England and Wales High Court (Family Division) Decisions

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Cite as: [2010] WTLR 1689, [2010] 2 FLR 887, [2009] EWHC 3422 (Fam), [2010] Fam Law 903

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		Neutral Citation Number: [2009] EWHC 3422 (Fam)
		Case No. FD07D02445

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

Royal Courts of Justice

19th June 2009

B e f o r e :

MR. JUSTICE MOYLAN
(In Private)
____________________

	B	Petitioner
	- and -
	B	Respondent

____________________

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____________________

Mr. P. Cayford QC And Ms. L. Cade Davies (Instructed By Mishcon De Reya) Appeared On Behalf Of The Petitioner.
Mr. P. Marshall (Instructed By Payne Hicks Beach) Appeared On Behalf Of The Respondent.
____________________

HTML VERSION OF JUDGMENT
____________________

MR. JUSTICE MOYLAN:

This judgment follows the hearing of the wife's ancillary relief application. The wife is represented by Mr. Cayford QC and Ms. Cade Davies. The husband is represented by Mr. Marshall.

The wife raises a number of issues as to the extent of the husband's wealth but the principal issue is the extent to which, if at all, assets held within a Jersey trust (in A and B funds) are financial resources available to the husband within the meaning of section 25(1)(a) of the Matrimonial Causes Act 1973. The husband's resources, absent the A and B funds, are delineated by him as being worth just under £6 million.

Absent the trust issue I have identified, this total is broadly accepted by the wife. The wife seeks to aggregate with this amount the assets within the A and B funds which have a total value of approximately £14.5 million.

The wife seeks a total award of £6.5 million, whilst the husband proposes an award totalling £3 million. Both sides contend that the respective orders they seek provide for the wife's financial needs at an appropriate level and therefore represent a fair outcome.

Background

The husband is Swedish and is now aged 42. He has been resident in the United Kingdom since 1993. The wife is English and is now aged 37. The parties met in 1995 or 1996, started living together in 1996 or 1997, became engaged in 2000, and married in 2001. The marriage came to an end when the parties separated in 2007. There are two children, aged 2 and 6. The elder child goes to school in Chelsea. The former matrimonial home is a property in Belgravia which the husband purchased in 1994. Its current gross value is £1.7 million. The husband still lives there, the wife and children currently living in rented accommodation.

In the mid 1980s a company founded by the husband's father was sold. The shares were then held by the husband's father and mother, the husband, his sister and a charitable family foundation. In her affidavit of 4th July 2007, the wife, in response to the husband's assertion that the family received £60 million from the sale, asserts that early in their relationship the husband told her that the family had sold its shareholding in this company for £600 million. She said: "This is not a detail I would confuse". In her affidavit of 20th November 2008, the wife's evidence changed. She said that the husband did not mention the currency denomination and she simply assumed it was sterling. In her oral evidence, the wife moved towards accepting that the 600 million probably referred to krona.

On 18th February 1993 the husband set up the W (now the C) Trust in Jersey. The trustee is a professional Jersey company. The beneficiaries are the husband, his sister, his parents, the charitable family foundation and the RNLI. The husband says that the assets settled into this trust derived from his share of the proceeds of sale of the family business in the mid 1980s. He accepts that he has always been the principal beneficiary of this trust. By a letter of wishes dated 1st May 1995 the husband requests the trustees to act in accordance with his wishes during his lifetime, and after his death in accordance with his father's and his sister's wishes. A schedule has been produced showing the financial history in respect of this trust from January 1998 to December 2008. At the beginning of this period, the trust had assets of approximately £28 million, which had grown to almost £34 million by February 2000. By December 2008 the trust's assets had all been dissipated, very largely in funding two businesses set up by the husband in 1997 and 1998, but also in funding the family's living expenses.

On 8th November 1994, the husband set up the F Trust in Jersey. The trustee is the same professional Jersey company. The named beneficiaries are the husband and the family foundation. The husband says that the assets settled into this trust derived from his father's share of the proceeds of sale of the family company which were gifted to him by his father prior to being settled by the husband into the trust. Although the evidence is not as clear as it could be, I accept, for the purposes of this judgment, that these funds do come originally from the husband's father. The husband's letter of wishes dated 1st May 1995 is effectively in the same terms as the letter of wishes for the C Trust. He also requests the trustees to add his father and sister as beneficiaries of the trust. This has never in fact been undertaken. In January 2006, the assets of this trust were settled into the C Trust and form what is now called the A fund. These assets are now worth just over £7 million. It is the husband's case that these assets are not held for his benefit but for the benefit principally of his family in Sweden.

On 29th April 1996, the husband set up the O Trust, again in Jersey, and again with the same trustee. The named beneficiaries are the same as for the C Trust. The husband says that the assets settled into this trust derive from a Liechtenstein foundation set up by his father. This assertion is unsupported by any documentary evidence. However, again for the purposes of this judgment, I accept that these funds originally derived from the husband's father. No letter of wishes in respect of this trust has ever been produced. In January 2006, assets of this trust were also settled into C Trust and form what is now called the B fund. These assets are also now worth just over £7 million. It is the husband's case that these assets are also not held for his benefit but for the benefit principally of his family in Sweden.

In 1997 the husband purchased a 75 foot yacht at a cost to him of just over £1 million. In the same year he also purchased a property in the USA at a total cost to him, including land acquired subsequently, of just under £2.9 million.

