Husband fails in lump sum claim centred on trust funds

Divorce|February 8th 2019

“I perfectly understand, and, indeed, have some sympathy with, the frustration that one party of no, or only relatively modest means must feel when he or she is aware that there is great wealth on the other side of the family, but is unable to tap into it even for the purpose of buying a home.  But this tragic and destructive case should stand as a cautionary tale to those who would embark on expensive litigation which they can ill afford in the hope of prising money from a discretionary trust.  A very careful and cool appraisal needs to be made at the very outset as to how realistic a prospect that really is.”

That quote, from early in the judgment of Mr Justice Holman in the case Daga v Bangur, really encapsulates all I want to say in this post. I think Mr Justice Holman’s point actually applies far more widely than just to cases involving discretionary trusts (i.e. trusts where the trustees have a discretion as to which beneficiaries receive money from the trust fund, how much they receive, and when). It applies to all financial claims on divorce: no matter how strongly you feel about the matter, think carefully about whether your claim is likely to succeed, before rushing off to court.

OK, I suppose I should say just a little bit more about this case. It concerned a husband’s claim for a lump sum payment, or other capital provision, from the wife. At the outset of the hearing before Mr Justice Holman the claim was for a lump sum of £2.5 million, but by the time of his closing submissions, his counsel had moderated that claim to one of the order of £1-1.5 million. The focus or target of the husband’s claim was two discretionary trust funds of which the wife is a beneficiary, and which have combined assets of the equivalent of about £17.5 million sterling. The husband, on the other hand, had debts of about £72,000 (he had savings of about £150,000 at the time of the separation, but they were spent on legal costs), and pension funds of around £220,000.

The parties were married in 2007, and have one child. The marriage broke down in 2016, and the husband issued divorce proceedings in October of that year.

And why did the husband’s claim fail? Quite simply, because Mr Justice Holman found that the trust funds were not an available resource in reliance upon which any award could be made. Further to this, the husband did not demonstrate a need for any substantial capital payment (although for the purpose of this post I will concentrate on the first point, regarding the trusts).

As I said, the two trusts are discretionary, the beneficiaries being members of the wife’s family. Mr Justice Holman found that whatever order he may make, the trustees were highly unlikely to make funds available to benefit the husband. Accordingly, he could not make an order in reliance upon the funds in the trusts, and to treat the wife as having about £20 million plus “available” to her, as the husband’s counsel did, was “frankly, fanciful.”

In the circumstances, the husband’s claims against the wife (and, indeed, the wife’s claims against the husband) were dismissed. In other words, there would be a complete clean break.

But that was not of course the full extent of the matter. As Mr Justice Holman also stated early in his judgment:

“How tragic it is that … the parties have spent or incurred between them over £1 million on legal costs.  Of that figure about £380,000 related to litigation about their son.  But almost £650,000 has been spent litigating over finance.  £650,000 could have made a very large contribution to the purchase cost of the sort of flat the husband now aspires to buy.  As it is, the savings of around £150,000 which the husband had accumulated during the course of the marriage by the time of separation have been wiped out, and each party now has considerable debts.  There are now in this case no liquid matrimonial assets nor any “acquest” at all, but only large debts.”

Ouch. As I said: always think very carefully before you rush off to court.

You can read Mr Justice Holman’s full judgment here.

Author: John Bolch

John Bolch often wonders how he ever became a family lawyer. He no longer practises, but has instead earned a reputation as one of the UK's best-known family law bloggers.

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