Dr v Gr (1st Respondent) A.B.C Trust Company (Jersey) Ltd (2nd Respondent) Oakleaf Ltd (3rd Respondent) Deerpark Enterprise Centre Ltd (4th Respondent) Summer Ltd (5th Respondent) Summer International Ltd (6th Respondent)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mostyn |
| Judgment Date | 10 May 2013 |
| Neutral Citation | [2013] EWHC 1196 (Fam) |
| Court | Family Division |
| Docket Number | Case No: SE10D00289 |
| Date | 10 May 2013 |
[2013] EWHC 1196 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Mostyn
Case No: SE10D00289
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Mr Jonathan Southgate QC (instructed by Irwin Mitchell) for the Applicant
Ms Jayne Mullen (instructed under direct access) for the 1 st Respondent
2 nd Respondent did not appear and was not represented
Mr Matthew Haynes (instructed under direct access) for the 3rd to 6 th Respondents
Hearing dates: 29 April 3 May 2013
This judgment was handed down in private on 10 May 2013. It consists of 70 paragraphs and has been signed and dated by the judge. The judge gives leave for it to be reported in this anonymised form as DR v GR and Others (Financial Remedy: Variation of Overseas Trust).
The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them (and other persons identified by name in the judgment itself) may be identified by his or her true name or actual location and that in particular the anonymity of the children and the adult members of their family must be strictly preserved.
In this case the total assets are, as I will find, just over £2.5m. Of these just over £1.3m are held in a post-nuptial settlement called the Brown Sugar Trust created on 22 January 1986. The settlement is a discretionary Jersey trust. This owns a Liberian company (Summer International Ltd) which in turn owns a UK company (Summer Ltd) which in turn owns two UK companies (Oakleaf Ltd and Deerpark Ltd) which in turn own two retirement villages in Lincoln and Gainsborough as well as some other assets, all of which are sited in the UK.
The applicant wife applies for a variation of the settlement under s24(1)(c) of the Matrimonial Causes Act 1973. In my decision of BJ v MJ (Financial Remedy: Overseas Trusts) [2011] EWHC 2708 (Fam) [2012] 1 FLR 667 I attempted to set out the principles to be derived from the authorities concerning applications of this nature, and I will not here repeat any of what I wrote there. In my later decision of Hope v Krecji [2012] EWHC 1780 (Fam) [2013] 1 FLR 182 I addressed a further aspect which I had not considered in BJ v MJ. That aspect was whether the interposition of companies between the trust at the top of the tree and the assets at its bottom acted as any kind of impediment to making a variation which disposed of the actual assets at the bottom. I concluded in reliance on authority never before doubted, as well as my own experience over decades of dealing with this class of case, that there was certainly no such impediment (see paras 12 -13).
In Hope v Krecji (at paras 14–27) I also offered some comments as to the power of the court when exercising the jurisdiction under s24(1)(a) of the 1973 Act to penetrate the carapace of a company owned by a respondent and to transfer to an applicant assets owned by the company. Again, in reliance on high authority never before doubted, as well as on my experience, I expressed the view that where the company was under the control of the respondent and where there were no material minority interests such property could be so transferred as it constituted property to which the respondent was "entitled" within the meaning of the section. However, in Petrodel Resources Ltd & Ors v Prest & Ors [2012] EWCA Civ 1395 [2013] 2 WLR 557 Rimer LJ, with whom Patten LJ agreed, politely but firmly held that my view about the scope of s24(1)(a), and the many antecedent authorities to like effect upon which I had relied, were all quite wrong, as they violated the long-standing principles stated in the decision of the House of Lords in Salomon v. A. Salomon & Co Ltd [1897] AC 22 (see paras 132 – 150 per Rimer LJ and para 161 per Patten LJ). But nothing was said about the s24(1)(c) point. The decision of the Court of Appeal was strictly confined to the question whether s24(1)(a) allowed the court to get under a corporate carapace and to dispose of assets within the company in favour of an applicant.
The decision of the Court of Appeal has been appealed to the Supreme Court and judgment is awaited. I am aware that the Supreme Court declined to hear argument about the scope of s24(1)(c) where matrimonial assets are held by companies.