In 1997 and 1998 the husband set up two businesses. Between then and 2008, he invested approximately £27 million in these businesses, broadly half this sum in each. The wife's brother worked as the managing director of the M business. Both businesses have failed. Indeed, apart from a short period when the M business was successful, neither business has generated any income. The whole of the £27 million has effectively been lost. The wife seeks to argue that at least some of this spending has been "reckless and irresponsible". The focus of this argument, as I understand it, is on the period principally since March 2008. In addition, the wife relies on the rate at which the husband was investing money into these businesses as supporting her contention that he must have been relying on the A and B funds as being available to him.

On 14th November 2001, the parties entered into a pre-nuptial agreement. This was first raised by the husband with the wife less than two weeks before the wedding and was not the product of any discussion. It makes no financial provision for the wife at all but expressly states that its terms will be reviewed on the occurrence of a number of events, including the birth of a child. However, it also, rather strangely, provides that the terms will remain valid even if no such review takes place. The wife obtained very brief advice from a solicitor who indicated that in his view it was wholly unfair. Mr. Marshall - very sensibly, in my view - has not sought to rely on this agreement during the course of this hearing.

The wife does not, of course, rely on the agreement, save for the schedule setting out the husband's property which was attached to it. This schedule included all of the trusts settled by the husband without distinction and under the headings "Irrevocable discretionary trusts where the husband has beneficial interest". The husband says that he went through this schedule with the wife telling her the distinction between those trusts of which he was the principal beneficiary and those which were for the benefit of the rest of his family. I do not accept the husband's evidence on this point. His account of this was wholly unconvincing.

In 2003 the parties contemplated moving to live outside London. They looked at a number of properties and made offers to buy at between £3.1 million to £3.9 million. None of these proposed purchases proceeded.

In November 2003 the family went on holiday with the husband's parents. The wife says that the husband's father raised with her his concern at the rate at which the husband was spending money on the businesses. The wife raised this with the husband. Both parties accept that there was some conversation between them along these lines. The wife says that the husband told her that both he and his sister had received £50 million on the sale of the family business. The husband accepts that he might have mentioned the figure of 50 million but this would have been euros and it would have referred to the amount to which his wealth had at one stage grown.

In August 2006 the parties rented a property in Buckinghamshire at a cost of £114,000 for one year.

The marriage, as I have said, came to an end in 2007. Initially the husband moved out of the former matrimonial home. He then rented accommodation for himself at a cost of £1,500 per week. Subsequently the wife and the children moved into this property and the husband returned to live in the former matrimonial home.

Proceedings

The wife's ancillary relief application is dated 23rd May 2007. Shortly after this, she applied for and obtained a freezing order. On 14th March 2008, I made an order as follows:

"And upon the court inviting A (CI) J as trustees of the C Trust, including subtrusts A and B, the PP Trust and the CT Trust (hereafter referred to as 'the trustees' and 'the trusts' respectively) to assist the court by cooperating with the husband to produce the information and/or documentation specified" in a number of paragraphs in the order.

Certain of those paragraphs read as follows:

"2. Copies of all letters of wishes and/or of all other documents containing any other relevant information, including any such documents and/or information in respect of the F Trust and the O Trust which the trustees take into account in exercising their discretion under the terms of each of the trusts.

3. In so far as it is not contained within or apparent from the face of the documents and/or information to be produced under 2 above, confirmation of the reasons for the trustees taking the view, if such be the case, that subtrusts A and B of the C Trust are held principally for the benefit of the husband's parents, sister and the charitable foundation.

4. Confirmation of the extent to which the exercise of the trustees' discretion under the terms of each of the trusts would or might be influenced by the death of the husband's father."

At a directions hearing in November 2008 I indicated my firm view that the trustees would not be helping their beneficiaries if they did not assist the court by providing as much information as possible so that the decision which might ultimately have to be made by the court was as fully informed as possible.

A preliminary (what is called) OS v. DS hearing took place in December 2008. I heard a substantial amount of oral evidence from each of the parties during the course of that hearing. Although I was not able at the end of that hearing to come to any, even preliminary, conclusions, the evidence that was given on that occasion has assisted me considerably in coming to the conclusions necessary for the purposes of this judgment. I referred at that hearing to the undoubted existence of a considerable amount of additional material which could be provided by the trustees and/or by the husband's father to assist me in making what I described as a fully-informed decision in respect of the principal contentious issue, namely the extent to which the A and B funds are resources available to the husband. In the event, I have no evidence at all from the husband's father, and the trustees have chosen simply to provide some additional, limited, documentary material.

Evidence

At this hearing I have heard further oral evidence only from the wife and the husband. There are a considerable number of documents collated for this hearing, although I have been referred to only a very few of them.

Neither party has applied to join the trustees. In my view, this was the right decision in the circumstances of this case. However, the trustees have also decided not to participate in these proceedings as witnesses. I can well understand why the trustees have decided not to seek to become parties to these proceedings, but it is less clear to me why, in the circumstances of this case, they should have decided not to assist this court by participating as witnesses. I say this because it is not entirely clear to me why it would have been decided that it was not in the interests of the trusts for them to participate at this hearing in that capacity.

Section 25

Financial Resources:

I propose to adopt the figure for the husband's resources, absent the A and B funds, as given in Mr. Marshall's final schedule, namely £5.8 million. This reflects the most recent information. In addition, the husband has unpaid costs of approximately £100,000.

