Aaz v Bbz and Others
| Jurisdiction | England & Wales |
| Judgment Date | 15 December 2016 |
| Neutral Citation | [2016] EWHC 3234 (Fam) |
| Date | 2016 |
| Court | Family Division |
Financial relief – Trusts – Bare trusts – Company assets held on bare trust for sole shareholder – Pre-marital wealth – Special contribution – Dispositions intended to defeat claim – Orders under s 37 Matrimonial Causes Act 1973 and s 423 Insolvency Act 1986 – Failure of all respondents to appear or participate – Service issues.
The husband and wife met in Russia; shortly after the marriage they moved to England, basing themselves first in London and later in Surrey. The wife became a British citizen in 2000. In 2003 the wife issued a divorce petition. The husband applied to strike this out, arguing that the marriage had already been dissolved by a Russian decree, producing ‘official’ Moscow court documents in support. However, a search of the official records in the Moscow court revealed that no divorce proceedings existed. In July 2006, the husband’s solicitors signed a consent application to dismiss the wife’s petition, which recorded ‘the parties having been reconciled’.
The husband had been increasingly successful as an oil and gas trader, travelling abroad a great deal. The wife was a housewife and mother, who brought the two children up without the assistance of a nanny, and also helped to care for the husband’s child by his first marriage.
In 2011 the husband set up a Panamanian company, P Ltd; in 2012 he sold his shares in a Russian company for $1.375 billion and transferred the money to P Ltd. In October 2013 the husband transferred significant assets into a Bermudian trust, of which he was the principal beneficiary; the trustee was a company, C Ltd, of which the husband was the sole director. A few weeks later the wife again applied for a divorce. Delays followed as the husband argued that Russia was the appropriate forum. In March 2015, the husband executed a further deed of trust, and a declaration of trust, assigning further assets to the trust. Shortly afterwards he submitted to the jurisdiction of the English court and decree nisi was granted in December 2015.
Shortly before the hearing of the wife’s financial remedies application the wife’s solicitors asked the husband’s solicitors to provide independent documentary evidence confirming that, as asserted, P Ltd was within the Bermudian trust structure and to explain, with documentary evidence, the legal and beneficial interests in P Ltd’s shares from January 2013. The letter
concluded: ‘If your client does not provide this documentation we will be asking the court to draw the inference that P Ltd is your client’s nominee.’ No reply was received.
A day later, the husband’s solicitors informed the court that they had come off the record. After this the wife’s solicitors served documents on the husband directly, using an email address previously approved by the court for service; he failed to respond. Documents were also sent to C Ltd in Cyprus by fax, email and by post, using C Ltd’s registered address. No working fax number could be found for P Ltd’s registered agents in Panama, so documents were sent by post, after Panamanian lawyers confirmed that there was no rule in Panama preventing postal service of documents relating to foreign proceedings on a Panamanian company’s resident agent.
The husband failed to appear in person at any stage of the proceedings and was in breach of various orders. Neither he nor P Ltd nor C Ltd, both joined as parties, were represented at the final hearing, at which the wife argued that there were over £1 billion of assets, all marital. The wife proposed an award of about £453.6 million (41.5 per cent). She was still living in the family home, which had been transferred into her name. Working from the husband’s statement of issues, his case was taken to include: pre-marital wealth and/or special contribution, marriage breakdown before the sale of the Russian company, and the majority of assets being unavailable within the discretionary trust.
Held – (1) A computation of a party’s resources included not only assets beneficially owned by the party, but assets he or she was likely to receive from a third party (eg a trustee) if he or she asked for them. Applying Charman v Charman [2006] 1 WLR 1053, the legal question was: if a discretionary beneficiary were to request the trustee to advance the whole or part of the capital to him, would the trustee be likely to do so now or in the foreseeable future? The question was not one of control of resources: it was one of access to them, applying Whaley v Whaley[2011] EWCA Civ 617 (see [25], [26], below).
