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Court of Appeal regards ‘dynastic trusts’ as matrimonial property

Husband’s appeal dismissed in Whaley v Whaley

The Court of Appeal has dismissed the appeal of Athelstan Whaley the owner of a Spanish hotel chain, who had sought to overturn Baron J's award of a lump sum of £3m to his former wife, Belinda Whaley. For the full judgment see Whaley v Whaley [2011] EWCA Civ 617.

The Whaleys married in 1987 after two years of cohabitation and separated in 2008.  The husband, aged 60, and wife, aged 47, have four children aged from 12 to 20.  The parties lived between England and Spain. 

The dispute between the couple focused largely upon the status of two dynastic trusts. The husband argued that these should be regarded as non-matrimonial property. On that basis, he claimed that the matrimonial assets amounted to just over £3 million net after legal costs whereas the wife puts the assets at over £11 million net after legal costs. 

Baron J had found that there was just over £10 million available to the parties of which nearly £7 million was made up of assets in the two trusts.  The judge accepted the wife's case that the trust assets should be seen as resources likely to be available to the husband.  The assets which the parties had outside of the trusts had a value of nearly £4 million net of debts.  In summary, the judge ordered the husband to pay the wife a lump sum of nearly £3 million by 10 months after the date of the order and in the interim to the wife periodical payments at £40,000 per annum.  Provision was also made for school and college fees etc. The judge calculated that the order would leave the wife with some 36% of the net assets, on top of which her debts net of bank balances in the sum of £331,000 would have to be met for her.  The judge's departure from equality took account of the husband's pre-marital wealth and wealth supplied by his parent's via the trust funds.

In the Court of Appeal the husband argued, inter alia, that Baron J's order  could not be satisfied without his having recourse to trust assets in order to meet his most basic needs, such as housing.  Leading and junior counsel for the husband sought to persuade the Court of Appeal that the judge's order put "improper pressure" on the trustees of the trust which would require them, against their stated intentions and ignoring their duties to other beneficiaries, to realise assets at a time that would be unpropitious commercially in order to make a payment to the wife, who was not a beneficiary of the trust, in a way that would represent a departure from the previous history of dealings between the trust and the husband, and in disregard of the fact that the husband was not himself the settlor of the trust.  It was also argued by the husband that it was wrong of the judge to take any account of a golf course (valued at £2.38 million) because it was held within a trust of which the husband was not a beneficiary.

The Court of Appeal rejected the husband's arguments and stated that the judge had asked herself the proper questions and arrived at the unassailable answer that the trustees were likely to make available such resources as the husband requests.  Given that the husband had access to the trust funds, the arguments that there had not been a fair division of the "copper-bottomed" assets and illiquid assets also failed.