The wife has no resources apart from her jewellery, and it is not submitted by the husband that this should be put towards meeting her financial needs. The wife has a litigation loan of £217,000 and unpaid costs of approximately £120,000.

Income:

The wife has not worked in paid employment since 1997. Having regard to the ages of the children, her age and her qualifications, it is clear that her ability to earn an income is very limited, at least in the near future. Mr. Marshall in one of his Duxbury calculations has postulated an earned income of £10,000 per year for some 10 to 15 years. I bear in mind that the wife has an earning capacity which she could exercise if she chooses to do so, but I do not consider that this is a significant factor in this case.

In his oral evidence, the husband indicated that he intends to return to work in currency trading and he anticipates that he will be able to earn sufficient to meet his income needs. I question whether he is being somewhat optimistic in this respect and I bear in mind his income needs when determining my award in the wife's favour.

Standard of living:

The wife contends that the family enjoyed a luxurious lifestyle. The husband asserts that the wife has exaggerated the level at which they lived. He has produced a schedule for the period 1998 to 2008 which suggests that the family spent an average of £155,000 per year on their living expenses. There is no doubt that the family had a very high standard of living which certainly in some years appreciably exceeded the sum of £155,000.

Contributions:

Both parties made significant contributions during the course of their relationship. Having regard to the ages of the children, the parties (and in particular the wife) will be making significant contributions to the welfare of the family for at least a further 16 years. The wife will by then have been making contributions for a total of at least 26 years. The other relevant point to note in respect of contributions is that effectively all the wealth in this case comes from the husband's family and did so prior to the effective commencement of the parties' relationship. There is therefore no matrimonial property, namely property generated during the parties' marriage or relationship.

Financial needs:

Each party has produced an array of property particulars which were considered during the course of the oral evidence. The question I have to decide is what level of housing represents a fair assessment of their respective long-term housing needs.

The wife wishes to remain living in the SW1/SW3 area. She puts forward a number of reasons for wanting to remain in this area, including the location of the elder child's school, and the location of her support network, including her friends. The price range of the properties for which particulars have been produced by her runs from £3.25 to £4 million. The wife accepts that most of the properties for which particulars have been produced by the husband would provide sufficient accommodation. They are simply not in an area in which she would choose to live. She has looked at another alternative area where she saw properties on the market for £1.8 and £1.95 million. The price range for the husband's particulars as produced by him for the wife is £1.5 to £2 million.

The husband did not put forward any specific case in respect of his future accommodation needs. However, there is no reason why they should not be similar to the wife's.

Income needs:

The wife has produced a number of schedules setting out her future estimated income needs for herself and the children. Her total estimated budget is in the region of £150,000 for herself and £55,000 to £60,000 for the children. She was cross-examined in an appropriately restrained manner about her proposed expenditure.

Issues

(i) The wife contends the husband has not disclosed the full extent of his offshore and trust interests. She relies on information that she says she was given by the husband during the course of their relationship, in particular that the family company had been sold for 600 million and that he and his sister had each received 50 million. As I have described, the latter occurred during the course of a conversation when the parties were on holiday in 2003. The husband's father had expressed concern at the amount of money that the husband was spending on the businesses. The wife raised this with the husband when he arrived. His response was to say that in essence it was nothing to do with his father, who had given him and his sister £50 million each. The wife was pretty sure that the husband had not just given her a figure but had also mentioned that it was sterling. She relies also on an affidavit from her mother in which she says that both she and the wife's father were told by the husband's sister's partner that the family has untold wealth, that it is very complicated and that the wife would never find it. She also says that she had a similar conversation with the partner on the same day.

The husband denies telling the wife that the family company sold for £600 million. In respect of the conversation in 2003, he accepts, as I have indicated, that he might have referred to 50 million. He says he told the wife that the money he received on the sale of the family company had recently been worth in excess of €50 million.

I have only referred to some of the evidence on this issue but I am not satisfied that the husband has other resources which he has failed to disclose. Although some of the husband's evidence is puzzling, particularly his assertion about the €50 million, the evidence viewed as a whole does not satisfy me that there are other undisclosed resources.

(ii) Another issue raised by Mr. Cayford is whether I should treat the husband as having available to him resources which he has in fact spent. As I understand it, this argument focuses principally on monies lost in the M and C businesses in the period since the parties separated. This issue was little canvassed in evidence. In any event, having regard to the pattern which had been established over the previous years, however ineptly, I do not consider that the continuation of this pattern through 2007 and 2008 is such as to justify me adding back any part of these resources.

(iii) Another issue raised is litigation misconduct, but this impacts, if at all, on the issue of costs. I will deal with it, if necessary, when I deal with the costs of these proceedings.

(iv) I now turn to deal with the principal issue, namely that concerning the F Trust or A fund and the O Trust or B fund.

The husband first sets out his case in respect of his interest in these trusts/funds in his affidavit of June 2007. He asserts that the trustees have "always regarded my parents and my sister and the family's charitable foundation … as the principal beneficiaries (of these trusts) and any beneficial interest I may have as being subordinate to their interests". Later in the affidavit he repeats that the trusts were created by him on behalf of his parents, his sister and the charitable foundation. It was "always understood and agreed" that the principal beneficiaries of both settlements were the Swedish side of his family, and that his interests were subordinate to their interests. He set up the trusts because of his position as a UK resident. He was" entrusted by the family in Sweden to set up structures which were essentially for their benefit". His case could not have been more clearly expressed and I emphasise the use of the word "always".