(2) The husband had failed to identify any ‘departure points’ to justify an unequal division of the assets. The marriage had lasted for over 20 years, and had not ended before the value in the Russian company was realised. The court did not undertake a prurient assessment of the quality of the marriage in considering financial provision; there was no legal definition of what constituted a ‘normal’ marriage and being physically apart for much of the year did not mean that a marriage did not exist. It followed that there was no need to consider any case concerning post-separation accrual, as the wealth had been generated during and not after the marriage. Having failed to provide any documentary evidence or give evidence, the husband had failed to prove pre-marital assets. Whilst he had clearly worked very hard, his evidence fell far short of the exceptionality (or ‘genius’) test and his contribution had not been unmatched as the wife had been caring for the children on her
own in a foreign country. Also, the wife was now only seeking 41 per cent of the assets instead of a 50:50 split, which gave some margin of appreciation(see [37], [48], [50], [53], [54], [57], below).
(3) The trust document was not a sham in the sense of pretending to be something that it was not. It was a remarkably simple, candid and pellucid document setting out what was colloquially called a ‘Dear me’ trust for the husband; for the husband’s lifetime he had free and unrestricted access to the trust funds. The so-called trust assets were therefore ‘financial resources’ under s 25(2)(a) MCA 1973, available to the husband, from which he could pay the wife’s financial award (see [72]–[74], below).
(4) There was no evidence that the husband had received any consideration for transferring £1.375 billion to P Ltd and P Ltd had not produced any accounts or documents to explain the basis on which it had come to hold these assets. It was trite law that where money was given gratuitously by A to B, absent presumption of advancement (eg parent to child), the inference was of resulting trust, ie that the legal owner of the asset held it absolutely for the transferor. There was, therefore, a presumption of resulting trust, which, as the husband had failed either to plead a defence to this or to give evidence, remained unrebutted. Further, the manner in which P Ltd had funded the husband’s numerous purchases and lifestyle was redolent of P Ltd merely being an open cheque book for the husband. The husband had provided no independent, documentary or contemporaneous evidence to support his assertion that assets in P Ltd’s name were within the Bermudian trust structure. In view of the husband’s failure to respond to the letter sent by the wife’s solicitors, a reasonable adverse inference could be drawn: P Ltd held all its assets absolutely for the husband on a bare trust (see [77]–[79],[83], [84], below).
(5) Applying Prest v Petrodel Resources[2013] UKSC 34, the restriction on ‘piercing the corporate veil’ did not apply to circumstances in which the company was a ‘bare trustee’ holding assets in its name for the husband. In essence, a bare trustee or nominee (terms often used interchangeably) were both ‘nominal’ title holders, holding an asset for another person who was the true beneficial owner for all purposes, using the definition of a bare trust in The Law Commission Report on Trusts of Land (No 181) (1989), para 3.27:‘A bare trust exists where the entire beneficial interest is vested in one person and the legal estate in another.’ A bare trustee was a mere repository of the trust property with no active duties to perform and no responsibilities in relation to trust property other than to preserve the property for the beneficiary (and the transferor of the assets) (see [85]–[88], [90], below).
(6) It was to be presumed that the intention of the March 2015 disposition was to defeat or impede the wife’s claim, within s 37 MCA 1973. The husband had produced no evidence to rebut this presumption (merely asserting in
his witness statement that he was only ‘one of a number of discretionary beneficiaries’ was not sufficient). The March 2015 disposition appeared to be part of a wider pattern of conduct by the husband designed to put his assets out of the wife’s reach. This was a paradigm case for the application of s 37 (see [98], [99], below).
(7) It might aid enforcement to make an additional order under s 423 of the Insolvency Act 1986; s 423 enabled a ‘victim’ to apply for an order to restore the position to what it would have been if the offending transaction had not been entered into. A ‘victim’ meant anyone prejudiced by the transaction (s 423(5)); which must have been at an ‘undervalue’ (s 423(1)). The March 2015 disposition had plainly been at an undervalue and the husband had clearly entered into the transaction for the purpose of either: (a) putting assets beyond the reach of a person making a claim against him, and/or (b) otherwise prejudicing the interests of such a person in relation to their claim. Thus, it was to be inferred that the March 2015 disposition was intended, at the very least, to ‘prejudice [the wife’s] … interests in relation to the claim’. The husband’s failure to answer the wife’s formal claim under s 423 enabled an adverse inference to be drawn against him in relation to his intention behind the disposition. The court could make any order it saw fit for restoring the status quo ante...
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