Charman v Charman (No 2)

JurisdictionEngland & Wales
Judgment Date2007
Year2007
Date2007
CourtFamily Division

Discretionary trusts – Trust property – Whether trust property ‘resource’ in hands of settlor/beneficiary – Whether settlor/beneficiary had immediate access to funds – Matrimonial Causes Act 1973, 25(2)(a).

Matrimonial property – Unequal division – Exceptional contribution – Whether and how to be assessed – Matrimonial Causes Act 1973, s 25.

Matrimonial property – Discretionary trust – Intention to create dynastic wealth – Whether to be included in matrimonial property.

A very wealthy couple separated and the wife claimed 50% of the matrimonial property. The husband claimed that their wealth was mainly a result of his exceptional skill, energy and dynamism as an insurance underwriter and in other finance related roles. The question for the court was whether and to what extent this should be taken into account, but the court also examined all the other factors under s 25 of the Matrimonial Causes Act 1973. The husband also claimed that money he had invested in a trust with the intention of creating dynastic wealth should not be included in the matrimonial property for division.

Held – (including the trust fund but ordering unequal division):

(1) The evidence did not support an intention to create dynastic wealth but in any case, the trust was a discretionary trust in conventional form and the money was effectively available to the settlor/beneficiary on demand. It was hence a ‘resource’ for the purposes of s 25 of the Matrimonial Causes Act 1973; Abacus (CI) Ltd (trustee of the Esteem Settlement), Re, Grupo Torras SA v Al Sabah (2003) 6 ITELR 368 considered.

(2) Exceptional wealth creation by one party was a potentially relevant factor in the exercising the discretion whether to depart from 50:50 division of matrimonial property. Conduct and contribution were opposite sides of the same coin, there was nothing to say that conduct was limited to misconduct; Miller v Miller, McFarlane v McFarlane[2006] 2 FCR 213 applied.

(3) The exercise of adjustment for special contribution was not a matter of calculation but more akin to assessment of general damages. If, however, adjustment was appropriate it should be meaningful and significant and not merely token. In a situation where there was no relevant conduct on the part of the wife, the adjustment was not to be so great as to impact on the wife’s standard of living.

Cases referred to in judgment

Abacus (CI) Ltd (trustee of the Esteem Settlement), Re, Grupo Torras SA v Al Sabah (2003) 6 ITELR 368, sub nom Re Esteem Settlement [2004] WTLR 1, Jersey RC.

Conran v Conran[1998] 1 FCR 144.

Cowan v Cowan[2001] EWCA Civ 679, [2001] 2 FCR 331, [2002] Fam 97, [2001] 3 WLR 684, [2001] 2 FLR 192.

Dart v Dart[1997] 1 FCR 21, CA.

G v G (financial provision: equal division) [2002] EWHC 1339 (Fam), [2002] 2 FLR 1143.

Kokosinski v Kokosinski [1980] 1 All ER 1106, [1980] Fam 72, [1980] 3 WLR 55, (1980) 1 FLR 205.

Lambert v Lambert[2002] EWCA Civ 1685, [2002] 3 FCR 673, [2003] 4 All ER 342, [2003] Fam 103, [2003] 2 WLR 631.

Miller v Miller, McFarlane v McFarlane[2006] UKHL 24, [2006] 2 FCR 213, [2006] 3 All ER 1, [2006] 2 WLR 1283, [2006] 1 FLR 1186.

R v R (rape: marital exemption) [1991] 4 All ER 481, [1992] 1 AC 599, [1991] 3 WLR 767, HL; affg [1991] 2 All ER 257, [1992] 1 AC 599, [1991] 2 WLR 1065, CA.

Sorrell v Sorrell[2005] EWHC 1717 (Fam), [2006] 1 FCR 75, [2006] 1 FLR 497.

Wachtel v Wachtel [1973] 1 All ER 113, [1973] Fam 72, [1973] 2 WLR 84, CA.

White v White[2000] 3 FCR 555, [2001] 1 All ER 1, [2001] 1 AC 596, [2000] 3 WLR 1571, HL.

Application

The wife, Beverley Charman, sought capital provision bringing her fortune up to at least 45% of the total value of the assets owned by herself, the husband, John Charman, and the trust. The facts are set out in the judgment.

Martin Pointer QC, James Ewins and Rebecca Bailey-Harris (instructed by Manches) for the wife.

Barry Singleton QC, Deborah Eaton and Deepak Nagpal (instructed by Withers) for the husband.