In the course of the OS v. DS hearing, the husband gave extensive evidence about the trusts. I propose to set out only limited parts of this evidence. The husband said that the trustees would "always consider my father's wishes first" in respect of the A and B funds because this "has been the way since it was set up". The trustees would "go to my father first" before deciding how to act. These funds "are very much my father's assets and the trustees have been very much aware of that since the inception … of these trusts, and that is my father's understanding, that is the trustees' understanding and nothing has really changed in that respect. There does not need to be any update from that point of view". There had been, he said, frequent conversations between both himself and the trustees and his father and the trustees. "There would be a lot of conversations, so the trustees are very much aware of what my father wished to do with his assets". The husband said that his father had had meetings or discussions with the trustees in 1994 and 1996 when he first set up the relevant trusts, and that his father would be in contact "if anything changed". The husband agreed that it would be surprising if the trustees had not kept written records of what was said because in part "they seem to recollect everything I have been saying and everything my father has been saying so I assume they take notes". The husband also said that his father did not really want to be mentioned in any documentation because of his position as a Swedish tax resident, although this point was less sensitive now than it was in the past.

When asked about the letters of wishes, the husband said that his express wish to the trustees was that they should listen to his father and act according to his wishes. They were very much aware that they should adhere to his father's wishes, although from time to time he would convey his father's wishes to the trustees. The husband made it clear that he told the trustees he was simply the vehicle for his father's wishes.

Turning now to the documents supplied, principally, by the trustees. On 30th March 2007 the person, who has been employed by the trustees and engaged in managing the trusts since their inception, sent the husband an email in which she said:

"It has always been our understanding that you did not intend to benefit from the funds held in (the F Trust) and (the O Trust) and that these funds were held for the benefit of other members of the family."

On 6th July 2007, the principal manager wrote:

"I will write today to the wife's lawyers to inform them that the trustees administer the assets in the A and B funds for the benefit of your mother, father and sister rather than for your benefit."

I note in passing that there is no reference to the family foundation.

By letter dated 2nd December 2008, lawyers acting on behalf of the trustees wrote to the husband's solicitors in response to a request for information relating to the A and B funds. The husband's solicitors had specifically sought information about the circumstances in which these two trusts were originally created, including:

"The trustee's specific instructions, from whom were they received, when and over what period, and were they oral or in writing? If the latter, can copies of the relevant letters of instruction be provided and what, if any, evidence exists to support the proposition that the husband is not the principal beneficiary and that the trustee has always regarded the husband's parents (latterly his father) and his sister and the family's charitable foundation, as the principal beneficiaries."

The letter of 2nd December 2008 sets out the instructions given by the trustees as to their understanding, "derived from information provided orally by the husband to the trustees over the years". I note in passing that there is no reference to this information having been provided by the husband's father. The funds settled into the F Trust are said to have derived from the father's share of the sale proceeds of the family business gifted to the husband for tax planning reasons. For the first time it was disclosed that the assets settled into the O Trust derived from a Liechtenstein foundation. The intention behind this latter trust is said to have been to create a pension or "rainy day" fund for the benefit of the family in case of a financial catastrophe in Sweden. "The A and B funds have been notionally allocated for the primary benefit of the family in Sweden". The husband's father "has confirmed to the trustee that he understands the A and B funds … to be held by the trustee for the benefit of himself" and the husband's sister. This last statement contrasts starkly with the husband's evidence about meetings or discussions between the trustees and his father in 1994 and 1996 when the trusts were first established. There is also, again, no mention of the family foundation.

In response to my order of 17th December 2008 and the husband's specific request for all documentation relating to his father's said alleged interest, the trustees' Jersey advocates, by letter dated 15th January 2009, indicated that the trustees had nothing further to add to that which had already been said "in this regard".

On 23rd February 2009, the husband's solicitors wrote to the wife's solicitors:

"It has come to our attention that, notwithstanding the terms of our letter [and that is a reference to a letter of 15th January], there are possibly additional documents in the possession of the trustees which may be material insofar as the issue of our client's father's interest in the F, O and C Trusts and the A and B funds. It appears that, having undertaken a further search of their own historic records, the trustees have identified a number of attendance notes of telephone conversations and/or meetings with our client which potentially are relevant to the issues in this case. These documents have been made known to both the writer and the husband, although thus far copies of the documents have not been made available by the trustees. Consistent with our client's disclosure obligation, he has formally written to the trustees requesting that copies of these documents be disclosed to this firm forthwith and a copy of his letter, dated 23rd February, is enclosed."

On 2nd March 2009, the husband's solicitors wrote to the trustees' Jersey advocates:

"In the circumstances, could I ask you please to arrange to let me have as soon as possible copies of these attendance notes and at the same time confirm that it is the trustees' case that, having now undertaken a thorough examination of their historical records, there are no other documents, correspondence, attendance notes, opinions, advices, memoranda etc. in their possession relating to the husband's father's alleged interest in the F, O and C Trusts and the A and B funds. You will understand, I am sure, my difficulties in advising the husband unless I can be absolutely sure that we have available to us a complete set of all relevant documents, including, for the avoidance of doubt, all internal attendance notes relating to this specific issue."

