overriding public interest", permission would not normally be given for information and documents disclosed for the purposes of an application under Article 51 to be further disclosed:

    "21. As just explained, the Court considers that it is in the interests of justice that trustees should be able to come before this Court in private, confident in the knowledge that they may speak frankly to the Court and that what is said or produced to the Court and to the other parties to the private proceedings will not be released to third parties or used for purposes other than the private proceedings."

    19. The Court, nevertheless, gave permission for information and documents to be disclosed by the beneficiaries in this case if the English court made an order to that effect. It was made clear as referred to above that, normally, the court would have refused permission but in the "very unusual circumstances" of this case, specifically the undertaking given by the adult beneficiaries, and the fact that the material was not particularly sensitive, the beneficiaries were given permission to disclose this material if ordered to do so.

    20. Although permission was given, it was subject to the following:

    "22. We would hope that the Family Division would, in the interests of comity, take note of those concerns. We accept, of course, that the Family Division will wish to establish the financial position of the Trusts and the likelihood of the husband benefiting thereunder as part of its role of resolving the financial dispute between the husband and the wife. However, by ordering the disclosure which it did in July, the Court has done all it can to ensure that the Family Division is made fully aware of the financial position of the Trusts and the likelihood of the husband benefiting.

    23. We accept that we cannot view the matter from the perspective of the Family Division but it does seem to us highly unlikely that the material disclosed for the July proceedings will add to the relevant knowledge about the Trusts on the part of the Family Division or will be relevant to the issue which the Family Division has to resolve. The only issues raised in the July proceedings were whether the trustee should provide information to the grandfather and whether it should submit to the jurisdiction of the Family Division. Following the Court's ruling, the information has been provided to the grandfather (and onwards) and the trustee has not submitted to the jurisdiction. The reasons for the trustee and the Court reaching that view do not, with respect, seem relevant to the issue of how much, if anything, the husband should be ordered to pay the wife or whether there should be a variation order in relation to any of the Trusts. The internal thinking of the trustee as to what it considers to be in the best interests of the beneficiaries and the decision of the Court in relation to that matter seems very different from the issue of what order should be made by the Family Division in relation to the financial position of the husband and the wife.

    24. We would therefore respectfully invite the Family Division to consider very carefully whether it needs to make any order that the adult beneficiaries disclose material relating to the July proceedings. If this Court were to find that the Family Division began routinely to make orders requiring disclosure of applications by trustees brought in private, the Court would have to consider amending its procedures either so as to heavily redact any material served on English resident beneficiaries or to preclude material from being sent out of the jurisdiction and allowing only inspection within the jurisdiction. This would seem to be in no-one's interests. If, despite this, the Family Division considers that some disclosure should be made, we hope that it will have regard to the remarks of this Court in relation to the different categories of material referred to in the remainder of this judgment."

    21. The material before the Royal Court was divided into the following categories: privileged, sensitive and "other" material. The Royal court did not give permission for the privileged material to be disclosed. I was not asked to make and have made no order in respect of that material. "Other" material comprised what was neither privileged nor sensitive.

    22. Sensitive material consisted of material which showed "the reasoning and decision making process of the trustee or other parties such as the Guardian of the minor and unborn beneficiaries", other than legally privileged material. The Royal Court added:

    "[33] ... However, we hope very much that the Family Division will respect the nature of the July proceedings and not order disclosure of the sensitive material".

    23. I make clear that I have given very considerable weight to the concerns expressed by the Royal Court in particular because the interests of comity have a powerful place in cases involving offshore trusts when the English court will often depend on the trusts' home courts not least for the purposes of enforcement. Comity brings substantive benefits as was apparent in my decision of P v P (Post-Separation Accruals and Earning Capacity) [2008] 2 FLR 1135. I, therefore, need to explain why I considered it necessary to order disclosure of both the sensitive and the other material despite the Royal Court's expressed wish that I should not do so, particularly in respect of the sensitive material. To do this, I need to address the exercise in which the English court was engaged which sets the framework for my decision in this case.

    24. The legal context is well known. There are two distinct strands. The English court has power to vary nuptial settlements (including offshore settlements) under the MCA 1973, section 24(1)(c). This will first require a factual determination that the relevant settlement is either an ante-nuptial or a post-nuptial settlement. The court will then have to decide whether it should exercise its discretionary powers to vary the trust. As I sought to explain in my previous decision in these proceedings (referred to above), when the court is deciding whether and, if so, what variation to effect, it has to take the interests of the beneficiaries into account. In this determination it is the trustee who is particularly well-placed to assist the court.

