The origins of this marathon battle, which resulted in the largest-ever contested divorce settlement, are firmly rooted in the Home Counties and
At the Legal Week Trust and Estates Litigation Forum, which took place in
It could hardly be more contentious; and not simply because of the doggedness that underlies Mr Charman’s campaign to limit the size of his ex-wife’s settlement, which was set at £48m by Coleridge. It also pits family judges against trust lawyers, offshore judges against onshore judges, and offshore jurisdictions against each other. And it isn’t going to go away.
As Family Division president Sir Mark Potter observed dryly in the Court of Appeal judgment: “The husband’s indignation has an intensity which has rendered this litigation hard-fought at every turn and which, we fear, will continue to do so until whatever is properly payable to the wife under English law has been paid in full.”
This spring the case is due to move to Bermuda when Beverley Charman, represented by Manches, will ask the local court to ‘give effect’ to the English judgment by ordering that a large chunk of the assets held in a trust set up by her ex-husband be handed over to her. The crucial question is whether or not the Bermudian judges will instruct the trustee of Dragon Holdings to concede to the wishes of the English court by stumping up the cash.
If the court refuses, it will be jeopardising the principle of comity which says that courts from different common law jurisdictions should respect each other’s judgments. But if it accedes to Mrs Charman’s request, it will stand accused of weakening
“This issue has been simmering for some years now, but it has really come under the spotlight since the decision in Charman,” observed Elizabeth Weaver, of 24 Old Buildings, one of the conference delegates.
“The question is how that is going to be worked out in all the offshore jurisdictions.”
Mr Charman originally set up Dragon Holdings in
He was both settlor and primary beneficiary, as well as having the power to replace trustees. Before the breakdown of his marriage his letter of wishes to the trustee requested that he have “the fullest possible access to the capital and income of the settlement”.
The thrust of Mr Charman’s argument during the divorce proceedings was that Dragon Holdings is a dynastic trust set up for the benefit of future generations of his family and that he had “no wish to benefit from it”.
Coleridge found no evidence to support this claim. His grounds for this conclusion, which were endorsed by the Court of Appeal, were that:
- the claim was inconsistent with letters of wishes written in 1987 and 2004;
- there was no documentary evidence to support it;
- Mr Charman had made “Herculean” efforts to prevent the trustee from giving evidence;
- Mrs Charman knew nothing about the trust’s dynastic nature.
During the appeal Mr Charman and his legal team, which comprised five counsel including two QCs, put a series of new arguments forward in an attempt to persuade the court that the £68m of assets in the trust should not be treated as part of the settlement. These, too, were dismissed, and in no uncertain terms.
One point was dubbed in the Court of Appeal judgment as “chop-logic of the most specious kind” another contention as “scarcely arguable”.
For Christopher Butler, head of family law at Speechly Bircham, Mr Charman’s team was fighting a losing battle from the start: “Given that Mr Charman was the settlor, the trust assets were the fruits of his talents and his letters of wishes stated that he should have full access to the trust’s capital and income, he was always likely to fail,” he wrote in a commentary on the judgment for Legal Week.
“The larger point of principle, however, remains,” he continued. “Can any trust arrangement persuade the English divorce courts to refrain from attempting to interfere with the assets within it? Possibly not, unless the party is truly excluded from benefit.”
The Court of Appeal went to some lengths to explain why offshore trusts are now so firmly within the sights of family judges.
It said the principle set out in White v White that assets should be shared required judges to conduct a thorough “computation of resources”.
“Prior to the decision in White, the elaborate enquiry in the present case as to the attributability of the assets in a trust to a party as part of his or her resources would probably have been unnecessary,” the judgment stated.
“But, whenever it is necessary to conduct such an enquiry, it is essential for the court to bring to it a judicious mixture of worldy realism and of respect for the legal effects of trusts, the legal duties of trustees and, in the case of offshore trusts, the jurisdictions of offshore courts.”
The judgment concluded that “it would have been a shameful emasculation of the court’s duty to be fair if the assets which the husband built up in Dragon during the marriage had not been attributed to him.”
It also gave short shrift to a claim by Mr Charman’s legal team that a ruling against him would “send a message to the offshore world that, in family cases, trusts do not matter”.
“It will by now be clear that we send no such message,” the Court of Appeal judgement sniffed before explicitly dismissing the notion “that the courts of Bermuda will not be disposed to help to ensure, within the parameters of its laws, that whatever may ultimately be awarded to the wife in these proceedings will be duly paid.”
It remains to be seen whether
At the Trust and Estates Forum the large contingent of delegates willing Bermuda to take a tough line drew considerable succour from a speech by the
Smellie delivered a robust defence of trusts, which he described as instruments of “great utility and flexibility”.
“In over 55 years of reporting from the Cayman Islands, there has not yet been a single reported decision in which the court declared a
But while Smellie sharply criticised the assault on offshore trusts by the
Nevertheless, his speech encouraged many of the conference delegates to conclude that the Caribbean jurisdictions were preparing to take a tougher line than
“When it comes to jurisdictions like Cayman we were given some hope that they would be slightly more robust in their resistance,” he said.
But the Family Division’s judges were not without some sympathisers among the ranks of delegates at the conference.
“In its defence, the English court would say that a lot of the cases it sees show some of the worst aspects of trust abuse and they are trying to deal with that,” said 24 Old Buildings’ Weaver. “The real question is how to find a balance so that properly regulated and respectable trusts can continue to exist and flourish and be recognised by the family court.”
The conference saw Christopher McCall QC, of Maitland Chambers, put forward a possible solution.
When trusts come under scrutiny in the Family Division, the trustees are faced with a dilemma. Should they concede to a request by the Court to give evidence about the trusts — thereby significantly reducing their ability to resist the subsequent rulings — or should they refuse to submit to the court’s jurisdiction on the grounds that the trusts they administer are governed by a different set of laws.
Conventional wisdom among trust lawyers, which is supported by rulings from the
But McCall argued that, by refusing to co-operate with the onshore jurisdiction, trustees were forcing judges there to draw negative inferences.
“The difficulty for the judges in the Family Division is that they feel they are being given only part of the picture. This can lead to an atmosphere of suspicion and hostility that is damaging to all sides,” said McCall.
The alternative scenario set out by McCall would be for the trustees to explain their duties to the court in an effort to secure a more equitable distribution of resources in which, for example, part, but not all, of the assets might be attributed to the spouse.
For the conference’s chair, Shan Warnock-Smith QC of 5 Stone Buildings, this is an intriguing idea.
“I had always thought that the best strategy for [offshore trustees] was to stay out of those [onshore] proceedings,” she said.
“But I am now beginning to think that for some cases at least it would be very helpful for UK judges to have a proper measured view of the offshore trust because, after all if you do not give it to them they are going to make the assumption against the trust that they currently do.”
Such an approach would no doubt be welcomed by the Court of Appeal as evidence of the worldly realism they called for in the Charman case. It seems highly unlikely, however, that the Charman case will be imbued with such a spirit any time soon.
After all, worldly realism is not generally regarded as Tunbridge Wells’ strongest suit.
2008 Legal Week Trusts & Estates Litigation Forum