On 6th March 2009, the trustees' lawyers replied in terse terms, their letter simply saying that they are "sending the trustees' attendance notes as requested in your letter of 2nd March 2009". I repeat that what was requested were all documents relevant to the issue in this case, in particular material in respect of the issue of the husband's father's interest in the A and B funds.

I now propose to summarise the information contained within these additional documents supplied by the trustees. The first attendance note which has been disclosed is clearly not the first note of any meeting between the husband and/or his father and the trustees. It is dated 7th October, without reference to any year, and records a conversation between the husband and the Tax Services Director of the trustees. The husband informs him that "they were proposing to proceed with the gift by the father" to the husband and that when the "dust settles, he will give some thought to perhaps settling the assets on an offshore trust".

The next attendance notes are of meetings between the husband and his father and the trustees in December 1992 and January 1993. They contain no relevant information save that they relate only to the W Trust, and the husband's father is not recorded as taking any active role in the meeting. Remarkably, especially having regard to the oral evidence given by the husband in December 2008 but also in any event, only one document has been produced for the years 1994, 1995 and 1996. These are the years in which the husband established the F Trust, wrote his letters of wishes and set up the O Trust. There is no documentary record of the husband's father having any further involvement or communication with the trustees until 2008.

I find it very hard to understand how there could be no further documents from this period which contain information relevant to the issues in this case. Surely the trustees would have been maintaining appropriate records to enable them properly to fulfil their obligations as trustees. Where are the records which resulted from the meetings or discussions between the father and the trustees which the husband said at the OS v. DS hearing had taken place in 1994 and 1996? How was it, to use the husband's words, "always understood and agreed" that the principal beneficiaries of both these settlements were the Swedish side of his family? How did the trustees acquire the understanding that, as the husband said at that hearing, these funds "are very much my father's assets and the trustees have been very much aware of that since the inception … of these trusts". How did the trustees know, as the husband says they did since the trusts were set up, that they "should always consider my father's wishes first".

The only document for these years which has been produced is a note of a telephone conversation with the husband in which he informs the employee of the trustee company responsible for his trusts that he has a Liechtenstein foundation. In fact the husband says this was his father's foundation, the assets from which were in due course settled into the O Trust. When asked by Mr. Marshall why this note contained no reference to the husband's father or his family, the husband replied that there would have been previous discussions about this. It seems highly likely that there were other and indeed previous discussions but no records relating to them have been supplied by the trustees.

On 17th February 2000, the husband met the trustees in London. There was a discussion about the beneficiaries of the F Trust, as the husband was concerned that the beneficiaries in the deed did not reflect what he had asked for in his letter of wishes. The trustees replied that appointing additional beneficiaries during the husband's life might lead to additional reporting responsibility:

"If, for example, it was the case that after the husband's death he wished, say, his sister and parents to benefit from all the trusts, then it is probably far easier to appoint them at the time than actually having them appointed now. Appointing beneficiaries is a fairly simple matter and if this is what the husband wanted, particularly then, we could do this. The husband agreed that he would look at his letter of wishes and come back to us."

Another issue addressed at the meeting was the consolidation of investment companies. Under this heading, the husband is recorded as saying:

"The husband advised that this had just been an idea and would really depend on what the family generally wanted. Mr. F picked up on this point to ask why there were three trusts rather than just one trust. The husband advised that the O Trust had always been viewed by him as a pension/insurance fund. It was safe and boring but if everything else crashed then gold and cash would hopefully hold up. Mr. F explained that our responsibilities to the beneficiaries would be to look at each structure in isolation. If performance was poor, then we will be failing the beneficiaries in not monitoring this and trying to achieve a better return. The husband advised that we must monitor the O Trust on a different basis and he also believes that we should really be looking at the structure globally. Mr. F advised that we need to be conscious that we are serving all beneficiaries and not just the husband at this point in time. It is therefore helpful for us to have an update from the husband as to other family members' wealth etc. He also pointed out that if we did not have additional beneficiaries at this point in time and only appointed them, say, after the husband's death, then we would not have to keep considering their long-term situation and needs from these trusts. The husband advised that the F Trust structure was a less aggressive investment strategy than the C Trust. As this money had originally come from the husband's father, the husband likes to demonstrate to his father that it is being invested wisely. Additionally, the husband reminded Mr. F that the C Trust was set up before he came to the United Kingdom so it was advisable to keep all pots separate. He confirmed that his father does not take part in the investment decision-making process."

Management of the husband's trusts was taken over by Mr. B in 2000. He first met the husband on 22nd February 2001. The note of the meeting contains no information about the purposes of the trusts or other relevant information for the purposes of this hearing, save that it records the husband saying that the beneficiaries of the F Trust should be the same as the two other investment trusts. The note simply records that "the existing manager outlined the family structure".

On 5th December 2001, the husband again met Mr. B. On this occasion the husband is recorded as saying:

"[The husband] explained that the O Trust structure was previously considered to be a pension fund for his family. The F declaration of trust structure was essentially held for the benefit of his father with the understanding that on his father's death the assets would probably be held by the trustees for the equal interest of him and his sister. [The husband] commented that there is an issue as to whether the structure would be left intact or wound up and two new structures created, one for him and one for his sister. [The husband] explained that the C Trust structure had always been considered to be entirely for his benefit. [The husband] said that, having reviewed the position now following the restructuring, it was apparent that the C Trust was significantly smaller than it was before, and this in effect meant that he had lost out on significant wealth. He also commented that nobody apart from his father was aware of the restructuring, and that [the husband] will need to explain very carefully the position to ensure that other members of his family whom he reports to have an understanding of the current position and why changes have been made."