    25. The second strand derives from the court's duty under the MCA 1973 to have regard to all the circumstances of the case including "the financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future ..."; section 25(2)(a). It is well-established that such resources include resources held within a trust including discretionary trusts: e.g. Browne v Browne [1989] 1 FLR 291.

    26. The critical factual question which the English court must answer, for the purposes of section 25(2)(a) in respect of resources held within trusts, was addressed in Charman v. Charman [2006] 2 FLR 422 and A v A [2007] 2 FLR 467. In the former Wilson LJ (as he then was) said:

    "[12] There has been some debate at the hearing of this appeal as to the nature of the central question which, in this not unusual situation, the court hearing an application for ancillary relief should seek to determine. Superficially the question is easily framed as being whether the trust is a financial 'resource' of the husband for the purpose of s.25(2)(a) of the Matrimonial Causes Act 1973 ... But what does the word 'resource' mean in this context? In my view, when properly focused, that central question is simply whether, if the husband were to request it to advance the whole (or part) of the capital of the trust to him, the trustee would be likely to do so. In other cases the question has been formulated in terms of whether the spouse has real or effective control over the trust. At times I have myself formulated it in that way. But, unless the situation is one in which there is a ground for doubting whether the trustee is properly discharging its duties or would be likely to do so, it seems to me on reflection that such a formulation is not entirely apposite.

    [13] Thus in effect, albeit with one small qualification, I agree with the suggestion of Butler-Sloss LJ in this court in Browne v. Browne [1989] 1 FLR 291 ... that, in this context, the question is more appropriately expressed as whether the spouse has 'immediate access to the funds' of the trust than 'effective control' over it. The qualification relates to the word 'immediate'. In that case the trial judge knew that, if he was to proceed also to order the wife to pay the husband's costs, she would be unable to comply with his orders for her swift payment of a lump sum and costs without recourse to the off-shore trusts over which he found her to have 'effective control' ... So the question in that case was whether her access to their funds was immediate. 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."

    27. In the latter, A v A, Munby J (as he then was) said:

    "[92] The question, therefore, adopting the language used by Wilson LJ ... comes down to this: Can the wife demonstrate that, if asked, the trustees would be 'likely', immediately or in the foreseeable future, to exercise their powers in favour of or in some way for the benefit of the husband?"

    See also B v B (Ancillary Relief) [2010] 2 FLR 887, para 88.

    28. In a previous decision of mine RK v RK (Financial Resources: Trust Assets) [2013] 1 FLR 329, in which English trustees had actively participated by giving evidence both written and orally at a hearing, I referred to this issue in the following terms:

    "60. Framed in this way the question is one of fact. Resources held within a bona fide discretionary trust are a party's resources to the extent which, on the balance of probabilities, they are likely to be made available to that party either now or within the foreseeable future. This would encompass provision for that party's own needs as well as provision to enable that party to meet an award made against him or her in favour of the other party. The form in which the provision can be made available or might be made available will of course vary. It might be by way of income or capital distributions, by way of loans or by way of occupation of a trust property.

    61. In determining this issue of fact the court must assess the evidence available to it. There is a very long tradition of the courts seeking to ascertain the reality of a situation. As Lord Merrivale, P said in N v. N [1928] 44 TLR 324, the ecclesiastical courts "showed a degree of practical wisdom ...They were not misled by appearances ...they looked at realities".

    62. In Re: The Esteem Settlement [2004] JRC 92, The Royal Court of Jersey said, at para.166:

    "In our judgment, where the requests made of trustees are reasonable in the context of all the circumstances, it would be the exception rather than the rule for trustees to refuse such requests."

    In Whaley v. Whaley [2011] EWCA Civ 617 the Court of Appeal again considered the dividing line between judicious encouragement and improper pressure, in a case where no trustee had given direct evidence to the court. In the course of her judgment Black LJ repeated that the issue was always to be approached by asking the question set by Wilson LJ in Charman. She then added that in answering the question the court will have regard to "the circumstances of the particular trust, how it came into being, who the beneficiaries are, what duties the trustees have, what other relevant terms there are, how it has been administered in practice and so on".

    In the course of his judgment Lewison J (as he then was) said, at para.114:

    "In deciding that question [that is the question identified in Charman] 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 ... 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 [18th revised edition 2007] para.29-157."

