B e f o r e :
LORD JUSTICE MUMMERY
LADY JUSTICE BLACK
MR JUSTICE LEWISON
|| Athelstan Michael WHALEY
||- and -
||Belinda Caroline WHALEY
(Transcript of the Handed Down Judgment of
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Charles Howard QC & Harry Oliver (instructed by Forsters LLP) for the Appellant
Martin Pointer QC & Robert Peel QC (instructed by Farrer & Co) for the Respondent
Hearing dates : 22nd & 23rd March 2011
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- Athelstan Michael Whaley ("the husband") appeals against an ancillary relief order dated 15 July 2010 made by Baron J.
- To understand the order, it is necessary to know something of the history of the marriage and the assets available to the family.
- The husband and Belinda Caroline Whaley ("the wife") were married on 7 November 1987, after over two years of cohabitation. They separated in January 2008. The wife spent some time with the husband at his house in Spain in the summer of that year which the husband hoped would bring about a reconciliation but which disintegrated into a final end to the marriage. They have lived separately since then and the wife has a new relationship.
- The husband is 60 and the wife is 47. They have four children whose ages range from 12 to 20. Family life was split between England and Spain. For the first ten years of the marriage, the whole family lived in Spain. In 1997, the wife and the children moved to live in England during the term time so that the children could go to English schools. The husband joined them on a regular basis but maintained his long term residence and domicile in Spain, primarily for tax reasons. Since the separation, the husband has continued to be based in Spain and the wife in England. The children divide their time almost equally between their parents, the wife caring for them during term time and the husband having them for extended periods during the school holidays.
- The cases that the parties presented to Baron J as to the assets available for her consideration differed widely. As she recorded, the husband's case was that the assets amounted to "some £3.173 million net after legal costs whereas the wife puts the asset base at some £11.873 million net after legal costs". The main reason for this difference was their treatment of trust assets in which the husband has an interest and it was upon those trust assets that the hearing before the judge particularly focussed.
- The judge ultimately took a figure of £10.4 million for the resources available to the parties. Nearly £7 million of this was made up of assets in two trusts, the Farah Trust and the Yearling Trust, the judge having accepted the wife's case that they should be seen as resources likely to be available to the husband. The assets which the parties had outside the trusts had a total value of nearly £4 million net of accrued debts, of which just over £1 million worth was in the wife's name. In arriving at her figure of £10.4 million, Baron J deducted £500,000 by way of provision for the children's school fees in the future.
- In summary, the non-trust assets comprised:
i) two properties in England in the wife's name with a total value net of borrowing and notional sale costs of just over £1.13 million (the wife lives in one of the properties, renting out some cottages in its grounds; the other property is also rented out);
ii) a property, El Aguilon, and a separate piece of land in Spain in the husband's name with a total value of just under £1.19 million net of borrowing, notional sale costs and, in the case of the property, CGT;
iii) the husband's share, worth just over £1.5 million, in three Spanish companies which own/manage hotels in Spain;
iv) the husband's share in SD Ltd worth £180,000;
v) each party's 30% share, worth £200,000, in a company ("the golf club management company") which manages the business of a golf club, the remaining 40% of the management company being owned by the full time manager of the golf club and the club land and hotel premises on it being owned through the Yearling Trust;
vi) approximately £66,000 in bank accounts in the wife's name.
- Quantified liabilities comprised:
i) nearly £400,000 owed by the wife, mostly in relation to legal costs;
ii) nearly £90,000 owed by the husband to the bank and in relation to legal costs.
- Baron J's order was detailed but in essence required the husband to pay the wife a lump sum of nearly £3 million by 27 May 2011 and meanwhile to make periodical payments to the wife at the rate of £40,000 per annum. Upon payment of the lump sum, the wife's periodical payments were to cease and she was to transfer her shareholding in the golf club management company to the husband. This would achieve a clean break between the parties. In addition, the husband was required to pay periodical payments for the children at the rate of £1,384.75 per child per annum until payment of the lump sum and thereafter at the rate of £3,125 per child per annum, and also to pay their school, college and university fees.
- The judge calculated that this order would leave the wife with some 36% of the net assets, on top of which her debts net of bank balances in the sum of £331,000 would have to be met for her. She did not specify how the sum should be raised by the husband although she did include provision in her order for the transfer of the Spanish property and land to the wife in part payment of the lump sum in the event that the husband did not pay it by the due date.
The basis of the husband's appeal
Treatment of the trust assets
- The most fundamental and far reaching of the husband's grounds of appeal are those relating to the judge's treatment of the trust assets. They are built on the proposition that the order that she made cannot be satisfied without the husband having recourse to trust assets in order to meet his most basic needs such as housing and, if his analysis of the figures is right, even to enable him to make full payment of the lump sum itself. Mr Howard QC, who with Mr Oliver represents the husband, sought to persuade us that the judge's order put "improper pressure" on the trustees of the Farah Trust which would require them, against their stated intentions and ignoring their duties to other beneficiaries, to realise assets at a time that would be unpropitious commercially, in order to make a payment to someone (the wife) who is not a beneficiary of the trust, in a way that would represent a departure from the previous history of dealings between the trust and the husband, and in disregard of the fact that the husband was not himself the settlor of the trust. He argued that it was wrong of the judge to take any account at all of the golf course (valued at £2.38 million net of borrowing) because it was held within the Yearling Trust of which the husband was not a beneficiary.
- Mr Howard argued that the judge had made errors in her calculation of the value of trust and non-trust assets, specifically (in the trust context) in relation to a debt of £561,849 owed by a company owned by the trust and (outside the trusts) in relation to El Aguilon, to which she attributed a value of £992,310 net. Furthermore, he said, she had failed to recognise that the realisation of trust assets that would be required to fulfil her order would render valueless other assets which she had taken to be valuable, notably the golf course management company, and would eliminate sources of income for the husband.
Approach to division of assets over-generous to wife
- Mr Howard criticised the judge's approach to division of the assets as over-generous to the wife on a number of grounds. He argued that she failed to give sufficient weight to:
i) the "inherited and/or quasi inherited nature of the trust assets" and the fact that the husband had acquired certain property before the marriage;
ii) the fact that her order gave the wife the assets which were "copper-bottomed, un-risk laden, and in cash or cash equivalent" whereas the husband would have assets which were "almost entirely (save for his home) very minority interests in private trading companies and/or were held within a trust of which he was not a beneficiary";
iii) the "wholly illiquid nature of the trust assets" which would hamper the husband in raising capital;
iv) the fact that the husband would have to sell his home in order to meet the order which would have an impact not only upon him but also upon the children; and
v) the husband's needs generally.
- He also argued that the judge wrongly adopted an incremental method of calculation, ascertaining the wife's needs and then adding a sum to represent the wife's "share in the marital acquest". He said she compounded this error by failing to calculate properly or at all the quantum of the "marital acquest" and by double counting by awarding the wife the two English properties which actually represented the "marital acquest" as well as a sum of money under that heading.
- The final category of complaint related to the judge's decisions about income payments. Mr Howard argued that in view of the fact that the school fees had always been paid by either the trust or the husband's brother, it was wrong of the judge to order the husband himself to pay them as opposed to accepting his undertaking to "use his best endeavours to procure the continuation of their payment". He also attacked the quantum of the periodical payments orders in favour of both the wife and the children which he said was fixed without proper regard to all the circumstances including the husband's own needs and the contribution that the wife's new partner could be expected to make to her budget.
The Farah Trust and the Yearling Trust
The Farah Trust
- The husband's father was a builder who ran his business through a company called Renway Homes Ltd ("Renway"). In 1983, he moved permanently to live in Spain, putting Renway into a trust governed by the laws of Jersey which became known as the Farah Trust. The beneficiaries were originally Mr and Mrs Whaley senior, their children (the husband and his two older brothers) and remoter issue plus charities; Mr and Mrs Whaley senior were irrevocably excluded later. The original trustees were Fitrust Fiduciaire et Trustee SA, Kleinwort Benson (Geneva) Trustee SA and Kleinwort Benson (Jersey) Trustees Ltd. They were to hold the fund on trust to pay the income as they might in their discretion think fit to or for the maintenance or otherwise for the benefit of one or more of the beneficiaries. They were given power to pay capital to one or more beneficiaries as they should in their discretion think fit.
