[back] Whaley v Whaley [2011] EWCA Civ 617 09/08/2011 The Facts H was 60 and W 47. The parties married in 1987 after two years cohabitation and separated in 2008. The trial of the ancillary relief proceedings was heard by Baron J. At trial there was a fundamental difference between the parties as to the extent of the assets. H contended for net assets of c.£3.2 million. W contended that the figure should be c.£11.9 million. The main difference between the parties turned on whether assets held in F Trust and Y Trust, with an approximate value of £7 million should be treated as a resource of H. The non-trust assets, had a total value of nearly £4 million net of accrued debts, of which H held around £3 million and W the balance of just over  £1 million.   The settlor of the F Trust was H’s father, who settled his company and the profits made by the company into the Trust. The beneficiaries were originally H’s father and mother, H and his 2 elder brothers and their remoter issue. H’s parents were subsequently excluded from benefiting under the trust. The original trustee, Mr W was a professional trustee. He was also found to be H’s personal friend/trusted advisor. When Mr W retired he was replaced by Mr H. On his retirement as a trustee, Mr W became the trust protector. The trustees 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 also given power to pay capital to one or more beneficiaries as they should in their discretion think fit. The terms of the trust included authorisation of the trustees in exercising any of their powers conferred in favour of any particular person to ignore entirely the interests of any other person interested or who may become interested. The trust fund was subsequently allocated to three separate funds for each of the settlor’s sons. The settlor signed a number of letters of wishes. The last of which made clear that he wanted each of his sons to have a separate fund over which they exerted power; which lead Baron J to conclude that the settlor was not ‘averse to his children deploying … in such manner as they deemed appropriate the funds which had been allocated to them’. Baron J found that the trustees were accustomed to doing H’s bidding in respect of his fund and that whilst the trust was not a sham, H knew and expected all of his wishes would be followed. The Y Trust was created by the trustees of the F Trust on the same terms as the F Trust and there was an overlap between the F Trust trustees and protectors and those of the Y Trust. However H was not a beneficiary of the Y Trust. The beneficiaries were the grandchildren of H’s father. Baron J found that the impetus for the transfer of the assets into the Y Trust was originally an anxiety on the part of H in respect of a potential tax liability. She also found that there was no real expectation that H’s brother’s children or H’s children would benefit and that it was appreciated by all that it would be possible to add H as a beneficiary at some future date. Baron J also added that she expected that H also appreciated that the creation of the sub-trust had the added advantage that it might be seen as distancing the trust asset from him in the event of divorce. Baron J held that the trustees of both the F and Y Trust were likely to do whatever H asked including making capital available to him. In those circumstances she had no choice but to treat the trust assets as part of H’s resources. Amongst other matters a lump sum of nearly £3 million was ordered to be paid as part of a clean break. Such an order was to effectively give W 36% of the total assets including the assets held in the F and Y Trust. H appealed on a number of grounds; the most fundamental and far reaching of which related to the judge’s treatment of the trust assets. H did not challenge the judge’s finding that the assets within H’s portion of the F Trust were a resource. Neither was a challenge made to the 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 H. A challenge was however made to treating the assets of the Y Trust as a resource. It was also argued that the judge fell into error in making an order that placed undue pressure on the trustees since the order made could not have been satisfied without H having recourse to trust assets in order to meet his most basic needs such as housing. Furthermore the pressure placed on the trustees to assist H was also said to be improper because it required them against their stated intentions and ignoring their duties to other beneficiaries to realise assets at a time which would be unpropitious commercially. Held The Court of Appeal had little difficulty in dismissing the appeal; both in relation to the trust issues and on the other issues raised by H. Baron J had asked herself the proper question; namely whether the trustee would be likely to advance capital on request immediately or in the foreseeable future. Such a finding was required to be made on the balance of probabilities; there was no requirement of something close to certainty of advancement. The argument that the judge’s findings did not add up to the necessary finding that the trustees were likely to be compliant and advance funds was ‘doomed’. It was abundantly clear that the judge considered and found that the trustees/protectors could be expected to comply with H’s requests and this applied to both the F and Y Trust, notwithstanding that in the case of the Y Trust the advancement of capital would require the additional step of H first being added as one of the beneficiaries. The judge had been correct therefore to include both the F and the Y Trust as a resource of H. Insofar as the argument that the line between permissible judicious encouragement and improper pressure had been crossed, the Court of Appeal noted that since the trustees/protectors were likely to do whatever H asked, the pressure was not therefore upon the trustees but upon H. Comment This case made legal headlines when the judgments were handed down. By itself the suggestion that a trust can be a resource when a spouse is not even a beneficiary suggests that the Family Courts were once again riding roughshod over pre-existing third party proprietary rights. However on a closer examination of the facts of the case, it is plain that this was not the case. Besides which, this was a Court of Appeal that included two judges with a chancery background. Section 25(2)(a) of the Matrimonial Causes Act 1973 requires a court to have regard to not only property but of course other financial resources. Financial resources is a flexible concept; requiring consideration both of the legal structure of the resource and the mechanisms by which such financial resources can be made available to one or other party. A finding that a trust of which a spouse is not a beneficiary is a resource to be taken into account is not therefore so contentious; especially when viewed against the background of a finding that the spouse would be added as a beneficiary and an advance likely to be made. By Simon Sugar First published in The Review (July/August 2011) Twitter@familybarrister

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