Later the husband is recorded as saying that he is concerned that:

"He does not want the possibility, however remote, of assets which he receives from a trust being subject to some sort of disclosure which would identify his interest in wealth which is not part of his current personal assets."

There was a discussion about the trustees of, "for example, the O Trust making a distribution to the trustees of, for example, the C Trust". Mr. B is recorded as saying that he was:

"... unaware that the different structures were really held for different purposes, and referred to [the husband's] comment that the O Trust had been the pension fund for the family. [The husband] said that this is something he had explained at the first meeting with Mr. B. Mr. B said he was aware of these discussions but instead of having an opportunity to take time to understand some of the finer details of the different structures, very shortly after taking responsibility for the husband's affairs he had identified the problem of mixing capital and income and this had been a far more important issue to resolve."

It is, frankly, inconceivable that Mr. B in taking over responsibility for the trusts would not have read sufficient documents to enable him to understand the context in which he was going to be performing his duties effectively as trustee. If, therefore, the husband's case is correct, it is, to say the least, very surprising to read Mr. B informing the husband that he is unaware that the different structures were held for different purposes. In his oral evidence, the husband indicated that he also found this very surprising, as Mr. B had by then been involved with the trusts for between six and twelve months.

The husband and Mr. B met again on 16th December 2003, and to quote from that attendance note:

"[The husband] said that the money in the C Trust and company is for his benefit. He said he understood why Mr. B questioned the level of withdrawals made from the trust over the last couple of years and the long-term future of the trust. [The husband] accepted that at the current rate of withdrawal the funds could be totally exhausted in the C Trust within a couple of years. [The husband] said that as far as the O Trust is concerned, this is very much a pension fund for him and his family in the event they suffer a financial catastrophe in Sweden. [The husband] said this is unlikely but this is the reason why the O Trust remains very conservatively managed. [The husband] said that originally he believed that the money in the F Trust was primarily for his benefit but it became apparent over the last one to two years from discussions with his father, that his father still wanted to retain an interest in these funds. [The husband] said that these funds are also fairly conservatively managed and certainly not managed in the way he would have wanted had they been solely for his benefit, but this mandate is something which has been agreed with J. [The husband] said that his expectation for these funds is that they will be managed on the same sort of mandate for the foreseeable future until his father passes on. [The husband] said it is likely that these funds would be split equally for the benefit of himself and his sister when his father dies."

The husband, in his oral evidence, sought to suggest that this note does not accurately reflect the content of his discussion with Mr. B. I do not accept this. There is no evidence of the trustees ever having failed to act in accordance with the husband's wishes. I am confident that if the husband had asked Mr. B to confirm that the note might be, or was, inaccurate, he would have done so. The husband's attempt to explain the references to the F Trust and the O Trust did not make any sense to me. It was said to be a misunderstanding, as all he had been talking about was how the funds were invested and the extent to which his father was, and had been, involved in investment strategy. It would, to my mind, have taken an extraordinary level of incompetence for Mr. B to get from that to the references in his note to a pension fund for "him and his family" - words which the husband said should be ascribed no importance - and to the husband originally believing that the money was for his benefit.

Following this meeting, the trustees sent the husband their "most current draft letter of wishes". This provides that on the husband's death the trustees should have regard to his wife's wishes and on her death to the wishes of his children in respect of an equal share of the trust fund for each of them. During his cross-examination of the husband, Mr. Cayford asked if he, the husband, was content with his letters of wishes. The husband replied that he gave the trustees lots of oral instructions as well so they were fully aware, from the very beginning, that his father was calling the shots in respect of the F and O Trusts. If that is correct, it is extraordinary that the trustees have been unable to find any contemporaneous records to that effect.

In 2005 discussions took place about rationalising the offshore structure. The tax services director of the trustees wrote two letters on the subject. In the first, dated 6th January 2005, it is said:

"I do, however, recall that the C Trust, the F Trust and the O Trust were viewed by you as being different pockets of wealth for different branches of the family, i.e. your father and your sister. I know from your recent meeting with D and A that your family's interests in the pockets of wealth have changed. Perhaps therefore some degree of separation of assets could be achieved by having different investment portfolios under the same umbrella structure. This would allow the overall structure to be rationalised but would still respect any need to separately identify particular assets."

No note for the "recent meeting" has been disclosed. The husband attempted to explain the comment that "your family's interests … have changed" by saying that this was a reference to Swedish gift tax having been abolished, and 10 years since the trust was set up having elapsed. For the first time, therefore, Swedish residents could receive a benefit from the F or O Trusts. Again, this does not make any sense to me when the husband's case is that the trustees have known about his father's and sister's interests in these trusts from the start. It also does not tie in with a letter which addressed the issue of distributions to beneficiaries who are resident and domiciled into the United Kingdom. The only people who might fall into this category were the wife and the parties' elder child. This issue was revisited in communications in October 2005 so it was clearly considered to be a relevant concern. The letter also deals with the consequences of merging the three trusts into one.