    63. It will be seen from both Re Esteem and Whaley that in some respects the debate is circular. The court will expect trustees to respond positively if the court concludes that the interests of the trust and of the other beneficiaries would not be appreciably damaged if the trustees were to provide the husband with the resources he requires to enable him to make proper financial provision for his wife and children. They would be expected to respond positively because the court would have concluded that the husband would be making a reasonable request and trustees are expected to act reasonably in the discharge of their duties. This requires the court and the trustees both to reach the same or a sufficiently similar conclusion as to what is reasonable, which would appear to assume that the former, that is the court, has sufficient knowledge of the matters which the latter would take into account; in other words, that they are surveying a broadly similar landscape and from a broadly similar perspective."

    29. The court's determination of this factual issue will obviously depend on its assessment of the evidence adduced by the parties and the trustees. The less direct evidence available to the court, the more the court will be driven to draw inferences or make assumptions. For many years, when deciding how trustees would be likely to respond, the English courts (as referred to in Whaley) have been applying the guidance given in Thomas v Thomas [1995] 2 FLR 668; Waite LJ made the general observation at p.670:

    "The discretionary powers conferred on the court by the amended sections 23 to 25(a) of the Matrimonial Causes Act 1973 to redistribute the assets of spouses are almost limitless. That represents an acknowledgement by Parliament that if justice is to be achieved between spouses at divorce the court must be equipped, in a society where the forms of wealth holding are diverse and often sophisticated, to penetrate outer forms and get to the heart of ownership. For their part, the judges who administer this jurisdiction have traditionally accepted the Shakespearean principle that 'it is excellent to have a giant's strength but tyrannous to use it like a giant'. The precise boundaries of that judicial self-restraint have never been rigidly defined - nor could they be.

    But certain principles emerge from the authorities. One is that the court is not obliged to limit its orders exclusively to resources of capital or income which are shown actually to exist ...

    Another is that where a spouse enjoys access to wealth but no absolute entitlement to it (as in the case, for example, of a beneficiary under a discretionary trust or someone who is dependent on the generosity of a relative) the court will not act and direct the invasion of the rights of, or usurp the discretion exercisable by, a third party. Nor will it put upon a third party undue pressure to act in a way which will enhance the means of the maintaining spouse. This does not, however, mean that the court acts in total disregard of the potential availability of wealth from sources owned or administered by others. There will be occasions when it becomes permissible for a judge deliberately to frame his orders in a form which afford judicious encouragement to third parties to provide the maintaining spouse with the means to comply with the court's view of the justice of the case. There are bound to be instances where the boundary between improper pressure and judicious encouragement proves to be a fine one and it will require attention to the particular circumstances of each case to see whether it has been crossed."

    Glidewell LJ summarised the applicable principles as follows, at p.678:

    "(a) Where a husband can only raise further capital or additional income, as the result of a decision made at the discretion of trustees, the court should not put improper pressure on the trustees to exercise that discretion for the benefit of the wife;

    (b) The court should not, however, 'be misled by appearances', it should 'look at the reality of the situation';

    (c) If on the balance of probability the evidence shows that, if trustees exercised their discretion to release more capital or income to a husband, the interests of the trust or of other beneficiaries would not be appreciably damaged, the court can assume that a genuine request for the exercise of such discretion will probably be met by a favourable response. In that situation if the court decides that it would be reasonable for a husband to seek to persuade trustees to release more capital or income to him to enable him to make proper financial provision for his children and his former wife, the court would not, in so deciding, be putting improper pressure on the trustees."

    30. In Charman v Charman [2006] Lloyd LJ commented on the consequences if the trustee did not assist the English court by providing requested information:

    "[67] ... The trustee's decisions ought to be made having regard to the best interests of the beneficiaries. In the absence of this evidence from the trustee, the judge at trial in England will have to draw inferences as to the likelihood that the respondent has access to the trust fund. In the nature of things the inferences drawn might not be accurate. If they are not accurate, they would be likely to lead to one or other of the petitioner and respondent, both of whom are beneficiaries, being treated on a false basis by the English court. In those circumstances, it seems to me that it could be open to the trustee to regard it as being positively in the interests of the beneficiaries that it should provide the evidence sought."

    See also B v B (Ancillary Relief) para. [77] and BJ v MJ (Financial Order: Overseas Trust) [2012] 1 FLR 667.

