In what is believed to be the highest award ever made in contested matrimonial proceedings in England and Wales, the Court of Appeal recently upheld a divorce settlement involving very considerable wealth. The decision provides a cautionary reminder that, in certain circumstances, trust funds may fall into the 'pot' of matrimonial assets to be divided on divorce. It also sounds a warning note to divorcees who claim that their special contribution to the family's wealth is such that they should be entitled to a greater share of the overall resources.
Mr and Mrs Charman's marriage lasted 28 years, during the course of which Mr Charman pursued a highly successful career in the insurance industry. In divorce proceedings in the High Court, the judge found that the parties' total assets amounted to £131 million, and in this total he included the value of an offshore trust that Mr Charman had made years earlier.
Those funds might not technically be Mr Charman's, but in practice they were available to him as a resource. The judge awarded £48 million (36.5%) to Mrs Charman and £83 million (63.5%) to Mr Charman. Mr Charman received over 50% primarily because he had made a 'special contribution' by generating the parties' fortune through his skill and effort during the marriage. The husband was unsuccessful in arguing, on appeal, that the judge had erred by including, in his calculation of the parties' total assets, the value of the offshore discretionary trust. He also lost on his argument that the judge had made insufficient allowance for the husband's 'special contribution'.
As well as helping to clarify the position on 'special contributions', the case illustrates the difficulties faced by those who put assets into a trust structure and then seek to claim, on divorce, that the trust structure offers protection. Such arrangements need careful structuring at the outset, and meticulous implementation thereafter, to reflect the realities of the situation. In particular, in order to be in a position to substantiate a claim of that kind, it will be important for any letter of wishes to record the settlor's intentions accurately, and for those intentions to be capable of being tested against reality.