- I am grateful to Lewison J for the rather more comprehensive account that he gives of the terms of the Farah Trust (and the Yearling Trust) in his judgment which I will accordingly not labour here.
- The husband worked in Renway, which continued to operate after Mr Whaley senior's retirement and developed the remaining sites within its land bank. Baron J recorded that it would seem that the profits from Renway were accumulated in the Farah Trust.
- Mr Whaley senior signed a number of letters of wishes in relation to the trust, the last being in November 1989. By that time, funds had already been allocated to three separate funds in the names of his three sons, the husband's fund coming to be known as "the M fund". Mr Whaley senior said in his last letter of wishes that he and his wife would expect the three sons to be "consulted on our death with a view to a distribution of the whole" and that regarding the funds "already allocated", he could foresee them "being used on various joint or individual projects over the next 8 – 10 years and that these funds should come under their control within that time".
- Mrs Whaley senior died first and Mr Whaley senior in 2001. The husband's fund was not, however, removed from the trust structure thereafter nor, as far as I am aware, were either of the other two allocated funds. However, the judge found (§100 of the judgment) that "by 1989 the settlor was not averse to his children deploying the funds which he had given them in such manner as they deemed appropriate".
- The judge found (§107) that the husband had sought to conceal the truth behind his trust holdings and also to obfuscate the use to which he had been able to put the funds over the years. She said (§108) that in broad terms she was satisfied that amongst the assets of the husband's fund within the trust were the following assets:
i) Shares worth nearly £3 million in Hostal La Pena (which owns two hotels), the husband's fund's share being 38% of the 78% shareholding held by the Farah Trust as a whole;
ii) Shares in Hotel Investments Ltd: the judge included in her schedule of assets under this heading a figure of £561,849 because although she accepted the husband's evidence that the shares, as such, had no value, she considered that the documents indicated that there was outstanding a loan of that amount from the company to the husband's fund;
iii) Humo Holdings Ltd which holds English land worth £1 million bought with a view to it being re-zoned for building in 2016 (this asset has been referred to as "Strawberry Farm");
iv) A portfolio of shares with a value somewhat in excess of £85,000.
The Yearling Trust
- The Yearling Trust was created by the trustees of the Farah Trust in 2008 by a deed of appointment dated 17 July 2008 which appointed the shares in Yearling Management Ltd and the benefit of all outstanding loans to Yearling Management Ltd on new trusts to be held separate and apart from the remainder of the Farah Trust fund. The trusts and powers and other provisions in relation to the Yearling Trust are identical to those in relation to the Farah Trust but whereas the husband is a beneficiary of the Farah Trust, he is not a beneficiary of the Yearling Trust, the only beneficiaries being the grandchildren of Mr and Mrs Whaley senior (presently the husband's four children and the four children of one of his brothers).
- Yearling Management Ltd owns the freehold of the golf course together with the associated premises, subject to a lease to the golf club management company. The details of the lease are unclear except that there is some evidence that the rental is (or has recently been) approximately £150,000 per annum. The lack of solid information about the lease is unfortunate because, as will become apparent, it made it more difficult than it might have been to evaluate certain of Mr Howard's arguments, particularly his argument that the sale of the golf course would destroy the value of the management company and his contention that the husband's income was insufficient to fund maintenance at the level prescribed by the judge. It may be that the judge was treated to more information than we were about this though I think not, as counsel were not able to enlighten us much during argument so the problem appeared to be more fundamental than simply the choice of material for the appeal bundles.
- The husband contended before Baron J that because he was not a beneficiary of the Yearling Trust, it should not be taken into account as part of the resources relevant to the ancillary relief exercise. The judge rejected that argument and treated the net value of the golf course in the same way as the remaining Farah Trust assets.
- She accepted that the impetus for the transfer of the asset into the Yearling Trust was originally an anxiety on the part of the husband about the tax position, which had been proceeding on the basis that he was not resident in the UK but which the Inland Revenue (as it then was) had begun to investigate in the light of the amount of time he was spending here. As the judge put it, he "determined that it would be prudent to ensure that UK sited assets, in particular the golf course which ….he regarded as 'his baby', were protected from exposure to the UK tax authorities" and sought advice in about December 2007 as to the best way to achieve that. Notwithstanding that that led to the creation of the sub-trust without the husband amongst its beneficiaries, the judge found expressly that although they were within the class of beneficiaries, there was never any intention of benefiting the children of the husband's brother (§84) nor any real expectation that the Yearling Trust would be used for the benefit of the husband's own children (§108(g)) and that it was appreciated by all that it would be possible to add the husband as a beneficiary at some future date "as and when it was considered that the tax challenge had ended" (§84). She added, "I expect that the husband also appreciated that the creation of the sub-trust had the added advantage that it might also be seen to distance the golf course from him in the event of divorce".
- Gathering together at §108(g) her reasons for counting in the Yearling Trust she said:
"I consider that the husband's portion of the trust should be augmented by the value of the golf course. I so find because (i) he can be added as a beneficiary of the sub-trust; (ii) the original tax reasons have evaporated as the husband is no longer potentially resident in the UK and (iii) the husband knew that his marriage had effectively broken down before the transaction was completed. Even though he may have hoped for a reconciliation, he knew or ought to have known that it was unlikely given that which the wife had told him. By permitting the transaction to proceed he was seeking to alienate an asset which he knew or ought to have known might be included as part of his resources. I am satisfied that he could have asked the Trustees to stop the transaction and, for reasons which are adumbrated at length elsewhere in this Judgment, I am convinced that the Trustees would have complied with his wish. In the light of this, I will add the full value to his portion of the trust. I am reinforced in this conclusion because Mr Hess wrote letters indicating that the children's school fees were in jeopardy because there was no long term liquidity to pay them. I do not believe that he could or would have so stated if the Trustees had a real expectation that the sub trust was to be used for their benefit, particularly because Yearling Management has a substantial tax free annual rental income from the Golf course which could have covered the bulk of the school fees."
The trustees and protectors
- Over time, there were changes to the trustees of the Farah Trust. Since 1991 the trustee has been a company called NWT. A director of that company is (or was) Mr Williamson who originally became involved with the trust in 1988. The judge said of him that "[b]y all accounts he was (or became) the friendly face of the trustees in whom the family reposed a great deal of trust and respect" (§101) and that he "was [the husband's] personal friend/trusted adviser" (§102). When he retired, his place as "lead Trustee" (as the judge put it) was taken by Mr Hess but "to ensure his continued involvement with the trust and the family he [Mr Williamson] became a Protector of the settlement in March 2006, a position which he still holds and fulfils" (§102).
- There is relatively little information as to how it was that the office of protector of the trust came to be created but we were supplied during the hearing with the deed, dated 29 March 2006, by which it was achieved. The deed recites that it is made in exercise of the power under clause 20 of the trust (a power to revoke, vary or add to any of the administrative provisions of the Declaration of Trust). The first protectors are named in the deed as Mr Williamson and a Mr Dawson and new provisions were inserted by it into the trust which, amongst other things, give the protectors power to remove a trustee or trustees. By another deed made the same day, the trustees restricted their own powers by imposing a requirement of the consent of the protectors for the addition or exclusion of beneficiaries, the distribution of capital and the appointment of new trusts.
- The judge made findings about the attitude of the trustees, in the person of Mr Hess, and the protectors who are still Mr Williamson and Mr Dawson.
- Mr Williamson, although not in good health, "remains a trusted family adviser" (§103). The judge said:
"105….I am absolutely satisfied that, after the death of Mr Whaley in 2001 and, given the sons' funds had been separated into the P, J and M funds, Mr Williamson became accustomed to doing the husband's bidding in respect of the M fund until his retirement in about 2005/6. Thus, whilst it cannot be said, nor is it being suggested, that the Trust is a sham, in reality, the husband knew and expected all of his wishes would be followed whilst Mr Williamson was at the helm.
106. I am convinced that the same was (and is) true with the chosen successor, Mr Hess, who did everything that was asked of him…."
- The judge found (§114) that
"Mr Hess assisted the husband in his incorrect presentation about the Farah Trust. I am satisfied that, by a letter dated 12th December 2008, he gave false information. In particular, Mr Hess asserted that there had been no past 'capital or income distributions' and he stated that the loans made to the Husband 'have been fully repaid with interest'. The first assertion was plainly wrong even on the Husband's own case and the second is flawed….."