    31. I have included the above references at some length because they demonstrate the nature of the exercise in which the English court is engaged and the court's inevitable concern to seek to ensure that, so far as possible, its decision is based on direct evidence, rather than assumptions and inferences. In this respect, during the course of the hearing I was referred to the Royal Court's decision of C Trust Company Ltd v Temple & Others [2010] WTLR 417, in which the Court approved the trustee's decision to provide written evidence for, and for its director to appear as a witness in, financial remedy proceedings in England. Another example is A v A (referred to above) in which the trustees intervened in the English proceedings and gave evidence.

    32. Returning to the present case, for the purposes of determining whether disclosure should be ordered I have had to assess the likely relevance and importance of the evidence, namely the sensitive and other material disclosed to the Royal Court. I must also consider whether I should order its disclosure despite the concerns expressed by and the direct request made by the Royal Court.

    33. It will be self-evident that I am undertaking this exercise in circumstances where I have only a limited understanding of what the material comprises. Further, the Royal Court, although acknowledging its different perspective, expressed the view that the material is "highly unlikely" to add to this court's "relevant knowledge" about the trusts or to be relevant to the issues which this court would have to resolve.

    34. I am also undertaking this exercise when the trustee is not participating in these proceedings and has not and does not propose to file any evidence directly. These steps have been approved by the Royal Court. The trustee has provided disclosure which provides information about what might be called the mechanical structure of the Trusts (i.e. the trust deeds and the assets within the trusts) and about some of the history but very little information directed specifically to the two issues referred to above, including in particular the critical, factual, question, namely whether the trustee is likely immediately or in the foreseeable future to exercise its powers in favour of or in some way for the benefit of the husband.

    35. In this context, I propose to focus on one comment made by the Royal Court in its judgment, namely:

    "23. The internal thinking of the trustee as to what it considers to be in the best interests of the beneficiaries and the decision of the Court in relation to that matter seems very different from the issue of what order should be made by the Family Division in relation to the financial position of the husband and the wife."

    36. The English court's decision in this case, at the trial of the financial remedy application, would have depended very significantly on the court's determination of the two issues referred to above including the extent to which, if at all, the resources held within the Trusts are resources likely to be available to the husband and as such part of his resources for the purposes of section 25 of the MCA 1973. I appreciate that the husband would first have to be added, with the consent of the protector, to the class of beneficiaries but the likelihood of this occurring would be part of the factual determination - as was the case in Whaley v Whaley. What the trustee considers to be in the best interests of the beneficiaries, and why, are, I would suggest, essential elements of this, factual, determination because it is the trustee who controls the availability of this wealth through the exercise of its discretion. The trustee's reasons for coming to its conclusion - its thinking - are highly relevant to this determination. This evidence can also significantly inform the issue of whether the Trusts are nuptial.

    37. Whilst the beneficiaries may well not be entitled to this information under general trust principles, it does not follow that the information is not relevant to the issue(s) being determined by this court. I would refer again to A v A and RK v RK. In the latter, the trustees gave direct evidence explaining why they had reached their decision which I found, very substantially, to have been a reasonable position for them to reach. In contrast in Whaley the trustee did not give direct evidence and the court found the trust assets to be resources available to the husband. That case also demonstrated the regrettable experience of a trustee found to have assisted a party to proceedings in putting forward an inaccurate case of wealth denial. Such an experience is not unique and trustees either positively, or passively by not participating, can and sometimes do assist (aid and abet) a party to English financial remedy proceedings when that party puts forward an inaccurate picture. I am not suggesting that such was the situation in the present case but it is part of the landscape in which such litigation takes place.

    38. As referred to above, at present there is very little evidence which bears directly on the issue of whether and if so how the trustees might, or would not, decide to benefit the husband. There is a letter of wishes - which is broad in its nature - and the bare assertion in the Affidavit filed by one of the adult beneficiaries that:

    "As I have always understood matters, the primary intention behind the settlements is that they should benefit me, my siblings and our descendants."

    This assertion has not been explored in evidence but, if the beneficiaries are aware of this asserted "primary intention", the trustee of the Trusts settled in 2008 must be in a position to give evidence on this issue and this could be expected to form part of the trustee's thinking.

    39. It is, therefore, not clear to me to what evidence the Royal Court was referring when it considered that, by ordering disclosure in July 2011, it had done all it can to ensure that this court is fully aware of the likelihood of the husband benefiting from the Trusts. On the current state of the evidence it would seem likely that the English court would be forced to rely on assumptions and inferences. As referred to earlier in this judgment, this is not the optimum manner in which to achieve justice not only for the husband and the wife but also for the beneficiaries.

