Following decree absolute in October 2017, the husband sought a lump sum payment from the wife, out of two discretionary trust funds of which the wife was settlor, with a combined value of £17.5m, the trustee of which was an offshore company. The beneficiaries were the ‘family members’ of the settlor. The letter of wishes directed the trustee to act on the advance of her father. The trusts were created in June and August 2015 and funded by the wife’s father, via the wife, between March and June 2016, the wife passively facilitating their funding. Although the source of the funds in the trust was obscure, it was not from the husband or the wife, or part of the matrimonial assets.
The wife’s father further loaned her £2.7m for a property, but due to the breakdown of the marriage, in October 2016, the wife repaid £2.6m of the loan.
The husband and wife were brought up in India and met at university, and were in a relationship from 2003, married in 2007, had a son in 2012 and separated in 2016. They lived in rented flats in London, in comfort but not luxury or opulence. The wife’s parents had never approved of the husband.
The husband earned £130,000 per annum net; his savings of £150,000 had been spent on costs and he was in debt by £72,000. The wife earned £40,000; she had been given soft loans of £1.4m by her father, but in India had a flat worth £39,000, investments of £470,000 and shares in her father’s company worth £2m, though they could not be sold without his consent.
The husband argued that the loans were in reality gifts, such that the wife really had assets of £2.6m which she could liquidate if necessary; the court could order her to pay these if the trustee of the trust fund declined to distribute money in response to judicious encouragement.
- 1) The wife had no practicably realisable assets of her own.
- 2) The court would only give judicious encouragement to trustees of discretionary trusts if (a) other beneficiaries would not be appreciably damaged, and (b) it would be reasonable for the payer spouse to seek to persuade the trustees to release more capital to enable her to make provision for the payee spouse, and (c) the trustees would be likely to respond to that encouragement. Neither party had benefitted from the trust funds or the loan during the marriage. Following his divorce, the husband was no longer “a family member” of the settlor, and therefore not a beneficiary of the trust. The wife was settlor in name only, and the father’s evidence was that he had no intention of advising the trustees to make any distributions from the trust fund during his life. Accordingly, it would not be reasonable to expect her to try to persuade the trustee to release more capital. Furthermore, the trustee was unlikely to make funds available to the wife, whatever the court may say.
- 3) Having regard to the standard of living during the marriage, including the fact they always lived in rented flats, the need for the husband to be able to accommodate the son when living with the husband, the husband’s income, and the fact that he was not required to pay any maintenance, the husband did not demonstrate any need for a substantial capital sum. He could continue to rent and live comfortably within his income. The only reason the husband needed capital was to clear his debts, but they were referable to his legal costs, so that such provision would be tantamount to making a costs order in his favour, which was not justifiable.
- 4) Per curiam: it is tragic that the parties have spent £1m on legal costs, wiping out the husband’s savings of £150,000. This case is a cautionary tale as to expensive litigation embarked on to prise money from a discretionary trust.