In this case all the companies have been joined to the proceedings in circumstances which I will describe. They are represented by Mr Matthew Haynes who argues that the effect of the Court of Appeal judgment in Prest is to render my view about the scope of the s24(1)(c) powers wrong also. He argues that respect for the corporate personalities means that the variation powers are confined only to adjustments in the shareholdings of the Liberian company and nothing more. Specifically the interposition of the companies means that the court cannot directly deal with the assets at the bottom of the tree.
If this argument is right it would mean that this jurisdiction would be almost totally emasculated. This is because it is only in rare cases that the settlement directly owns the underlying assets (although this does crop up from time to time in cases about landed estates here). In the great majority of cases there is an interposed company, and it is usually off-shore. A grant of relief that leaves the applicant to engage in enforcement proceedings in Monrovia or Tortola or George Town is likely to prove to be a poisoned chalice. That said, if the argument is right the unintended consequence of the destruction of the efficacy of this type of relief is something that will have to be borne.
However, I am quite certain that the argument is not right. The language of the two sub-sections is completely different and the decision of the Court of Appeal in Prest was squarely based on the language of s24(1)(a). In Brooks v Brooks [1996] AC 375 Lord Nicholls emphasised the very wide meaning given to the term "settlement" under s24(1)(c). He stated:
"In English law "settlement" is not a term of art, with one specific and precise meaning. Its meaning depends on the context in which it is being used. To a conveyancer a settlement essentially connotes a disposition by deed vesting property in trustees to be held by them for a succession of interests. In some contexts settlement bears a statutorily defined meaning, as in section 1 of the Settled Land Act 1925. Another example, where settlement is given an extremely wide statutory meaning, is section 670 of the Income and Corporation Taxes Act 1988 ("any disposition, trust, covenant, agreement, arrangement, or transfer of assets").
In the Matrimonial Causes Act settlement is not defined, but the context of section 24 affords some clues. Certain indicia of the type of disposition with which the section is concerned can be identified reasonably easily. The section is concerned with a settlement "made on the parties to the marriage" So, broadly stated, the disposition must be one which makes some form of continuing provision for both or either of the parties to a marriage with or without provision for their children. Conversely, a disposition which confers an immediate, absolute interest in an item of property does not constitute a settlement of that property. The statutory provision is concerned with an order varying the terms of a settlement. This would not be an altogether apt exercise in relation to property given out-and-out and belonging to one of the parties to the marriage as his or her own absolute property. The context does not require that outright gifts of this nature should fall within the scope of the variation provision. In such a case the appropriate order on the dissolution of the marriage, if an order is needed in respect of the property, is a property transfer or property settlement order.
Beyond this the authorities have consistently given a wide meaning to settlement in this context, and they have spelled out no precise limitations. This seems right, because this approach accords with the purpose of the statutory provision. Financial provision that is appropriate so long as the parties are married will often cease to be appropriate when the marriage ends. In order to promote the best interests of the parties and their children in the fundamentally changed situation, it is desirable that the court should have power to alter the terms of the settlement. The purpose of the section is to give the court this power. This object does not dictate that settlement should be given a narrow meaning. On the contrary, the purpose of the section would be impeded, rather than advanced, by confining its scope. The continuing use of the archaic expressions "ante-nuptial" and "post-nuptial" does not point in the opposite direction. These expressions are apt to embrace all settlements in respect of the particular marriage, whether made before or after the marriage." (emphasis added)
Assuming that "disposition" is a synonym for "arrangement" the test for what comprises a nuptial settlement can be thus expressed: "any arrangement which makes some form of continuing provision for both or either of the parties to a marriage". In Brooks the arrangement in question was a pension scheme of which the husband and wife were beneficiaries which was established by a company (since struck off) owned by Mr Brooks. Looked at in the round (rather than at the transactions that led to its creation in isolation) Lord Nicholls was satisfied that the scheme amounted to a variable nuptial settlement.
In Ben Hashem v Shayif & Anor [2008] EWHC 2380 (Fam) [2009] 1 FLR 115 Munby J (as he then was) gave a...
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