Cur adv vult

27 July 2006. The following judgment was delivered.

COLERIDGE J.INTRODUCTION

[1] In the recent House of Lords decision in the case of Miller v Miller, McFarlane v McFarlane[2006] UKHL 24, [2006] 3 All ER 1, [2006] 2 WLR 1283 (Miller/McFarlane) Baroness Hale of Richmond considered that the size of the fortune in the Miller case (about £17.5m) put it in the category of ‘very big money case’ (para [149]). Adopting a similar categorisation for this case leads to a description, perhaps, of ‘huge money case’. The overall assets even on the most pessimistic presentation exceed £100m.

[2] John Charman (the husband) and Beverley Charman (the wife) are only five months apart in age. They are both 53. They met at school as teenagers in 1969/1970. In 1973 when they were about 20 they became engaged. By then they were both working. They married in 1976 when the husband was 23 and the wife 22. They made their first home with the wife’s parents but within months moved into their own home. When they married, apart from their respective earning capacities, they had no assets of any particular value.

[3] In November 2003, thirty years after they became engaged, the husband and wife separated. By the time the hearing of this application began in February 2006, by the wife’s calculation, the husband had generated wealth to the tune of £150–160m although by then it was by no means all in his name. So, for example, nearly £6m of that sum was in wife’s name. £25–30m (or may be more) was held in a trust for the parties’ children. The remaining £125m or so was either in the husband’s ownership (about £56m) or in a trust called the Dragon Holdings Trust (£68m) (The Dragon Trust).

[4] This application by the wife seeks capital provision bringing her fortune up to at least 45% of the total value of the assets owned by herself, the husband and the Dragon Trust. In round terms that is just about £53m on top of her present £6m ie a total of £59m. The husband does not accept the wife’s calculations and has offered to pay the wife a sum to bring her assets up to a total of £20m. So simple arithmetic shows that about £40m turns on the resolution of the various significant issues in the application. That, as I say, even by today’s standards in this Division, makes the common but unattractive description, ‘big money case,’ something of an understatement so far as this application is concerned.

[5] The wife’s case is the now familiar one. She says this was a long marriage during which all the wealth (however now held) was generated from scratch. She played her full part as wife and mother (of two now adult sons). Fairness dictates that the fortune generated during their marriage (apart from the sum set aside in trust for the children) should be split 50/50. However, in deference to very recent authority she is prepared to accept a 45/55% split to recognise what has come to be called the husband’s special/stellar contribution to the generation of the wealth if, despite her submissions, the court were to hold that in this case that is a factor properly to be taken into account in the divisionary process.

[6] The husband resists the application, defending his position on every front.

[7] Firstly, he asserts that the assets owned by the Dragon Trust should be left entirely out of account because they were deposited there by him as part of his long-term plan and intention to found a ‘dynastic trust’ for the benefit of as yet unborn members of the family (the children having been already provided for by their own trusts).

[8] Secondly, whatever the recent authorities may or may not say, he does not accept a 50/50 starting point/cross check. He says the court should proceed from the position that the wife is entitled to nothing except as ordered by the court and the court should not be deflected from an incremental approach by talk of any particular percentage entitlement, let alone 50/50. Since Miller/McFarlane he also invites the court to consider carefully whether all the assets in the case really fall into the same category for allocation between the parties. The business assets are to be looked at differently, he says.

[9] Thirdly, he says the wife’s award should reflect or be reduced by the fact that she failed to support him in his business endeavours during the marriage and, as part and parcel of that argument, at the end of the marriage refused to move with him to the tax haven of Bermuda to avoid a massive potential capital gains tax claim. She should not anyway benefit from that tax saving, he says.

[10] Fourthly, he says that the wife’s calculations of the wealth take no account of proper discounts which should be applied to the valuation of his assets to reflect the lack of marketability of some of the investments he and the trust hold in Axis, the insurance company he has built up since 2001.

[11] Finally and in any event, he asserts that he has made a special /stellar contribution which should lead the court to award him a special bonus/premium in the post-marriage division. Thus, departure from equality is fully justified.

[12] Those are the significant issues between the parties. Plainly the resolution of each one either way could carry expensive financial implications. I shall decide them as they arise during the course of this judgment.

THE HEARING AND THE EVIDENCE

[13] The hearing lasted a total of nine days and had a number of unusual features. In the first place, it was divided into two parts (in February and May) because it was anticipated, rightly, that House of Lords decisions in the pending cases of Miller/MacFarlane might throw some much needed light onto the proper approach to the ‘conduct’ and ‘special contribution’ debates which have been bedevilling these cases since Cowan v Cowan[2001] EWCA Civ 679, [2001] 2 FCR 331 in 2002. This was in the context that the wife had made a written concession that she would not contend for a greater share than 45% of the assets if ‘special contribution’ as a concept survived the Miller/MacFarlane...

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