- She found (§115) that the trust accounts were only drawn up for the purpose of the proceedings and that prior to about 2010, the trustees only kept balance sheets. They took no part in a process of equalisation in which sums agreed directly between the brothers were moved between their three funds and could produce no record of the figures (§117).
- She found that when the wife asked Mr Hess in September 2008 for financial assistance and was not only given short shrift but also told that a loan for which she was nominally responsible to another of the family trusts was due and repayable, Mr Hess was aware that the husband "had set his face against the wife receiving other than a basic sum of capital and some maintenance" and certainly did not want her to obtain trust capital and "followed the party line" (§95). She also found that when Mr Hess indicated not long before the hearing that there was very limited liquidity in the husband's share of the trusts with the result that funds may not be available to pay future school fees, "this presentation was tactical" (§8).
- The judge found that "Mr Hess was/is prepared to do the husband's bidding" (§118). Notwithstanding letters from Mr Hess in firm tone and which it was argued demonstrated his independence and which the judge took into account, she found:
"119. There is simply no evidence of the Trustees ever failing to provide funds for the husband's needs whether in terms of business investments or assistance with the provision of homes. In addition, the manner in which Mr Hess can be demonstrated to have fulfilled his role since the proceedings began confirms that he continues to follow the husband's wishes. "
- The views to which Baron J was led by the rest of the evidence were plainly bolstered by Mr Hess not being available to give evidence despite the fact that the order made by Mostyn J at the pre-trial review included in the preamble a recital of the court's expectation that he attend in person to give oral evidence at the final hearing.
- Mr Dawson is a professional in the financial world, a friend of the husband's with whom he was at school but of whom the husband said they had "never been to dinner together". The judge found (§23) that "Mr Dawson was chosen because he could be relied upon to act in the husband's interests". Mr Dawson had written a letter to Mr Hess during the course of the matrimonial litigation about the question of his attending to give evidence which the husband asserted demonstrated Mr Dawson's independence but which the judge found (§125) to be "a spirited attempt to ensure that Mr Hess supports a given position through oral evidence". She was "satisfied that Mr Dawson is also imbued with the husband's current thinking and is wholly supportive of him".
- In addition to findings such as these that the judge made about the three individuals who were together responsible as protectors and trustees of the Farah Trust and also the Yearling Trust, the judgment contains many more general findings about how the Farah Trust had in the past complied with the husband's wishes and could in the future be expected to do so. Lewison J has collected together a considerable number of them and it is not necessary for me to add to that.
Erroneous inclusion of the trust assets as part of the husband's resources and alleged improper pressure on the trustees
- Mr Howard did not seek to argue that the judge was wrong to take account of the Farah Trust as part of the resources available to the husband; her errors, he argued, were to put improper pressure on the trustees as to the funds that they would provide and to subject the assets of the trust to "the sharing principle". He said that the Yearling Trust should have been left out of account altogether.
- There were a number of ways in which Mr Howard sought to make good these propositions. They did not include an attempt to disrupt the factual findings made by the judge about the compliant attitude of the trustees/protectors or the way in which the trust assets had been made available to the husband by way of loans in the past. What he did argue, however, was that the judge's findings as to what the trustees would do in the light of the court order did not go far enough to entitle her to include the trust assets in the way that she did in her calculations.
- At times, it seemed that Mr Howard was submitting that what the law required was something close to a certainty that the trustees would come up with funds so that unless a judge finds that the trustees will provide, the trust is irrelevant. However, I think he did concede in argument that this was putting it too high. Such an approach would not be consistent with s 25(2)(a) Matrimonial Causes Act 1973 which refers to the property and other financial resources which each of the parties to the marriage "is likely to have in the foreseeable future" and it is not in line with the authorities which contemplate a finding (which will obviously be made on the balance of probability) that the trustees are likely to comply with what is requested of them. That can be seen, for example, in what Wilson LJ said in Charman v Charman  EWCA Civ 1606 at §12 and §13 which culminated in the following:
"In principle, however, in the light of s. 25(2)(a) of the 1973 Act, the question is surely whether the trustee would be likely to advance the capital immediately or in the foreseeable future."
- Mr Howard's argument, as refined, was therefore that the judge's findings did not add up to the necessary finding that the trustees were likely to be compliant and to advance funds. That argument was doomed, I am afraid. It is abundantly clear from the judgment that the judge considered, and found, that the trustees/protectors could be expected to comply absolutely with the husband's requests. This applied to both the Farah Trust and the Yearling Trust, notwithstanding that in the case of the Yearling Trust the advancement of capital would require the additional step of the husband first being added as one of the beneficiaries. Without doubt, what the judge said amounted to a finding, albeit variously expressed at intervals throughout the judgment as she dealt with particular issues that had arisen, that the trustees were likely to advance funds from the trust immediately or in the foreseeable future if the husband requested that.
- Could it be said that the trustees were only likely to make loans as opposed to advancing capital? Loans had been the order of the day so far except in relation to the school fees which had been funded outright by the trust. The judge found (§109) that the trustees had made loans from the Farah Trust to the husband of £1.6 million between 1994 and 2004. Nothing was repaid until 2002 when a sum slightly in excess of the sums lent was repaid.
- In contrast, capital had been advanced to the husband's brothers and some of their children. The trust accounts showed outright distributions of capital to them between 1999 and 2008 in the total sum of £1.9 million. There was no evidence as to what amounts, if any, were provided to them outside that period.
- The judge found (§109) that the loans to the husband, which were interest free and repayable on demand, were "an approved, well founded and professional method of repatriating funds to the United Kingdom with little or no charge to tax". She found (§116) that the reason that the husband was treated differently from the others by receiving loans not capital was "only because the loan structure was tax efficient. I am absolutely satisfied that he had the use of the funds whenever he wanted or needed them".
- These factual findings which (like all the other findings about the attitude of the trustees) were a matter particularly within the remit of the trial judge, left no room for an argument that only loans and not capital would be made available from the trust funds.
- In summary, therefore, the position as found by the judge and not dislodged in any way in argument was that the trustees of both the Farah Trust and the Yearling Trust were likely to do whatever the husband asked including making capital available to him. In those circumstances, she had no choice but to treat the trust assets as part of his resources for the purposes of section 25(2)(a) of the 1973 Act.
- There might be thought to be little scope, in that context, for an argument that the order put improper pressure upon the trustees for, in so far as there was pressure, it was upon the husband and not upon the trustees at all and the payment required from the trust is not, as Mr Howard submits, a direct payment from the trust to the wife but a payment to the husband. However, I will deal with some particular aspects of Mr Howard's case on this point.
- In advancing his arguments in this respect and generally, he referred to the Farah Trust as a "dynastic trust". I use that term in this judgment only because he did and certainly not intending to give the impression that I endorse it as some sort of technical term, still less some sort of ancillary relief concept with its own body of attendant principles. Individual trusts vary considerably and global labels for them may be unhelpful as they risk deflecting attention from the particular terms of the trust under consideration. Having said that, I understand that Mr Howard sought by means of the label to draw attention to the fact that the trust was not one set up (or contributed to) during the marriage by one of the spouses but an arrangement set up by the husband's father before the relationship between the husband and wife even began with the design of benefiting his sons and, potentially, succeeding generations.
- Mr Howard invited attention to the following passage in the judgment of Waite LJ in Thomas v Thomas  2 FLR 668:
"the court will not act in direct invasion of the rights of, or usurp the discretion exercisable by, a third party. Nor will it put upon a third party undue pressure to act in a way which will enhance the means of the maintaining spouse. "
- The court cannot go further, Mr Howard said, than to give judicious encouragement to trustees to make funds available to a spouse from a discretionary trust. He submitted that Baron J did precisely that which Waite LJ had warned against, placing undue pressure on the trustees to make provision from both the Farah Trust and the Yearling Trust.
