Paws for thought: what happens to the pet on divorce?
Anthony Bailey, former fundraiser to Tony Blair and PR guru knows how to spin a headline… ‘The Princess and the Pauper’ he claims from the comfort of a luxurious villa in Portugal following the High Court’s decision to hand him a 12 month prison sentence for contempt of court.
Mr Bailey and his former wife, Princess Marie-Therese von Hohenberg, have been embroiled in litigation in the English courts since 2016. Following a hearing, in which Mr Bailey was heavily criticised by the judge for his dishonesty (including falsifying documents), the long suffering princess was awarded a financial settlement of over £2m, to be paid from the sale of the family home in England and a villa in Portugal. Given Mr Bailey’s complete disregard for the English order, he has now been found in contempt of court.
The 6 bedroom Portuguese villa is owned by a Cypriot trust of which Mr Bailey is the settlor. It’s not mine, claimed Mr Bailey throughout the court proceedings – a story he maintains to this day. This did not wash with the English judge who has extensive powers to look at the reality of the situation, to look beyond legal ownership to determine who really has the benefit of an asset and distribute them accordingly upon divorce. Following close examination of the trust documents, the judge concluded that Mr Bailey had complete control of the Cypriot trust.
The princess has received approximately half of her financial settlement. The other half was expected from the sale of the villa but Mr Bailey has no intention of handing this over. The total disregard for the welfare of the child of the family and lack of remorse all played a part in the judge reaching the conclusion that imprisonment was justified. “It is a shameful spectacle, deserving of considerable opprobrium”, he concluded.
Many ultra-high net worth families set up foreign trusts as part of their sophisticated tax planning and to preserve wealth for future generations. An English court can deem the assets within a foreign trust a “resource” and will find creative ways in which to force the beneficiary to part with trust assets to ensure that the needs of the parties and in particular their children are met. If required, the English courts will not hesitate to join the trustees (including foreign trustees) to the financial remedy proceedings in order to compel disclosure of trust documentation and to ensure compliance with the final order.
The powers of the English court should not be underestimated. It regularly hears arguments similar to those deployed by Mr Bailey (although often with a legal basis). The Pugachev litigation where the judge found that the off-shore trusts in that case were sham trusts in Mr Pugachev’s control is another high-profile example. Spin and lies do not work and there are serious consequences for failing to provide full disclosure and showing disdain for court orders. Better protection of assets is perhaps to be found in the form of a prenuptial agreement (or post-nuptial agreement) drawn up to help with wealth protection. Whilst prenuptial agreements are not legally binding in England and Wales (yet) they have certainly gained favour in the English courts since the Supreme Court decision of Radmacher in 2010.
A shorter version of this article was originally published by Spear's on Monday 14 February 2022: Ex-husband to Princess Marie-Therese handed prison sentence in divorce battle - Spear's Magazine (spearswms.com)
If you have any questions about the issues raised in this blog, please contact a member of our family and divorce team.
Sital Fontenelle is a partner in Kingsley Napley’s family team, where she specialises in complex financial matters within a divorce, including international jurisdictional cases, negotiating and drafting prenuptial and postnuptial agreements as well as every aspect of private children law cases.
Sital’s areas of practice include all aspects of private family work, with particular expertise in financial remedy proceedings often involving an international dimension, with a particular expertise in advising families of an Indian background. Sital has extensive experience in complex cases involving off-shore trusts, family businesses, tracing assets and inherited wealth.
As non-UK tax residents, the couple will be subject to special rules for calculating the capital gains tax (“CGT”) due in relation to either the sale or transfer of their UK property.
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