A matter of trust...continued

25 May 2011

If ever a reminder were needed about the wide ranging powers and discretion of the English court in divorce proceedings, it came yesterday in the Judgment given by the Court of Appeal in the case of Whaley.

Mr and Mrs Whaley were married for twenty years. Family assets totalled approximately £10.4 million, the lion’s share of which was held in two trusts established by the husband’s father. The husband was ordered to pay 36% of the assets to the wife. Although not directly owned by the husband, the Judge at first instance was satisfied that the trustees would act in accordance with the husband’s wishes and pay income and capital from the trusts as directed or requested by him. The husband appealed, arguing that the decision put “improper pressure” on the trustees. His argument was unsuccessful. The Court of Appeal agreed with the first instance decision, concluding that the trustees of both trusts were likely to do whatever the husband asked, including making capital available.

Putting assets in trust will not necessarily put them beyond the reach of an English divorce Judge if the reality is that the trust is merely a device to give the appearance of distance without the reality. In the case of a longstanding trust the court, it seems, will look closely at how trustees have behaved in the past and whether, in fact, the trust operates at the direction of the beneficiaries as if the funds ‘belonged’ to them.

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