The second letter, dated 25th October 2005, states:

"Mr. B has asked me to write to you to comment on any potential tax implications arising from the suggestion that the present offshore trusts and companies structure might be rationalised. I understand you and Mr. B are considering merging the investment structure so that all the assets are held under one offshore trust, probably the C Trust. This is being considered on the basis that there have been significant changes in your personal life since the present structure was set up and, with the passage of time, the present structure has become a little cumbersome and in some respects no longer achieves what was originally intended. It is important to note here that the proposed changes are not being driven from the tax point of view. However, obviously you and the trustees would wish to effect any changes as efficiently as possible from the UK tax point of view."

A number of emails which follow these letters have been disclosed. They also deal with the proposed distribution of €1 million. In an email, dated 26th October 2005, it is made clear to the husband that part of this distribution, namely a sum of €188,000, is to come from the F Trust. The husband says that this went unnoticed by him at the time - an assertion I find surprising as it is his case that it was always agreed and understood that these funds were not for his benefit. I also did not find at all convincing his attempt to explain this distribution by saying that it would have been remedied if the proposed restructuring had followed a different route, and was overlooked when it did not.

On 27th October 2005, Mr. B wrote to the husband in the context of the proposal that the assets of the F and O Trust be appointed into the C Trust. He said:

"This leads me to the letters of wishes and your thoughts with regard to trust beneficiaries. We have touched on this subject a couple of times in the last two or three years. I will send you a copy of the C Trust deed on Friday and a draft letter of wishes so you can see the wording. Your choice of beneficiaries, should they be UK domiciled and resident, could be relevant to the points raised above."

Attendance notes for two meetings in 2008 have also been disclosed. The first was a meeting between the husband and Mr. B alone. In this it is recorded:

"Mr. B confirmed that the C Trust A and B funds were not for (the husband's) benefit. Mr. B asked [the husband] how his father was. [The husband] said that his father appears to be in good health. [Then a bit later:] [The husband] said that he has not discussed his father's personal financial position, nor has he discussed what might happen to his father's personal assets or the C Trust A and B funds in the event of his father's death."

The next meeting included the husband's father, who met Mr. B for the first time. Mr. B, for reasons that are not explained, felt it necessary to ask the husband's father to explain the background to the formation of the various trusts and about the origins of the F and O Trust funds. Interestingly, the only origins mentioned in the note are the proceeds of sale from the family company, and there is no reference at all at that stage to the existence of a Liechtenstein foundation. I quote from the attendance note:

" [The husband's father] confirmed that the F and O funds were for him and [the husband's sister], and these funds were retained offshore in the knowledge that should either he or [the husband's sister] require access to the funds, they would be given access. Mr. B confirmed that this was the trustees' understanding and that we had taken steps to ensure that these funds remained for [the husband's father and sister's] benefit."

There is then reference to the husband's father assisting under-privileged people and that he lives a very simple life in Sweden.

"[The husband's father] said that he has no need for significant funds in Sweden but he might be interested in requesting the trustees to make a distribution to him so that he can use these funds in Sweden. This possibility was on the basis that they did not 'belong' to [the husband] and if they were going to be included as funds available for a matrimonial settlement, he would prefer them to be paid to him and used for charitable purposes. Mr. B said that this is something we could explore."

A bit later in the note it reads:

"[The husband] explained that in his opinion part of the divorce proceedings and actions being taken by the lawyers was intended to try and gain access to the funds which originated from F and O Trusts. [The husband] said that he personally would strongly resist this because these funds should not be considered for his benefit. [The husband's father] confirmed that this was the case, and Mr. B said that this view was consistent with the information the trustees had received over the years."

What, I ask, was this "information"? How and when was it recorded? It is self-evident from the documents which have been disclosed that the information provided to the trustees "over the years" was not "consistent" with the assertion that these funds were not considered to be for the benefit of the husband. For example, what of the information given by the husband at the meeting on 17th February 2000? I might have been helped in understanding this apparently confident assertion, if the trustees had given evidence before me. I am left with having to interpret the words as they appear in the attendance notes and other records. I regret to say that this assertion is so clearly inaccurate it raises considerable doubts in my mind about the extent to which I can rely on the trustees and, in particular, rely on their implicit assertion that they have provided all material documents.

I have received comprehensive and skilful submissions, both written and oral, from counsel, who have, if I might say so, conducted the case with commendable acumen. I have taken all matters raised by them into account when reaching my decision.

In his closing submissions, Mr. Marshall relies on the following matters in respect of the A and B funds:

(1) Although the husband is the settlor, the assets in the F and O Trusts originated from the husband's father;

(2) This case is unlike, for example, Charman, in which the trust contained wealth built up during the marriage and in respect of which the husband exercised almost absolute control;

(3) Each is a properly-constituted trust (the wife does not allege any were a sham) with a range of actual or intended beneficiaries;

(4) Whatever issues may remain as to whether the husband or his father was principally responsible for communicating with the trustees, the trustees have been on notice since at least 2001 or 2003 that the A and B funds are intended to be held either principally for the benefit of the husband's father or for the benefit of his family, including his father and sister;

(5) The trustees have acknowledged this to be the case;

(6) This is entirely consistent with the manner in which the assets held in A and B funds have been managed and retained intact;

(7) There is no reason at all to suppose that the trustees will simply allow the husband to treat the A and B funds as his own;

(8) Save for one small erroneous payment from the A fund in October 2005, no capital or income distributions have been made to the husband or any other beneficiary. The husband's sister's prudence aside, there is absolutely no reason to suppose the trustees would favour the husband over any other beneficiary.