- Several of the points that he made in support of this submission revolved around the notion that the judge had interfered with the trustees' duties in administering the trust. He argued that it was wrong to force the trustees to act in a way which was against their stated position; this argument was untenable in the light of the judge's findings about the tactical and partisan nature of the trustees' presentation of trust affairs. He submitted that they might find themselves in breach of their fiduciary duty in a number of respects if they provided the funds, arguing that they owed a general duty to all the beneficiaries of the trusts and would be failing in that duty if they paid out capital to a single beneficiary. This argument does not survive a careful reading of the terms of the Declaration of Trust in relation to the Farah Trust, which govern both that trust and the Yearling Trust. Clause 6(D) thereof reads:
"(D) PROVIDED ALWAYS that the Trustees are hereby expressly authorised in exercising any of the powers hereby conferred in favour of any particular person to ignore entirely the interests of any other person interested or who may become interested under these presents"
- A further potential breach of the trustees' fiduciary duty which he identified was that the beneficiaries of the Yearling Trust would be disadvantaged if Strawberry Farm had to be sold prematurely in order to raise money for the husband because that property was bought for its hope value and the investment would not come to fruition until 2016. The judge rightly dismissed this submission as groundless. The figure of £1 million which was taken for the purposes of the proceedings as the value of Strawberry Farm was a figure advanced by the husband and agreed by the wife. It was incumbent on the husband accurately to reflect in his valuation the hope value of the property and that hope value would also be reflected in the figure that a purchaser would presently have to pay for the land. The implication that a sale now would be a sale at a loss is therefore incorrect. The land may be worth more if retained until 2016, but it is a speculative investment so it may not. Indeed I would anticipate that if it were not to be re-zoned as is hoped, it may be worth less after 2016 than it is now as the value may no longer be enhanced by the hope of future gain. In any event, Clause 6(D) would insulate the trustees from any problems vis-à-vis other beneficiaries in relation to such a sale.
- Mr Howard suggested that the judge had fallen into the error of crossing the line between legitimate judicious encouragement and undue pressure because she had relied upon the cases of Re the Esteem Settlement  WTLR 1 and Charman v Charman  EWCA Civ 503.
- Re the Esteem Settlement and Charman concerned "settlor-beneficiaries" (as Mr Howard put it) and not "dynastic trusts" and he submitted that the judge failed to realise that there was a crucial difference between the two types of case. However, the passages from those cases which the judge cited in her judgment (§139 and 140) deal in unexceptional terms with some of the practicalities of trusts. There is no evidence that the judge was led astray in some way by her reference to them. Furthermore, it has not been established that the authorities dictate the application of a distinct and different test when determining whether resources from a "dynastic trust" should be treated as part of the husband's resources for the purposes of s 25(2)(a). Whatever the nature of the trust, this issue is always approached by asking the question set out by Wilson LJ in Charman  (see above) although plainly the court will have regard to the circumstances of the particular trust – how it came into being, who the beneficiaries are, what duties the trustees have, what other relevant terms there are, how it has been administered in practice and so on - in answering the question and in determining, in due course, what ancillary relief order to make. In this particular case, factors of particular relevance included, as the judge identified, the wishes of the settlor who, "by the end of his life ….wanted each boy to have a separate fund over which they exerted power" (§42) and the existence, in fact, of three separate funds within the Farah Trust which "by 1989 the settlor was not averse to his children deploying …in such manner as they deemed appropriate" (§100).
- The judge having asked herself the proper question and arrived at the unassailable answer that the trustees were likely to make available such resources as the husband requests, it seems to me that Mr Howard has no grounds to complain of improper pressure and can only attempt to make headway with his arguments about the trust in the context of an attack on the judge's choice of ancillary relief order. I therefore propose to deal with them further in that context.
Other arguments in relation to the trusts
- Mr Howard argued that the route by which the judge arrived at her decision to treat the Yearling Trust as a resource of the husband was not open to her because it amounted to a back-door adjudication on an application which had never been made and could never have been made under s 37 Matrimonial Causes Act 1973 for avoidance of the transfer of assets from the Farah Trust into the Yearling Trust. Further, he argued that it was inappropriate for the Yearling Trust to have been treated as available to the husband without the trustees of that trust and/or the other beneficiaries being joined as parties to the litigation in order to protect their interests. He also sought to advance an argument, based on Vaughan v Vaughan  1 FLR 1108, that the value of the Yearling Trust could not be taken into account unless the husband had wantonly dissipated the assets of the Farah Trust by arranging for them to be transferred to the Yearling Trust or by not halting that process.
- None of these three arguments can succeed in my view. No reliance was placed on s 37 by the wife, nor did it need to be. The judge was entitled to reach a determination as to what the husband's resources were by the much more direct route that she adopted, applying Wilson LJ's test to the facts of this case. I do not see the judge's reference to the husband's having sought to alienate assets by permitting the transfer into the Yearling Trust to proceed as in any way indicating that she was pursuing the sort of approach set out in Vaughan. She was intent on considering what the reality was in relation to the availability to the husband of the assets in the trust and she found they were likely to be made available to him by the trustees. She was not in the territory of adding back a figure for assets which a spouse had dissipated or otherwise succeeded in making unavailable in the ancillary relief proceedings. As for the argument that the judge should have declined to deal with the Yearling Trust without joining the trustees/beneficiaries, I do not accept that there was a parallel between this trust and the chalet in Val d'Isere which was purchased in the name of one of the husband's brothers and in relation to which the judge declined to consider the wife's claim that the husband had a beneficial interest in that property without the brother being joined in the proceedings. A challenge to the brother's ownership of that property was a challenge of a quite different nature from the assertion that the assets of a discretionary trust were, in fact, available to the husband, particularly where the trust includes a provision such as there is here, enabling the trustees to exercise their powers without reference to the interests of any other person who is or may become interested in the trust.
The Hotel Investments debt
- The husband's argument is that the judge was wrong to include as a trust asset a debt of £561,849 owed by Hotel Investments Ltd (a company owned by the husband's part of the trust) to the husband's part of the Farah Trust. The grounds of appeal assert, essentially, that there was no evidence that the company had any funds to repay the loan, that it had never repaid loans in the past and that the loans were simply part of "accounting constructs to re-order ownership levels within the trust structure".
- The judge said (§108 (b)) that she had not been shown any evidence which convinced her that this was a mere book debt or had been double counted in some way and nor were we. The attack upon her conclusion does not, therefore, get off the ground.
- El Aguilon was bought in the early period of the marriage. It has been developed over the years so that it now consists of a main house and various ancillary properties, together with a swimming pool, tennis court and gardens.
- The husband did not get planning permission for the development. The ultimate sanction for this default is a demolition order.
- The parties jointly instructed an expert valuer from an associate firm of Savills in Spain to value the property. He said that "a true valuation would assume the worst case scenario" and that on that basis his figure was €680,000. If the house were to be "legalised", he put the value at €1,980,000.
- The judge took the valuer's higher valuation less 10% to allow for "a small risk factor given that the paperwork is incomplete" (§54). She therefore included the property in her schedule with a net value of £992,410. Her reasoning for this was:
"53. Naturally, the Husband submits that I should take the low value even though he had previously put its value as high as €3 million and, in the past, has actually marketed the property for sale at in excess €4 million (albeit he now maintains that was simply a marketing ploy). As I find, the fault to obtain [sic] the relevant consents must lie primarily with him and I decline to accept the low valuation, particularly as I am confident that the Husband understands how matters work in his part of Spain where he is well connected. In my view he would not have failed to take any steps which he considered posed a substantial risk to the value of his investment.
54. The Wife submits that I should ignore the planning difficulties altogether. However it would seem to me that some deduction is merited because there must be a small risk factor given that the paperwork is incomplete. There is no evidence to assist me in this regard and so, doing the best that I can, I intend to deduct 10% from the net value (after tax and costs) to allow for this point."
- Mr Howard argued that there was no evidential basis for the judge's decision to work on the basis of the full value less 10%. The single joint expert did not attend to give oral evidence and was therefore not cross examined, nor was that approach put to him in writing. No evidence was produced at the hearing by the wife to establish that it would be possible to resolve the permit problem, nor was the issue dealt with in cross examination of the husband. In these circumstances, the judge was not entitled, he said, to reach her own figure for the value of the property.
