KG (Proposed Appellant) v LG (Proposed Respondent)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Moor |
| Judgment Date | 08 July 2015 |
| Neutral Citation | [2015] EWFC 64 |
| Docket Number | Case No: FD09D05089 |
| Court | Family Court |
| Date | 08 July 2015 |
[2015] EWFC 64
Mr Justice Moor
Case No: FD09D05089
In The Family Court
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Jeremy Posnansky QC and Mr Simon Webster for the Proposed Appellant
Mr Tim Amos QC and Mr Richard Sear for the Proposed Respondent
Hearing dates: 6th to 8th July 2015
This is an application for permission to appeal out of time and, if granted, an appeal against an order made by Marco DDJ on 1st June 2010. In essence, the application is that I set aside the original order on the grounds of material non-disclosure.
The relevant history
The Proposed Appellant, Mrs KG, was born in August 1964. She is therefore aged 50. She lives at the former matrimonial home, a property in Dorset. The Respondent is LG. He was born in June 1966 and so is aged 49. He lives at a property in Switzerland. I propose to call them the Wife and the Husband respectively for the sake of convenience, even though they have now been divorced for some time. I mean no disrespect by so doing.
They began to cohabit in 1987 and got married in August 1996. They separated in August 2009. It was, therefore, a long marriage, taking into account the period of pre-marital cohabitation.
There are three children, A aged 20, B aged 19 and C aged 17. The former matrimonial home was a substantial property, valued by Savills at £3.25 million at the time of the divorce.
The Husband's parents had acquired a company that became X Ltd. The Husband began working in the business in 1988. Eventually, the Husband, his brother MG and the two parents held 25% of the business each. It was sold in 1999 to Z plc for approximately £85 million gross. The Husband received £15 million net.
The Husband then commenced another business which became S Ltd. On 18th July 1999, a settlement known as the 1999 settlement was established by the Husband's parents. The beneficiaries are the children and the trustees are the Husband and Wife. Approximately 18% of the shares in S Ltd were placed in this trust.
At this point, it is right to note that there was an Accumulation and Maintenance Settlement established by the Husband's father on 25th March 1997 for A and B. The trustees were the Husband's father and the family solicitor, Mr CC. Originally, the assets were 5 D shares in W Ltd, a supplier to X. The Husband says that this settlement was replaced by the 1999 Settlement.
T and the trusts
The Husband's brother, MG, set up his own business called T in January 2002. The Husband was not directly involved but he did loan over £1 million towards funding the project. MG is clear that " I regarded 50% of my shares in T as destined for (the Husband)" on the basis that MG would benefit from 10% of the shares in S Ltd.
In March 2008, MG decided to redistribute the shares to reflect the original intentions although he reduced slightly the shares notionally held for the Husband in exchange for MG no longer having any entitlement to shares in S Ltd. He did this in anticipation of Y plc investing in T.
Two trusts had been established on 11th March 2008, namely the HA Trust and the EA Trust. 6 million B shares were transferred into the HA Trust by the Husband's parents and MG transferred 2,580,460 shares into the EA Trust. The trustees of both trusts were MG and his parents. The beneficiaries are the Husband and his descendants. The Wife is not a beneficiary of either trust. MG says in his statement that the shares were transferred into the trusts " for the benefit of LG and his children" who were the beneficiaries.
The Husband's parents and MG, as trustees, signed a letter of wishes saying that, subject to legal constraints, they will administer the trust " in accordance with [the Husband's] legal and reasonable request, which should be notified to us in writing for our consideration and action as necessary". On the same day, MG gifted the shares to EA Trust in consideration for the Husband's " assistance in setting up of T and any previous discussions and agreements…relating to the ownership of T and (S Ltd)".
A letter from Speechly Bircham, acting for the trustees, dated 29th May 2014 to Withers, who were acting for the children, says that, in view of the source of the trust assets, " our clients have always considered the Husband to be the principal beneficiary during his lifetime and continue to do so".
On 3rd April 2008, Y plc purchased a 30% stake in T for £12 million, although around £7 million was used for debt repayment. There was also an option to purchase the remaining 70%. The Husband was repaid £625,000 of his loans. The HA Trust received £1,194,862 but its shareholding was reduced to 4.2 million. The EA Trust was paid £513,882 but had its shares reduced to 1,806,322.
