AAZ v BBZ [2016] EWHC 3234 (Fam)

WTLR Issue: Autumn 2017 #169

AAZ

V

1. BBZ

2. C LTD

3. P LTD

Analysis

AAZ (W) applied for financial orders ancillary to her divorce from BBZ (H). H was the sole director of the second respondent C Ltd, a Cypriot registered company and the trustee of a Bermudian Discretionary Trust (the trust). P Ltd, the third respondent, is a Panamian company which H said was within the trust. P Ltd was said to hold the bulk of the wealth in the case. None of the respondents took any part in the trial. H was in breach of several court orders, including one compelling his personal attendance for the duration of the trial.

H and W had been married since 1993 when they moved to England. H became very successful in pursuing business interests in the Russian energy sector through his Russian company. In November 2012, H sold his shares in the Russian company for US$1.375bn. W was a ‘hands-on’ mother who cared for and brought up her children herself (as well as H’s child from his first marriage) without the assistance of a nanny.

W’s case was that the total net marital wealth was just over £1bn, and that the entire net wealth in this case was matrimonial in character and should therefore be subject to the sharing principle. H had not appeared, but W’s counsel had made and the court had considered arguments made on his behalf, all of which the judge considered.

Haddon-Cave J directed himself as to the relevant law in financial remedy claims, setting out ss23-25 of the Matrimonial Causes Act 1973 (the MCA) and noting that the court had to have regard to all the circumstances of the case as well as particular factors in exercising its wide discretionary powers. The judge then set out the principles to be applied on the two stages of the analysis: (a) computation, ie assessing the available resources and (b) distribution, ie determining each party’s share.

In relation to computation, Haddon Cave J noted that a party’s resources included not only assets beneficially owned by the party, but assets which he or she was likely to receive from a third party (such as a trustee) if he or she asked for them: the question was one of access, not control. In relation to distribution, the judge summarised the relevant principles following the decisions in White v White [2000] 2 FLR 981, Miller v Miller. Mcfarlane v Mcfarlane [2000] 1 FLR and Charman v Charman (No. 4) [2007] 2 FLR 1246), noting the circumstances in which the court might depart from the principle of equal sharing. Haddon-Cave J then summarised the ‘very narrow’ concept of special or ‘stellar’ contribution, the ‘flexible’ concept of needs, and the appropriate inferences that the court may draw from silence.

Held:

  1. 1) Having failed to provide any clear documentary evidence as to pre-marital wealth, H had failed to prove any case on pre-marital assets. The only figure provided by H was the price paid for the first matrimonial home: however, even if correct, the matrimonial home occupied a unique position and would be subsumed into H and W’s long marriage.
  2. 2) H had not provided any valid evidence to support his case that between 1999 (or 2004) and 2013 the parties were de facto separated. W’s evidence that the parties remained married from 1993 until 2013 when W issued her petition was to be preferred. The marriage finally came to an end in late 2014.
  3. 3) H had not properly explained on what basis he claimed to have made a special or stellar contribution to the marriage such that the court should depart from a 50:50 division of the assets in his favour. While H had clearly worked very hard and was resourceful, his evidence fell far short of the ‘exceptionality’ (or ‘genius’) test explained in the authorities. Moreover, H’s contribution was not unmatched. W had been keeping the home fire burning. Secondly, it was a case of realisation of value built up during the years of marriage, not merely of fresh accrual. The present case was a paradigm example of Lord Nicholls’ statement in White v White at [989].
  4. 4) H had failed to prove any valid reasons or ‘departure points’ which would justify the matrimonial property being divided other than equally: the marriage endured from 1993 until 2013, there was no need to consider H’s case on post-separation accrual because the wealth was generated during the marriage, and all the considerable wealth generated during the marriage was matrimonial property. The value of each of the available assets was as listed in the Schedule of Assets subject to the trust issues.
  5. 5) As to the trust issues, the trust was ‘remarkable in its simplicity’. H was principal beneficiary, sole director of C Ltd, the trustee, and protector of the trust. It was not a sham in the sense of pretending to be something it was not. It was a ‘remarkably candid and pellucid document’ which made no pretence. The answer to the legal question ‘if a discretionary beneficiary were to request the trustee of the C Ltd trust to advance the whole or part of the capital to him, would the trustee be likely to do so’ was yes, and therefore any funds in the trust were ‘financial resources’ available to H from which H could pay W’s financial award.
  6. 6) There was a presumption of a resulting trust as to the funds transferred from H to P Ltd for no consideration. As H had failed to plead a defence or give evidence, that presumption remained unrebutted. There was also no evidence that assets in P Ltd’s name were within the trust structure. P Ltd was effectively H’s ‘piggy-bank’. P Ltd was H’s nominee and P Ltd held all its assets absolutely for H on a ‘bare’ trust.
  7. 7) The present case was on all fours with Prest v Petrodel Resources [2013] UKSC 34 and [2012] EWCA Civ 1395. The form of order sought by W was in line with the order made in Prest, where the companies were found to hold the properties on trust for the uncommunicative husband, and they qua nominee/bare trustee were ordered to transfer the properties to the wife.
  8. 8) The March 2015 disposition was a transparent attempt to put the assets of the March 2015 companies out of his legal reach and inhibit W’s ability to claim. This was a paradigm case under s37 of the MCA and H had not rebutted the presumption against him. The March 2015 disposition would be set aside pursuant to s37 of the MCA. It was also appropriate to make an order pursuant to s423 of the Insolvency Act 1986.
  9. 9) A fair distribution of the marital assets was an equal division and W’s claim for 41.5% of the marital assets was justified in all the circumstances.
  10. 10) All the respondents had been properly served with up-to-date proceedings in this matter.
  11. 11) For the purposes of enforcement under the Lugano Convention, it was necessary to separate those elements that constituted ‘maintenance’ from those that comprised a share of the matrimonial assets.
JUDGMENT HADDON-CAVE J: Introduction [1] The applicant, AAZ (W), applies for financial orders ancillary to her divorce from the respondent, BBZ (H). [2] The 2nd respondent (C Ltd) is a Cypriot-registered company and the trustee of a Bermudian Discretionary Trust (the trust). H is the sole director of C Ltd. The 3rd respondent, (P Ltd), …
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Counsel Details

Mr Nigel Dyer QC (1 Hare Court, Temple, London EC4Y 7BE, tel 020 7797 7070, email clerks@1hc.com), Mr Dakis Hagen (Serle Court, 6 New Square, Lincoln’s Inn, London, tel 020 7242 6105, email clerks@serlecourt.co.uk) and Mr Henry Clayton of counsel (4 Paper Buildings, Temple, London EC4Y 7EX, tel 020 7427 5200, email clerks@4pb.com) for the applicant.

The respondents were not present or represented.

Legislation Referenced

  • Insolvency Act 1986, s423
  • Matrimonial Causes Act 1973, ss23-25, 37