- I prefer the submissions of Mr Pointer on this issue. He rightly identified that the point made by Mr Howard about the failure to pursue matters with the expert or through further evidence cuts both ways. The expert said in his report:
The Property, if fully legal, would be very desirable being near Tarifa and its beautiful coastline and world famous wind surfing beaches. The Property is a typical Spanish "cortijo" full of style and character. Some properties in a similar legal situation have in the past been legalized but other instances of demolition have occurred although none that we are aware of in the immediate vicinity. At present steps are being taken to legalize the property and a new title deed has been prepared for presentation to the Property Registrar. The outcome, however, must be considered uncertain. To evaluate the risk factor in this valuation is very subjective but I shall give my opinion later in this report."
Despite the final sentence, the valuer did not give his opinion evaluating the risk factor later in his report. He gave a valuation on the worst case scenario and a valuation if the house were to be legalized but no indication whatsoever of which scenario was the more likely to materialise. As Mr Pointer submitted, either party could have pursued this with the valuer; it was not just a matter for the wife. In the absence of assistance, the judge was entitled to form her own view.
- Furthermore, I agree with Mr Pointer's submission that the conclusion she reached was well within the range of conclusions open to her and supported by the evidence.
- Mr Howard complained that the judge attached significance to the husband's not having viewed the lack of consents as a problem in the past and argued that this was a mistake because it was inconsistent with the wife's oral evidence. He argued (Skeleton Argument §35) that the wife had accepted in cross examination "that the prior apparently relaxed attitude of each party during the marriage was not a good guide to the current situation which was, W admitted, much more serious than they realised at the time". Having looked carefully at the three questions and their one word answers upon which this submission is based, it does not seem to me that that fleeting exchange goes anywhere near providing a sufficient foundation for it. The judge was entitled to take the view that the husband understood how matters work in that part of Spain where he is well connected and that he would not have failed to take steps that he considered posed a substantial risk to the value of his investment and to infer from that, as she plainly did, that there was not a substantial risk to the value of the investment. There was nothing illogical in her making a modest discount in recognition of the lever that the absence of paperwork would potentially give a purchaser of the property.
- Mr Howard also complained that the judge placed reliance on the notion that the lack of proper consents was the husband's "fault". He asked how, if the husband was unconcerned about the lack of consent, could he be criticised for failing to attend to it? All that had happened, Mr Howard argued, was that hindsight had revealed that the parties were both wrong in thinking there was no problem and this was no basis on which to import a Vaughan approach, attributing a notional sum to the husband for the lost value of the property.
- I did not read the judgment as turning on fault on the part of the husband. The judge's comments about fault were essentially part of her analysis that the husband was the one who attended to the question of obtaining consents, that he knew what he was doing, that he would not have risked the value of his investment, and therefore that the valuer's worst case scenario was not likely to materialise. She was not taking a Vaughan approach at all.
The golf club management company
- Mr Howard argued that the judge was wrong to include the husband's interest in the golf club management company (which would ultimately be a 60% interest in it which the judge took to be worth £400,000) as a valuable part of his assets because she failed to take into consideration the impact that the sale of the golf course would have on the management company. His argument was that if the golf course was sold, the management company would have to cease business and would neither produce any income for the husband nor have any capital value.
- I mentioned earlier the difficulty caused by the lack of information about the management company's tenancy of the golf course. I am indebted to Lewison J who has dealt comprehensively with the position under Part II of the Landlord and Tenant Act 1954 in relation to this tenancy and made it clear that it is impossible to write off the tenancy and/or the management company as valueless in the event that there is a sale of the golf course to raise the funds to meet the husband's obligations under the order. I need say nothing further myself.
- It follows that none of the grounds of appeal relating to the inclusion/valuation of assets succeed. No adjustment is required to the figures that the judge took as the basis for her determination and which can be found set out at the start of this judgment.
Division of assets over-generous to the wife
- Mr Howard's most powerful grounds of appeal related to the weight that the judge gave to the fact that the trust assets came from the husband's family, under the auspices of a trust originally set up before the parties were married, and continued to be held on trust throughout the marriage.
- The judge recognised (§143 (f)) that in addition to the contributions that the parties had made during the marriage, the husband had "brought wealth into the marriage which had been made available to him by his father/parents" and that this was "the base upon which all the homes and other investments were acquired". She said that it was "an additional contribution which, in fairness, must be brought into account when considering the fair apportionment of funds". She also recognised that the bulk of the funds were held in a trust structure throughout the marriage and that they "were not consumed rashly but were husbanded to enable further assets to be purchased". She said that note had to be taken of that in assessing the wife's proper award and that it was also just to note that the husband was 34 years old when the parties married and had already embarked upon the purchase and development of a hotel. She said:
"All of these points justify a departure from equality and are discounting factors which militate against a 50-50 or even a 60-40 split of the assets."
So far, I do not think Mr Howard would complain. His complaint was that the judge did not follow this approach through in assessing the award and also failed to take account of liquidity issues and of the impact on the husband's other assets of implementing her orders and therefore gave the wife too great a share of the assets.
- By Mr Howard's calculation (as set out in his Skeleton §6) the judge's order gave the wife 34% of the total assets including the trust assets, but this amounted to an award of 94% of the matrimonial assets, leaving the husband with only the trust assets. Furthermore, said Mr Howard, the assets with which the husband was left were largely not liquid and a significant proportion of them was made up of minority shareholdings in limited trading companies. Mr Howard identified as illiquid the golf club management company and three companies related to the Spanish hotels (all outside the trust structure) and within the Farah Trust, the Hotel Investments debt with which I have dealt above and Hostal la Pena (see §65 of his Skeleton). Assets in the husband's hands which he accepted were potentially more saleable were El Aguilon (but this was the husband's home), the land in Spain worth £197,051 and, in the trusts, the portfolio of shares worth £85,000, Strawberry Farm worth £1 million, Yearling Management Ltd/the golf course worth £2.38 million and a business interest, identified as Safety Devices, worth £180,000.
- I will deal first with Mr Howard's liquidity/risk point which is a criticism of the judge for, he said, giving no consideration to the liquidity and nature of the parties' respective assets and arriving at an unfair distribution of safe/liquid and risky/illiquid assets between them. This was a result which he submitted was contrary to the principle in Wells v Wells  2 FLR 97 which contemplates that assets should be shared with a "fair division of both the copper-bottomed assets and the illiquid and risk-laden assets".
- Mr Pointer responded that it had not been established that the assets retained by the husband were "risk-laden". He pointed out that in any event the husband had been anxious to retain the business assets. I accept these points. Furthermore, it is not correct, in my view, to say that the judge failed to take account of liquidity. She said at §108(a) that of the total net assets, "the bulk are not immediately liquid and many are business assets". Later in that paragraph she expressly recorded Mr Howard's submission that "because nearly all the assets are illiquid the Wife's award should be circumscribed to minimal capital and periodical payments" but rejected it for perfectly tenable reasons. It is worth noting that the judge's assessment of saleability is pretty much in line with Mr Howard's in that she accepted that the holdings in relation to the Spanish hotels may be regarded as virtually illiquid because they are core business assets and shared with the husband's brothers but said that "the same does not hold good for other properties or land based investments. They could be sold….". She went on to say that if the husband wanted to retain El Aguilon (as he undoubtedly did) it would be feasible for the trustees to sell the English based assets. She was not suggesting how matters could or should be arranged, but noting correctly that those ventures were less obviously central to the husband's investments with his brothers.
- Overall, I cannot identify any valid cause for complaint about the judge's approach to issues of risk and liquidity.
- I turn to the question of the effect that realising capital to meet the order would have upon the husband's financial position. Mr Howard sought to undermine the judge's order by demonstrating that the disposals of assets that would be required would deprive the husband of his income. I have already dealt with the impact on the golf course management company of a sale of the golf course. Strawberry Farm is not a generator of income so could be sold without implications for income. If the English assets were sold, as they could be, the hotels would not need to be so there would be no impact on the husband's income derived from that part of the business. The judge's assessment of his income was based, as we can see from §108(a), on income from the Spanish hotels and from renting out El Aguilon. The judge was conscious of the difficulty in predicting what his precise income would be because of the choices in relation to what assets to sell but thought it would be at least €100,000 a year and probably more. It has not been demonstrated that that was wrong. If the golf course management company continued to operate, that would obviously generate additional income.