On 20th May 2008, the HA Trust loaned S Ltd £750,000 and EA Trust loaned £250,000. It is right that the Wife signed the deed and that it did say that HA Trust and EA Trust were " settlements for [the Husband] and his family". This fact was confirmed in Note 18 of the company accounts for the year ended 31st July 2008. The accounts were signed by the Wife as Company Secretary on 30th December 2008. On 10th March 2009, the loans were assigned from the company to the Husband personally. It is not alleged that the Wife knew about that at the time.
On 6th February 2009, the Husband received distributions of £300,000 from HA Trust and £200,000 from EA Trust. This money was used as part of the finance for a deal in Australia. Again, it is not alleged that the Wife knew about this at the time.
The divorce proceedings
In the divorce proceedings, the Wife instructed Farrer & Co. The Husband instructed Burges Salmon. On 16th October 2009, Ms Catherine Hallam of Burges Salmon wrote to Farrer & Co. The letter gave some very brief disclosure. The letter said the following in relation to trusts:-
" There is a family trust which owns shares in another company, T Ltd. LG's parents are the Trustees and LG and KG's children are in the class of beneficiaries. Neither LG nor KG can benefit under the Trust and LG is neither a director nor a shareholder. I therefore do not expect that an independent report on this shareholding would be considered necessary, though details of the Trust should be exchanged during the disclosure process in the usual way."
There can be no doubt that this passage as to the trust was fundamentally wrong. Moreover, I contrast it with something said by the Husband in a statement for this case. He said that he was keen to do the settlement properly as he was worried that, knowing the Wife's character " given the slightest imperfection, there was a good chance (she) would be back for more in the future".
On 22nd October 2009, the Wife's solicitors suggested accountants to value the Husband's corporate interests. In relation to the trust, they said they would need to have an idea of its assets and income. The instruction of experts to value the various assets was put on hold in early November 2009 as the parties were discussing the matter themselves with their accountants, EX & Co, assisting by assembling financial information.
On 30th November 2009, the Husband wrote to the Wife direct. The letter itself was a "without prejudice" proposal but it attached an " approximate wealth statement" showing that the Husband was worth around £15,694,000. There is no reference to HA Trust and EA Trust. He had received this schedule from Mr SP, the accountant dealing with the Husband and the Wife in EX & Co.
The informal discussions did not reach an agreement and appear, in effect, to have broken down. There was further solicitors' correspondence in December 2009 with the Wife's solicitors not surprisingly saying that the disclosure was not yet sufficient to consider the Husband's without prejudice offer. The Husband's solicitors agreed that there should be Forms E and experts. The letter says that the trust will be dealt with in the Form E.
In early 2010, T negotiated a further payment from Y plc of £12 million. On 5th February 2010, HA Trust received £2,933,885 and EA Trust received £1,261,795. On 12th February 2010, the Wife issued her Form A.
The informal discussions recommenced in March 2010. On 19th March, the Husband's solicitors made a further without prejudice proposal, after discussions between the parties. The letter says that " at this stage, the financial disclosure remains incomplete. Both parties are aware of the assets and liabilities in broad terms but the quantification of those has not yet been completed."
The Wife's solicitors responded on 25th March 2010 with a without prejudice offer. The letter said " although we do not consider that (the Wife) has a reasonable picture of the family's assets, liabilities and income (in particular in relation to your client's businesses), she would also like to try to resolve matters as soon as possible".
Thereafter, it appears that Mr CC, a partner in the firm of CTC was asked by both sides to act as " honest broker". He was the family solicitor. There is an attendance note between Mr QQ, who was Mr CC's family law partner and the Wife which suggests that Mr QQ thought the Wife was going to instruct him but I am satisfied that was not really what was intended. It certainly was not what happened. Mr CC met with the Wife on 7th May 2010 and then with Mr SP on 11th May. It was agreed that Forms E would not be exchanged. The Husband's solicitors suggested using the First Directions Appointment to approve an order or to agree a revised timetable.
On 24th May 2010, a meeting took place in Switzerland between the Wife, the Husband, Mr CC and Mr SP. I will have to return to this in due course. There is no doubt that the meeting went through a draft consent...
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