    40. Returning then to the matters referred to in paragraph 32 above. During the course of the hearing Mr Hagen submitted that the trustee's thinking as to what it considers to be in the best interests of the beneficiaries is "absolutely of the essence in this claim". Whilst this might be overstating it, he makes a powerful point in that the trustee's views of what is in the best interests of the beneficiaries is likely to be significant evidence on the critical issue of the extent to which the resources in the Trusts are resources available to the husband and also in respect of whether they are nuptial settlements. Mr Hagen made further submissions, by reference to documents from the Jersey proceedings disclosed from the BVI proceedings, that the Jersey material might be expected to assist this court in determining the issues in the case. He was also able to make the point that the Royal Court refers to the interests of comity in circumstances where that Court has approved the trustee's decision not to participate in the English proceedings although properly joined as a party.

    41. Mr Pocock was placed in a difficult position because he could not assist me as to the content of the material nor why the issues in this case would not be, to use his word, illuminated by what the trustee (and others) said and did in the Jersey proceedings. Although he submitted that I should not order disclosure of the Jersey material, I do not think I would be doing him a disservice if I said that he advanced his case in a minor key in part, perhaps, because the beneficiaries have not wanted to appear obstructive.

    42. I have sought carefully to analyse in particular paragraph 23 of the Royal Court's judgment to see whether I might have misunderstood the potential significance of the material, especially given the Royal Court's assessment referred to above. It may be that I have but, given the lack of evidence from the trustee as to its likely approach to the exercise of its powers, any evidence which appears to give the prospect of providing a window into this factual issue is relevant evidence potentially of considerable significance. I repeat that, despite what the Royal Court says in paragraph 22 and whilst acknowledging that I do not know what disclosure was ordered at the earlier hearing, the information provided to the English court seems to me to contain limited evidence directly addressing the issue of the likelihood of the husband benefiting from the Trusts.

    43. The significance of this issue is enhanced in this case because it appears that the bulk of the wealth accumulated as a result of the husband's endeavours during the course of the marriage is held in the Trusts. The outcome of the case at trial would have hinged to a considerable extent on whether the Trusts were nuptial settlements and/or whether the Trusts' resources were likely to be available to the husband.

    44. Given the pivotal importance of these issues and given the importance of seeking to understand how and why the trustee was likely to exercise its powers, I ordered disclosure of the material because I concluded that its potential relevance and importance, including in particular the sensitive material, was such that I must order its disclosure notwithstanding the strong judgment of the Royal Court and the demands of comity. I should also add that I, of course, recognise the specific concerns which flow from trustees being able and required to apply confidentially to the court for directions.

    45. However, in my judgment, any light on the "internal thinking" of the trustee would be significantly preferable to none. Given the circumstances of this case, such evidence was not likely to be forthcoming from any other source. This extends to why the trustee did not consider it to be in the interests of the beneficiaries for the trustee actively to challenge the wife's claims within these proceedings, either as a party or as a witness, when those claims are said to be, factually, wholly without merit and when the Trusts hold significant wealth within this jurisdiction. As I have remarked on previous occasions and, I hope without naivety or irony, I remain puzzled as to why such a trustee should not consider it in the interests of the beneficiaries to provide the evidence which will rebut a case if the trustee has that evidence available to it; to adopt Coleridge J's words - when it would be likely to have been able to produce evidence from its files to that effect. If it does not, as referred to above, the English court will be left to draw inferences and make assumptions.

    46. Accordingly, I ordered the adult beneficiaries to disclose the material such, in my judgment, being necessary and proportionate to assist this court in determining the issues raised in these proceedings. Because the proceedings settled before any further substantive hearing took place I do not know what the material comprised. However, given the circumstances of this case, I do not see that my order should, and would hope that it does not, impede or undermine the interests of comity. In any event, I would also hope that co-operation between the English court and the Royal Court of Jersey, and other courts, in cases in which wealth is held in trusts or other similar vehicles will continue to develop. Such co-operation should not undermine legitimate wealth protection but, I would suggest, in the context of financial remedy proceedings would assist the interests of justice for not only spouses and civil partners but also for trusts and beneficiaries.

Judgment, published: 24/11/2013


See also

Published: 24/11/2013


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