- Mr Howard also criticised the judge for concentrating unduly on the wife's needs and failing to take account of the husband's, arguing that she had barely referred to them in the judgment and had not quantified them. In so far as this relates to income needs, I will deal with it later. The other major need that each party had was for a home which would accommodate themselves and the children. There is no doubt that the judge had this firmly in mind in relation to the husband as well as the wife when fixing her capital order and she gave her views about him retaining El Aguilon. Contrary to Mr Howard's submissions, the judge's order would, if the husband so chose, permit him to retain his Spanish property as his home, selling English assets to meet the order and thereby also preserving his income from the Spanish businesses.
- Having despatched much of the detailed criticism of the judge's order, does there remain a valid criticism as to her conclusion that a fair order was one leaving the wife with what she calculated to be 36% of the net assets?
- As part of his attack on the reasoning which led the judge to that conclusion, Mr Howard argued that the judge had "erred in law and in fact in her approach to 'acquest'". This submission is based on a sentence in §144 of the judgment. That paragraph (with the offending passage highlighted by me) reads:
"The resources available (inclusive of Trust assets totalling nearly £7 million) are as explained to be taken at £10.4 million. The Wife's needs are £3 million. However, in addition to that sum she is entitled to share in the marital acquest albeit that most of it has been made with the assistance and through the Husband's fund in the Farah Trust. I cannot calculate with precision how the asset base has been augmented during the marriage because I have not been presented with the necessary evidence. But I am clear that the Wife deserves a modest share in the marital resources which exceeds her basic needs. I have come to the conclusion that a fair figure for the sharing element of her award is £750,000 which is just over 10% of the trust assets (and might in a loose way be thought to equate to about half of the profit made on the property projects). Accordingly the overall award is £3.75 million which amounts to some 36% of the net assets which in the circumstances of this case is fair. In addition the Wife's debts must be met they total £331,000 and this sum will be added making the total award £4,081,000. "
- Mr Howard's submission was that it was an "error in law…to consider acquest (aka "sharing the fruits of the marriage") as an uplifting principle regardless of the sum needed to meet needs". He cited the following passage from the judgment of the court in Charman v Charman No 4  EWCA Civ 503 as encapsulating the correct approach.
"§73…..It is clear that, when the result suggested by the needs principle is an award of property greater than the result suggested by the sharing principle, the former result should in principle prevail: per Baroness Hale of Richmond in Miller at paras  and . At least in applying the needs principle the court will have focussed upon the needs of both parties; analogous focus on the respondent is not present in the compensation principle and we leave for another occasion the proper treatment of irreconcilable conflict between that principle and one of the others. It is also clear that, when the result suggested by the needs principle is an award of property less than the result suggested by the sharing principle, the latter result should in principle prevail: per Lord Nicholls of Birkenhead in Miller, at paras  and , and Baroness Hale of Richmond, at para . "
- He argued that in this case need had already dictated that the wife was getting the majority of the matrimonial assets in any event and her sharing entitlement had been subsumed in that; it was wrong in these circumstances for the judge to add a "sharing" award to the needs award. Or putting it very simply, this was a needs case, not a sharing case.
- Mr Howard appears to have assumed that the judge had quantified the "acquest" at £1.5 million and he complained (§89 of his Skeleton) that she was wrong about this. In fact, the judge did not put a figure on the "marital acquest". The furthest that she went was to indicate that £750,000 might in a loose way be thought to equate to about half of the profit made on the property projects but she also commented in the passage that I have quoted that she had not been able to calculate with precision how the asset base had been augmented during the marriage because she had not been presented with the necessary evidence. This comment is underpinned by other earlier passages from the judgment. At §78, the judge said that doing the best she could, she thought the English property ventures made profits well in excess of £2.5 million which helped to augment the parties' lifestyles and the husband's business ventures; this was in addition to monies from the golf club. At §69 the judge found that monies were placed into the Farah trust and used for the golf club which in reality represented some of the joint profit made from the purchase and improvement of the parties' property Fairlight Hall which was sold in 2002 with a profit in the region of £750,000. It follows that those monies may well have generated capital within the trust. That demonstrates that an analysis such as Mr Howard's which works on the basis that the only profit that relates to the marriage is the profit on non-trust assets is likely to be flawed. It is simply not open to him to argue, as he has, that the two UK properties (the wife's home and the other rented out property) were the sole repository of the matrimonial acquest and his dependent argument that the judge had assessed the acquest at a value greater than the current value of the assets that it was used to buy (£1.13 million net) similarly falls away. By the same token, he cannot maintain his argument that the wife is recovering twice because she is to have the two properties which represented the entire fruits of the marriage and a further sum on top.
- Mr Pointer conceded that the judge's phraseology is unfortunate in §144. He accepted that the process of calculation of the award is not an incremental one in the sense that the court computes elements for need, sharing and/or compensation and then adds them together. But he submitted that it is not demonstrated that the judge misunderstood or misapplied the authorities of Miller & McFarlane and Charman. He submitted that what the judge was actually saying was that this was not a case in which the award should be determined by needs alone but one to which the sharing principle applied and that the proper application of that principle in this case would produce a figure which exceeded the needs calculation by £750,000.
- I accept that analysis of the rather difficult passage in §144. The process by which a judge ultimately arrives at a figure for an award is often one which involves looking at the facts from a number of angles and trying out various solutions. The authorities recognise this when speaking of arriving at a provisional award, of cross-checking, and so on. The judge plainly proceeded from her provisional figure to examine what proportion of the assets her proposed award gave the wife, standing back to consider whether that was fair and concluding that it was. In so doing, she had in mind the considerations which dictated a departure from equality which she had just set out at §143(f) and she departed from it significantly.
- I return therefore once again to the fundamental question of whether, given that the husband's resources derived in such significant measure from the family trust, the judge's award to the wife should have been confined by reference to her needs which already required a fund greater than any conceivable share of the fruits of the marriage. The relevance of the source of the assets cannot be denied. Jones v Jones  EWCA Civ 41 is, of course, a very recent decision underlining that, albeit that it turned on a different point. It was a factor that the judge had very firmly in mind. Amongst her extracts from authority was the excerpt from Miller & McFarlane where Lord Nicholls comments that the matter stands differently regarding non-matrimonial property that the parties bring with them into the marriage or acquire by inheritance or gift during the marriage. The precise weight to be given to that factor in an individual case is very much a matter for the discretion of the trial judge, however, and, to my mind, it has not been shown that the judge's division of the assets in this marriage of significant length failed to give due regard to the source of the assets or that she arrived at a decision which was outside the band of decisions that were open to her on these facts.
- The final area of challenge to the judge's decision was in relation to income related issues.
- Ground 15 of the grounds of appeal relates to the judge's order that the husband should pay the school fees. Mr Howard says that this should have been dealt with by an undertaking. I can see no reason why the judge should not have made the order she did. If the necessary funds were to come from the trust, then her findings about the attitude of the trustees meant that the husband had only to ask for the money to be paid and it would be, thus enabling him to satisfy the order. There was material indicating that the school fees had been used "in terrorem" and it was appropriate (and in the children's interests) that this should be brought to an end by an order. The judge was satisfied that there were funds to permit the next year's fees to be paid and had made allowance for this in her calculations, deducting £500,000 from the assets for that purpose.
- Ground 17 also relates to the children and is to the effect that the judge was wrong to provide for an increase in the maintenance for the children in twelve months' time. A number of points are made in this regard. Some of them focus on the fact that the starting figure was fixed in accordance with the child support formula whereas the new figure would depart from it. Mr Howard also argued that the judge did not find that there would be any (or any sufficient) increase in the husband's income to fund the increase and that the increase was "unprincipled and not supported by the evidence or judgment".
- The figures involved for the children's maintenance are quite modest. It can hardly be said that £12,500 per annum for all the children is inappropriately high either in principle or in practice in the circumstances of this case. The judge was quite clear about the reason for the increase in amount. It was not based upon any forecast that the husband's resources would increase but was designed to commence when the lump sum was paid, at which point the wife's interim periodical payments order would cease. There was nothing wrong with that approach.
- Ground 16 and Ground 18 relate to the periodical payments to the wife. The judge found that the wife does not have the ability to earn much in the future. In looking at her needs, she therefore inevitably built in provision for maintenance. She did so in the long term by means of a Duxbury fund based on an annual net income of £65,000 to which would be added the net rental income of £15,000 which the judge found the wife could make from her properties. This would cover her budget of £80,000 per annum which the judge considered not at all excessive.
