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RK v RK [2011] EWHC 3910 (Fam)

Financial remedies case where the wife sought such provision from the husband that it could only be met if the trustees of trusts (of which the husband was but one of the beneficiaries) were to make resources available.

The main issue in the case was the extent to which trustees of a number of trusts, of which the husband and the children of the family were discretionary beneficiaries and some of which the wife was a discretionary beneficiary, were likely to provide resources to or for the wife directly and/or to the husband to enable him to meet the wife's financial claim.

The parties were married for eight years and had three young children.  The financial resources within the marriage were (in the main) derived from the husband's family's company where he was an employee and the parties received housing and financial support generally from the trusts.

At an early stage in the proceedings, the trustees had offered to make some provision for the wife as a beneficiary.  However, the wife contended that what the trustees offered was insufficient and therefore sought additional provision from the husband at a level that he would only be able to meet if the trustees were to make additional resources available to him via the trusts.

In a thorough review of the authorities, which address the court's approach to resources held within trusts, Moylan J considered the dividing line between judicious encouragement and improper pressure.

Moylan J concluded that the position of the trustees was a reasonable one and that they had sought to provide directly to the wife a home on a life interest to her.  The judge criticised the litigation conduct of the husband and wife but made no order for costs as he thought that the trusts or the husband (via the trusts) would pay the sum he ordered to the wife to discharge her debts.  In addition to making an order for periodical payments to the wife, Moylan J ordered that one of the paintings from the former matrimonial home be transferred to the wife but that there be no order on the issue of the family dogs.

Moylan J also gave an indication (after reading submissions by both parties' counsel) that he would be surprised if the purported assignment by the wife to her solicitors of any periodical payments order (pursuant to a so called "Sears Tooth agreement") was enforceable in this case.

Summary by Stephen Jarmain, barrister, 1 Garden Court Family Law Chambers

 
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IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION No. FD10D04134
[2011] EWHC 3910 (Fam)
Royal Courts of Justice
Monday, 21st November 2011

Before:

MR. JUSTICE MOYLAN


B E T W E E N :

RK Applicant

 -  and  -

RK Respondent
 
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(Transcript of the Handed Down Judgment of
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_________


MR. D. BRAZIL appeared on behalf of the Applicant Wife.

MR. T. BRUDENELL appeared on behalf of the Respondent Husband.

_________


Judgment
As Approved by the Court

Crown copyright©
 

MR. JUSTICE MOYLAN:
1. This judgment follows the hearing of the wife's ancillary relief application.  The wife is represented by Mr. Brazil and the husband by Mr. Brudenell. 

2. The principal issue in this case is the extent to which trustees of a number of trusts, of which the husband and the children of the family are discretionary beneficiaries and of some of which the wife is a discretionary beneficiary, are likely to provide resources to or for the wife direct and/or to the husband to enable him to meet the wife's financial claim.  I phrase the issue in this way because the trustees have offered to make some provision for the wife as a beneficiary.  The wife contends that what the trustees have offered is insufficient so seeks additional provision from the husband at a level which he would only be able to meet if the trustees were to make additional resources available to him from the trusts.

3. The wife seeks a capital fund of £425,000, £400,000 being the cost of a house and £25,000 being to fund the costs of purchase and a car.  The wife agrees that the sum of £400,000 should be provided by the trustees by way of a life interest.  In addition, she seeks a lump sum of £245,000 to cover her debts, including her legal costs, an equal share of the husband's company pension fund, and maintenance for herself and the children at the rate of £30,000 per annum. 

4. The trustees have offered to provide £400,000 in total, of which £10,000 is for the purchase of a car and £15,000 for the purchase of furniture and equipment for the house, the cost of decorations, moving and the like.  The balance of £375,000 is for the purchase of a property, inclusive of stamp duty and other expenses, which is to be provided under a protective life interest trust.

5. The husband agrees to his company pension being shared equally between the parties and offers maintenance totalling £22,500 per annum. 