Mr Marshall submits, relying principally on these matters, that the assets in the A and B funds are not resources which are likely to any significant extent to be available to the husband.

Mr. Cayford in his closing submissions has set out a summary of the evidence relevant to this issue. He submits that the evidence establishes that the A and B funds are in reality resources readily available to the husband. He further submits that the trustees would be likely to accede to a request from the husband to provide him with a sum of up to £1.5 million to enable him to meet the award he seeks in the wife's favour of £6.5 million, and also to provide the husband with such further additional resources as would be necessary to enable him to meet his needs at a reasonable level. Mr. Cayford submits that, if they did so, the interests of the trusts and of the other beneficiaries would not be damaged either appreciably or at all.

Trust assets are relevant in the determination of an application for ancillary relief when they consist of resources which are or may be available to one of the parties. The 1973 Act requires the court, when deciding how to exercise its powers, to have regard to "the financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future": section 25(2)(a). In respect of trust assets, this will often be a two-stage exercise. First, it might be necessary to determine whether trust assets are resources in which a party has any interest or potential interest at all. Secondly, if he has, it will be necessary to determine what, if any, legitimate expectation he has and, accordingly, the extent to which they are resources available to him or likely to be available to him in the foreseeable future. In this exercise the court will, of course, take into account the interests of other beneficiaries.

In the present case, the husband has always been a named discretionary beneficiary of all the relevant trusts and one to whom the trustees could pay all the income and could appoint or advance all the capital of each trust. The issue is therefore whether, and if so the likely extent to which, the assets of the A and B funds are resources likely to be made available to the husband.

I must be cautious in what I say in response to the line taken by and on behalf of the trustees because they have not made themselves available to answer questions which arise from the information and documents provided by them. However, as a general point, trustees must consider whether co-operation with this court is in the interests of their trusts. However cautiously the court approaches its statutory task, there must be an increased risk that the court will obtain or might obtain the wrong picture in the absence of all the information. Why should trustees consider it in their beneficiary's or the trust's interests to take a risk that this court might obtain an inaccurate picture? I would hope they would decide that it is not.

Counsel have referred me to a number of authorities, but I propose only to refer to Thomas v. Thomas [1995] 2 FLR 668 and Charman v. Charman [2006] 2 FLR 422. In Thomas v. Thomas, p. 678, Glidewell LJ identified a number of broad principles applicable when the court is dealing with trust assets as a potential resource:

"(a) Where a husband can only raise further capital, or additional income, as the result of a decision made at the discretion of trustees, the court should not put improper pressure on the trustees to exercise that discretion for the benefit of the wife.

(b) The court should not, however, be 'misled by appearances'; it should 'look at the reality of the situation'.

(c) If on the balance of probability the evidence shows that, if trustees exercised their discretion to release more capital or income to a husband, the interests of the trust or of other beneficiaries would not be appreciably damaged, the court can assume that a genuine request for the exercise of such discretion would possibly be met by a favourable response. In that situation if the court decides that it would be reasonable for a husband to seek to persuade trustees to release more capital or income to him to enable him to make proper financial provision for his children and his former wife, the court would not in so deciding be putting improper pressure on the trustees."

In the same case, Waite LJ said:

"... where a spouse enjoys access to wealth but no absolute entitlement to it... 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. This does not, however, mean that the court acts in total disregard of the potential availability of wealth from sources owned or administered by others. There will be occasions when it becomes permissible for a judge deliberately to frame his orders in a form which affords judicial encouragement to third parties to provide the maintaining spouse with the means to comply with the court's view of the justice of the case. There are bound to be instances where the boundary between improper pressure and judicious encouragement proves to be a fine one, and it will require attention to the particular circumstances of each case to see whether it has been crossed."

In Charman v. Charman, Wilson LJ addressed the approach to be taken when trust assets are being considered, [12]:

"Superficially the question is easily framed as being whether the trust is a financial 'resource' of the husband for the purpose of s.25(2)(a) of the [1973 Act]. But what does the word 'resource' mean in this context? In my view, when properly focused, that central question is simply whether, if the husband were to request it to advance the whole (or part) of the capital of the trust to him, the trustee would be likely to do so. In other cases the question has been formulated in terms of whether the spouse has real or effective control over the trust. At times I have myself formulated it in that way. But, unless the situation is one in which there is good ground for doubting whether the trustee is properly discharging its duties or would be likely to do so, it seems to me on reflection that such a formulation is not entirely apposite. ...

13. Thus in effect, albeit with one small qualification, I agree with the suggestion of Butler-Sloss L.J. in this court in Browne v Browne... that, in this context, the question is more appropriately expressed as whether the spouse has 'immediate access to the funds' of the trust than 'effective control' over it. The qualification relates to the word 'immediate'. In that case the trial judge knew that, if he was to proceed also to order the wife to pay the husband's costs, she would be unable to comply with his orders for her swift payment of a lump sum and costs without recourse to the off-shore trusts over which he found her to have 'effective control'... So the question in that case was whether her access to their funds was immediate. In principle, however, in the light of s.25(2)(a) of the Act of 1973, the question is surely whether the trustee would be likely to advance the capital immediately or in the foreseeable future."