- As to the husband, the judge said (§143 (a)) that she was satisfied that he was "capable of earning or investing sufficient to meet his long term needs". She said that she believed that in the long term, his income would be "at least €100,000 from the Spanish hotels and renting out his home or through other investment income". She rightly identified that it was difficult to predict his precise income because there are many options in relation to the sale of assets to meet the ancillary relief claim but she said that "[w]hatever course is taken I am clear that my award will leave the Husband with sufficient to cover his needs given that the Trustees will, as I find, continue to offer support and will effectively follow his instructions".
- Mr Howard submitted that it was not disputed that the husband's current net income was about £51,700 p.a. (derived from two of the hotel management companies) and that self evidently, given his other outgoings, he would not be able to meet interim orders for periodical payments for the wife and children which totalled £45,539 per annum. He criticised the judge for failing to take sufficient account of the husband's needs both vis-à-vis the interim periodical payments position and more generally.
- It is correct to say that no budget is set out for the husband in the judgment but it is clear from §143(a) that the husband's needs, capital and income, were not ignored and the judge properly assured herself that he would have sufficient to meet them. Mr Howard's complaint about the shortfall in the husband's income during the currency of interim periodical payments for the wife depends upon the husband's income being limited to the net figure that he identified. It fails to take account of the judge's finding that the trustees would offer the husband support and, as Mr Pointer submitted, ignores the important contribution that the golf club management company's rent to Yearling Management could make to the husband's resources in this way and also the fact that this is a family which historically has traded in real property with a view to generating capital gains which have discharged expenses, making it of limited utility to focus on the income available to the husband by more direct means. I am not therefore persuaded that the judge erred by fixing interim periodical payments for the wife which the husband could not manage to pay.
- The final challenge to the judge's conclusions about periodical payments relates to her approach to the wife's new partner, Mr Olson. It was argued that she failed to apply the ratio of Grey v Grey  EWCA Civ 1424 properly and failed to make proper allowance for the contribution that Mr Olson should be making to the wife's household.
- Mr Howard submitted that the test to be applied in relation to a new partner was that set out at §28 and §51 of Grey by Thorpe LJ and Wall LJ (as he then was). As Thorpe LJ put it:
"The real question will generally be not what is he contributing but what ought he to contribute."
- The judge's findings about Mr Olson are contained in §87 of her judgment. She said:
"Despite the Wife's coyness about Mr Olson I am clear that this is a committed relationship. They do not spend a great deal of time in England because Mr Olson is away for the bulk of the year but that does not lessen the quality of the relationship, particularly as the Wife often joins him on voyages. I am satisfied that he is a man of limited means although he earns at least £60,000 per annum and, whilst on duty, has his daily needs met. It would not appear that he has much capital. The Husband has asserted that, whilst he is with the Wife, Mr Olson should make a contribution to the Wife's needs. This is put by Mr Howard QC as, at least, £7,800. I am sympathetic to that submission because I do not consider, as a matter of principle, a new partner should be supported by a wealthy former spouse. However, the Wife's expenses do not seem to me to be increased by Mr Olson's ad hoc visits. Therefore the sum suggested as his contribution will cover any extra expenditure which he engenders but will not inure to the Wife's benefit. As such Mr Olson is cost neutral. "
- Mr Howard submitted that this revealed that the judge asked herself the wrong question, that is to say not what Mr Olson should be contributing but whether he increased the wife's expenses. He argued that this ignored the benefit that Mr Olson got from using the wife's property, having no home of his own and availing himself of accommodation with her for himself and for the purposes of having staying contact with his children. Had the judge assessed this factor appropriately, he argued, she would have put a lower figure on the wife's needs, dictating lower periodical payments and a lower Duxbury sum.
- The short answer to the point relating to Mr Olson in the Duxbury context is that although the judge did work out what capital would be required to meet the wife's needs, she ultimately decided that this was not a needs only case and went on to make an order which exceeded those needs. Any error in her approach to Mr Olson was therefore overtaken by that conclusion.
- However, it is clear that the judge did in fact accept that Mr Olson should be paying a contribution and that the figure she took for that contribution was the £7,800 suggested by Mr Howard. She did not see him as a man of means who could make a sizeable capital or income contribution and, implicitly, she found that his visits to the wife's home were limited because she said he was away for the bulk of the year and described the visits as "ad hoc". These, no doubt, are the reasons why she did not consider that he should be paying anything akin to "occupation rent" for his use of the wife's accommodation. She concluded that Mr Howard's suggested contribution would cover the additional expenses that Mr Olson generated for the wife and no more. That conclusion was one she was entitled to reach on the facts and Mr Howard has not made good his assertion that she went wrong in principle by setting herself the wrong test.
- It follows for all the reasons that I have set out that I would dismiss the husband's appeal.
More general observations
- Before I leave this judgment, I want to revert shortly to a matter to which I have already made reference, that is the lack of precise information about the legal framework of the various assets with which the court was concerned. I have referred specifically to the lease of the golf club in favour of the golf club management company. The other area in which the task of the court would have been made easier if more information had been made available sooner is in relation to the trust documentation. I am sure that the various trust deeds were made available to the judge but they were not included in the appeal bundles and we had access to them only when we asked. Their importance in considering the points which we had to determine in the appeal was considerable and there was no substitute for a detailed consideration of the specific terms of the trusts involved. Even though there can be occasion in ancillary relief proceedings for the court to depart from strict property rights and to look at more flexible concepts such as earning capacity, needs and resources, the court also requires sufficient concrete information about the legal framework within which the parties' various assets exist to enable a proper view to be formed as to issues such as saleability, security of tenure, profitability, control of any relevant company and valuation of its shares, tax, powers and duties under any trusts and, of particular relevance here, the likelihood of resources being made available from a trust.
- I agree with the comprehensive judgment of Black L.J. I wish to add a few observations of my own on the questions of property that arise.
- Section 25 (2) (a) of the Matrimonial Causes Act 1973 requires the court, in exercising its powers of property adjustment, to have regard to:
"the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future"
- Before considering how to exercise these powers the court must identify what are the "property" and "other financial resources" in relation to which its orders can be made. "Property" is property: its nature and extent do not differ according to the Division of the High Court in which the proceedings are heard. "Financial resources" is a more flexible concept. But even there it is necessary to consider the legal structure of those resources, and the mechanisms by which such financial resources can be made available to one or other party before considering the likelihood of that happening.
- There are two particular aspects of the case on which I wish to comment. The first concerns the two trusts in issue: the Farah Trust and the Yearling Trust. The second concerns the relationship between Yearling Management Ltd (which owns the golf course) and Sedlescombe Golf Club Management Ltd (which runs it).
- The Farah Trust is governed by a deed dated 5 December 1983. The initial trust asset was £100 (Recital C). The trust period is 80 years (clause 2 (A) (b)). The original class of beneficiaries consisted of Mr and Mrs Whaley senior and their children and remoter issue plus charities (clause 2 (A) (c)). Mr and Mrs Whaley senior were irrevocably excluded from the class by a later deed. The trustees have power to add "any person or class of person" to the class of beneficiaries (clause 2 (C)). The trustees hold the fund on trust to pay the income of the fund as they "may in their discretion think fit" for one or more of the class of beneficiaries; and to accumulate the residue (clause 5 (A)). The trustees have power to pay capital to one or more beneficiaries as they think fit (clause 6 (A) (i)). The trustees have power to appoint new trusts over the trust funds (clause 6 (A) (ii)). In exercising their discretion the trustees are entitled to ignore entirely the interests of any particular beneficiary (clause 6(D)). The trustees have power to release or restrict the future exercise of their powers or discretions (clause 6 (E). There is a clause exonerating the trustees from liability for breach of trust save in the case of "personal conscious bad faith" (clause 15).
- The trust was varied by two deeds both dated 29 March 2006. The first deed created the office of "Protector" and appointed the first two Protectors. The Protectors were given power to remove the trustees (new clause 12 (D)). The Protectors are not liable for loss except for their own fraud, wilful misconduct or gross negligence (new clause 23 (C)). The second deed was a deed executed by the trustees. By that deed the trustees revocably restricted some of their powers. The power to add beneficiaries, the power to advance capital and the power to appoint new trusts were thenceforth to be exercised only with the consent of the Protectors. The deed itself was revocable with the consent of the Protectors.
