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

Contested financial remedy proceedings involving adult beneficiaries of a number of offshore discretionary trusts.

  • In brief: During the course of these well known financial remedy proceedings, as we know, the adult beneficiaries of a number of offshore discretionary trusts had been joined as parties (see Tchenguiz -Imerman v Imerman [2012] EWHC 4277 (Fam)). Subsequently, Mr Justice Moylan had made an order that those 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 the English court not to require such disclosure. The financial remedy proceedings had subsequently been resolved by a consent order but Moylan J was requested by the parties to give a judgment dealing with the order for disclosure. He also took the opportunity to explain his decision to order disclosure given the terms of the Royal Court's judgment which had now been reported ([2012] (2) JLR 51) and which stated:

    "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."

    Moylan J had previously expressed the view that the trustees were in the best position to help the court in the exercise of its powers under the Matrimonial Causes Act 1973 because the critical question before the court was 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 H. The trustees provided some information about the trusts but had declined to provide a considerable part of the information and documents sought by W and, it appeared, were not willing or were unlikely to be willing to provide evidence as witnesses. As the trustees were not participating, the adult beneficiaries were joined as parties because this would assist with the investigation and resolution of the issues in the case and the adult beneficiaries would be subject to direct disclosure obligations.

    Now, the material before the Royal Court in Jersey had been divided into the following categories: 

    • privileged; 
    • sensitive; and 
    • other material.  

    The Royal Court did not give permission for the privileged material to be disclosed. "Other material" comprised what was neither privileged nor sensitive. The 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.  

    In his judgment, Moylan J made plain that he had given considerable weight to the concerns of the Royal Court 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  . . .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.

    Moylan J highlighted that the court's inevitable concern was to seek to ensure that, so far as possible, its decision was based on direct evidence, rather than assumptions and inferences. He noted that that he had only a limited understanding of what the material comprised and that the Royal Court had expressed the view that the material was "highly unlikely" to add to the court's "relevant knowledge" about the trusts or to be relevant to the issues which this court would have to resolve. He also noted that he was having to consider matters in the face of a pretty unco-operative trustee who had not nor did not plan to file any evidence that went to the heart of the matter -  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 H: 

    "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.

    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." 

    In the face of being forced  to rely on assumptions and inferences, Moylan J concluded that any evidence which appeared to give the prospect of providing a window into this factual issue was 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 . . . 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. "

    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, Moylan J explained that he had ordered disclosure of the material because of its potential relevance and importance notwithstanding the strong judgment of the Royal Court and the demands of comity: 

    " . . . 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." 

    Accordingly, Moylan J had ordered the adult beneficiaries to disclose the material but, as we know, because the proceedings settled before any further substantive hearing took place none of us know what the material comprised.

Case note, published: 13/01/2014

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See also

  • 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. Judgment, 24/11/2013, free

Published: 13/01/2014

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