The judgment of Mostyn J concerned divorce proceedings in the Family Division of the English High Court and an application for the variation of a settlement under s24(1)(c) of the Matrimonial Causes Act 1973 (the Act). The settlement in question was a Jersey discretionary trust (the Trust) of which a Jersey trust company was trustee. The judgment was handed down prior to the Supreme Court ruling in Prest v Petrodel Resources Ltd & Ors (Prest) which was confined to the consideration of s24(1)(a) of the Act as to whether the court had power to lift the corporate veil of a company and dispose of assets within the company.  However, the Supreme Court in Prest declined to hear argument on the scope of s24(1)(c) of the Act where matrimonial assets are held by companies. In this case, there were three main areas of discussion, namely the broad definition of settlement, the joinder of trustees, and the disposition of the assets.

Background

The couple had been married for 33 years.  They had one child together, in addition to both having children from previous marriages.  Ten years after they married, the Trust was established. The Trust owned a Liberian company, which in turn owned a UK company, which in turn owned two UK companies, which each owned a retirement village as well as other UK situs assets.  The beneficiaries were (1) the husband, (2) any person who was or had been his spouse, (3) the issue of any person within (1) or (2), and any spouse of a person in (3).  A major question for the Court was the treatment of the assets held in the settlement.

Definition of Settlement

A substantial part of judicial discussion was dedicated to the broad definition of settlement used by the UK courts.  Mostyn J  having considered the authorities set out the test for what comprises a nuptial settlement as being "any arrangement which makes some form of continuing provision for both or either parties to a marriage". 

It is worth noting that the courts also distinguish between property which lies within such a settlement because it is matrimonial in nature, and that which lies outside such a settlement and whether there is a "sufficient nuptial element" should be considered alongside the test for "continuing provision".  In finding a "sufficient nuptial element" the set-up must be considered in its entirety.

Mostyn J stressed that there was no potential in arguing that the UK courts do not have the power to vary a settlement with regard to assets held under a company, as the interposition of companies between the trust "at the top of the tree'" does not mean that the court cannot directly deal with assets "at the bottom of the tree".

Discussion of s24(1)(a) and s24(1)(c) of the Act

These sections of the Act give the court the power to make property adjustment orders in respect of transfers (s24(1)(a)) and varying ante-nuptial or pre-nuptial settlements (s24(1)(c)).  The respondents made an argument that in light of the Court of Appeal's decision in Prest the court should not be allowed to pierce the corporate veil and dispose of assets held within a company.  This argument necessitated the application of principles relating to s24(1)(a) to the interpretation of 24(1)(c).  Mostyn J stated that such application could not be done automatically, and his own reasoning, previously seen in Hope v Krecji, was still valid in relation to 24(1)(c).  While clarification could have been made by the Supreme Court when they heard Prest on appeal, the Court declined to consider a point of appeal made with regard to 24(1)(c) in that it did not appear "seriously arguable".  Therefore it appears that Mostyn's ruling here still stands as far as 24(1)(c) is concerned.

Joinder of Trustees

The Court considered the joinder of the respondent trustee and companies, and the application by the companies to be dis-joined.  The Court found that in a variation of settlement case the trustees must be served copies of the application under the Family Procedure Rules 2010 (the FPR) (rule 9.13) but they should not automatically be joined.  If the trustee has been served but takes no further action, any variation order is binding.  Counsel for the wife submitted that, following Tebbutt v Haynes, trustees must be joined in order for variation orders to be binding.  The Court found this "surprising" and went on to consider T v T (Joinder of Third Parties) where the joinder was upheld because it would assist (i) in determining who controlled the trust funds; and (ii) in obtaining a reciprocal enforcement order in Jersey.  The Court considered the joinder of trustees unnecessary for factual inquiry due to the enforceability of orders for disclosure under the FPR.  The Court considered it more pertinent to the matter at hand that the wife had not adhered to the requirements of the FPR, as notice had not been given to the trustees of the joinder.

The Court outlined the principles for consideration on the question of joinder.  In application of these principles the Court found that there was no evidence that joinder of trustees or companies would contribute to easier achievement of a variation order.  As a result, ABC was disjoined.

In relation to enforcement, the Court made reference to the decision of Birt DB (as he then was) in Mubarak v Mubarik [2008] JRC 136 where he noted that in cases where the operation of Article 9 (4) of the Trusts (Jersey) Law 1984 prevented enforcement of an English variation order, that Article 51 of the Trusts (Jersey) Law 1984 might permit a direction that had that effect provided that the court was satisfied that the variation was within the powers of the trustees and was in the interests of the beneficiaries as a whole.  The court also noted the recognition given by Birt DB to the effect that if trust assets were sited in England and Wales and the English court could enforce directly against them, then trustees were not to be criticised for "bowing to the inevitable" and complying with the order in England.

Treatment of the Trust Assets

The Court felt that the husband had not argued his case efficiently and noted that it was unfortunate he had advanced his case on premarital wealth too late, failing to provide contemporaneous evidence as to his wealth prior to his second marriage.  This case therefore shows that delay can cause the court to be less sympathetic to otherwise valid arguments.

Having calculated the wife's needs, the Court came to a sum similar to the sharing entitlement which would have come from equal division (which had not been challenged successfully by the husband).  The wife left the marriage with 49% of the total assets, and an order for variation of the trust was made where the assets were now security for an outright payment to the wife, payable within two years.  It was ordered that (i) the wife be erased as beneficiary of the Trust; (ii) the assets of the settlement held by the companies be charged with a sum in favour of the wife, (iii) the charge being enforceable on 1 June 2015 and until its enforcement carry simple interest of 5%; (iv) the wife cease to act as director of the companies under the settlement.

Comment

It is interesting to note in this judgment the respect with which the judge, Mr Justice Mostyn gave to the then Deputy Bailiff's remarks in the Mubarak case.  The English Court noted that assistance could be given under Article 51 of the Trusts (Jersey) Law 1984 where the variation order of the English Court did not amount to an alteration and that if the trust assets were sited in England and Wales, that the English court could enforce against them directly.  It is against this backdrop that the Court had no qualms about exercising its power in relation to assets held in a Jersey trust, nor did they feel that dis-joined trustees would be any obstacle to the enforceability of an order for variation of a trust.