- The Yearling Trust was created by the trustees in exercise of their power under clause 6 (A) (iii) of the original trust deed. The Yearling Trust is governed by a deed dated 17 July 2008. Since this deed post-dates the trustees' restriction of their power to appoint new trusts, it required the consent of the Protectors. The deed does not recite that the consent of the Protectors was obtained; but no one suggests that it was not. The initial trust asset was the share capital of Yearling Management Ltd and the benefit of outstanding loans to that company. The class of beneficiaries consists of the grandchildren of Mr and Mrs Whaley senior (clause 1). Thus the husband is not one of that class. However, the powers in the Farah Trust continue to apply (clause 2). Thus the trustees retain the power under clause 2 (C) of the original deed to add beneficiaries to the class of beneficiaries. Equally, this trust is also a discretionary trust, with the same powers to apply capital. The exercise of these powers is, however, only permissible with the consent of the Protectors.
- The legal position relating to these trusts is as follows. A discretionary beneficiary has no proprietary interest in the trust fund. But he has a right to compel the due administration of the trust. Thus he is entitled to compel the trustees to consider exercising their discretion in his favour. He can also complain if the trustees exercise their discretion capriciously. But the trustees' liability for breach of trust is limited by the trust deed itself to cases of personal bad faith. Although a trustee must normally consider the interests of all beneficiaries before exercising a discretion, this is excluded by clause 6 (D) of the trust deed. In deciding whether to exercise their powers trustees "may and should take into account … the wishes of the beneficiaries and their needs": Lewin on Trusts para 29-153. The presence of clause 6 (D) and the existence of the office of Protector distinguishes these trusts from many discretionary trusts. When considering the likelihood of resources from the trust being made available to the husband, it is important to have the trustees' actual powers, and restrictions on those powers, in mind.
- As I have said, a discretionary beneficiary has no proprietary interest in the fund. But under section 25 the court looks at resources; not just at ownership. Thus whether a beneficiary under a discretionary trust has a proprietary interest is not relevant. The resource must be one that is "likely" to be available. This is the origin of the "likelihood" test. No judge can make a positive finding about the future: the best that can be done is to assess likelihood. What is relevant is the likelihood of the trust fund or part of it being made available to him, either by income or capital distribution. If the husband were to ask the trustees to advance him capital, would the trustees be likely to do so: Charman v Charman  1 WLR 1053; A v A  2 FLR 467, 499?. The question is not one of control of resources: it is one of access to them.
- In deciding that question the court must look at the facts realistically. The court will not put "undue pressure" on trustees to exercise their discretion in a particular way, but may frame an order which affords "judicious encouragement" to provide one spouse with the means to comply with the court's view of the justice of the case: Thomas v Thomas  2 FLR 668. The cases do not say what amounts to "undue pressure". But in Thomas Glidewell LJ said what would not be undue pressure (viz. if (a) the interests of other beneficiaries would not be appreciably damaged and (b) the court decides that it would be reasonable for the husband to seek to persuade trustees to release more capital to enable him to make proper financial provision for his former wife). Even if the court makes such an order the trustees are not bound to comply with the husband's request; but it is "plainly proper for the trustees to take it into account … and commonly it will be decisive": Lewin on Trusts para 29-157
- In the present case, the analysis is a little more sophisticated, as a result of the structure of the trust. In theory, four steps are needed before the assets of the Yearling Trust can be made available to the husband:
i) The trustees must decide to add him to the class of beneficiaries of that trust;
ii) The Protectors must agree to that addition;
iii) The trustees must resolve to distribute capital to the husband;
iv) The Protectors must agree to that distribution.
- The judge did not expressly consider the likelihood of each of these events taking place. But it does not appear that that was how the case was argued before her. Indeed this appeal was prepared without even including the trust documents within the appeal bundles; and they were only provided at the request of the court. The judge's relevant findings of fact were as follows. During the marriage the husband "simply made decisions as to the movement of funds and designated them to such settlement or asset as he deemed fit" (§ 68). He "simply told the trustees how the funds were to be deployed and they followed his instructions" (§ 71). Following the death of Mr Whaley senior the lead trustee (Mr Williamson, who subsequently became one of the Protectors) "became accustomed to doing the Husband's bidding." The husband "knew and expected all of his wishes would be followed" (§ 105). The same is true of his successor Mr Hess (§§ 106, 118). The husband had the use of funds whenever he wanted or needed them (§ 116). The trust operated flexibly "at the direction" of its beneficiaries (§ 117). Until these proceedings began in earnest "the trustees regarded the assets within the Husband's designated fund as available for his use in such manner as he considered appropriate" (§ 60). The trustees will "continue to offer support and will effectively follow his instructions" (§ 143 (a)).
- The judge further found that Mr Hess gave false information (§ 114); "cobbled together" figures (§ 110), and that Mr Hess was unwilling to support his professed attitude under cross-examination (§ 119). She was therefore entitled to disbelieve the trustees' professed attitude. She found that Mr Hess and the Protectors were not independent and "followed the party line" (§ 95). She also found that the husband had tried to conceal the truth behind his trust holdings and to obfuscate the use to which he had been able to put the funds over the years (§ 107).
- So far as the Yearling Trust was concerned she found as follows. The impetus for this came from the husband who "determined" that the golf course should be protected from HMRC (§ 84). He could have stopped the implementation of the scheme (§ 108 (g)). It was appreciated by all concerned (including the husband) that it would be possible to add him to the sub-trust once the tax challenge had ended (§ 84). The tax challenge has ended (§ 108 (g)).
- On the basis of these findings of fact, in my judgment the judge was justified in finding that the assets of the Farah Trust (in so far as they fell within the husband's designated fund) and the assets of the Yearling Trust were resources likely to be available to him. Since the judge found that in practice the trustees and the Protector did as the husband asked them, it can hardly be said that to continue along the same course amounts to "pressure" on them; let alone "undue pressure".
- The second aspect of the case on which I want to comment is the golf course. Mr Howard QC argued that if the trustees sold the golf course, then the husband's interest in Sedlescombe Golf Club Management Ltd would be rendered valueless because there would be no golf course left to manage. This submission entirely overlooks the company's proprietary interest in the course. The judge found that it had a tenancy of the course (although she did not explain what kind of tenancy it was). When this point was put to Mr Howard he replied that the lease had expired. In his written submissions Mr Pointer QC argued that Yearling Management Ltd could terminate the lease by notice and would then control the whole asset. But both these positions overlook the nature of the lease or tenancy. The company runs the golf course for profit. It therefore occupies the course for the purposes of a business carried on by it. Accordingly the tenancy falls within Part II of the Landlord and Tenant Act 1954 (unless it has been contracted out, as to which there is no evidence). The mere fact that the expiry date of the lease has passed does not bring the tenancy to an end. It continues indefinitely under section 24 of that Act unless and until it is terminated in accordance with the Act. In practice this means that either the landlord or the tenant must serve a notice in the prescribed form. Even if it is terminated, the company will have the right to apply to the court for a new tenancy. It is entitled to a new tenancy at the market rent, unless the landlord can establish a statutory ground of opposition. In the event of a sale, a purchaser may wish to establish a ground of opposition under section 30 (1) (g) of the Act (intention to occupy for its own business). Whether such a ground of opposition could be established within five years of the sale will depend on whether the subject matter of the sale is the freehold land or the company that owns it. In the former case (but not in the latter) section 30 (2) precludes reliance on section 30 (1) (g) for five years. The ground of opposition cannot be established if the landlord simply wants possession in order to sell the freehold. Even if the ground of opposition can be established, the landlord will have to pay compensation to the tenant. Since the tenant has been in occupation for 14 years or more, that compensation will be six times the rateable value.
- None of these legal characteristics of the tenancy were ventilated before the judge. They should have been; because they would have enabled her to have reached a conclusion based on the true nature of the property in question. But an exposition of the legal characteristics of Sedlescombe Golf Club Management Ltd's tenancy only reinforces the judge's instinctive conclusion that the husband's shareholding in the company (and the shareholding he was due to receive from the wife under the judge's order) was a valuable asset; and that its value would not be extinguished if the trustees were to sell either the golf course itself or Yearling Management Ltd.
- I agree with both judgments.