6. The wife's costs of her financial proceedings total £195,000, of which she has paid £21,000.  The husband's costs are £130,000 of which his form H states he has paid £66,000, but in respect of which he says in his s.25 statement that he has been lent £86,000 by the trusts and £28,000 by his father, largely for his legal costs of these proceedings.  The trustees have incurred costs in excess of £46,000.  This combined expenditure is, in my judgment, a wasteful level of expenditure given the circumstances of this case.

History
7. The parties married in 2001.  The wife is now aged 40 and the husband is aged 39.  They have three children aged 8, 6 and 4.  There is a shared residence order in respect of the children and all three currently attend a fee paying school.  Their fees have always been paid by the husband's father and/or one of the trusts.  There is a question over whether this will continue beyond this academic year. 

8. The parties separated in May 2009.  The wife commenced divorce proceedings in July 2009 and Decree Nisi was pronounced on the 29th October 2010.  The wife's financial claims were initiated in October 2009.  It is regrettable that these proceedings have taken over two years to progress to a final hearing because the issues raised by them are not, in my view, unduly complex. 

9. When the parties met the husband was working as an assistant estate manager in the family company ("FC").  He is now employed as an estate manager and is a director of the company.  He owns no shares in the company.  The company's principal activity is farming and it owns a large estate.  The company also owns a number of other assets, principally properties.  The estate was founded by the husband's great grandfather who began purchasing farmland about 100 years ago.  The husband describes him as a very successful farmer and businessman.  The estate passed to the husband's grandfather who incorporated the business. 

10. In 1965 the husband's grandfather settled the first trust referred to in these proceedings.  Since then a significant number of additional trusts have been established, one by the husband's grandfather and the others mainly by the husband's father or his mother.  The schedule prepared for this hearing identifies seven further trusts of varying substance.  The beneficiaries of the 1965 settlement are the lineal descendants of the settlor and any spouse.  The beneficiaries of all the other trusts are essentially the children and remoter issue of the husband's father plus, in most of the trusts, their spouses.  The husband has two siblings, one of whom is married and who has two children, with a third due in December. 

11. The principal asset held by the trusts appears to be shares in FC.  The trusts together own just over 15 per cent. of the issued shares.  The husband's father owns approximately 29 per cent., his uncle owns approximately 42 per cent., and an aunt owns approximately 13 per cent.  On a pro rata basis the shares held between the trusts have a combined gross value, broadly, in the region of £12.8 million.  In 2009 the company purchased shares held by another aunt of the husband's; 12.6 per cent. of the issued shares at a price of £468 per share.  If this price was used, the combined value of the trusts' shares would be £3.2 million.  In addition, the trusts have interests in a small number of properties and liquid assets in the region of £600,000.

12. During the course of the marriage the parties lived in properties owned by FC.  When they married the husband was living in a bungalow.  In November 2002 the family moved to the last matrimonial home.  This had been extensively renovated and refurbished prior to their occupation commencing.  According to the valuation obtained for these proceedings it has been maintained to a good standard.  It is a relatively large property with three to four reception rooms and four bedrooms.  It is valued at £580,000, with adjoining paddocks, the use of which is disputed, being valued at £115,000. 

13. When the parties met the wife was working in IT in private banking.  She left this employment in 2001.  Apart from a very modest catering business which the wife undertook for about three years from 2004 the wife has not worked outside the home since 2001.  The wife also owned a property which she sold during the course of the marriage.  The net proceeds of sale of approximately £70,000 were spent on the family. 

14. In 2004 the husband bought an investment property.  The wife says that he did this on the advice of a financial adviser in part to raise a sum with which to repay his debts.  In 2006 the 1982 Trust lent the husband £102,000 to repayment the commercial mortgage.  The trust loan is charged against the property and is repayable without interest in 2031.  The purpose was to enable the husband to benefit from the rental income which had otherwise been used in meeting the mortgage payments. 

15. During the course of the marriage the husband received various other loans from the trusts to enable him to pay off his debts, principally, but not exclusively, credit card bills.  The 1982 trust lent the husband £30,000 in 2005 and a further £30,000 in 2007.  The 1996 trust also lent the husband £20,000 in 2007. 

16. The wife says that during the course of the marriage she was asked if she needed any financial assistance from the trusts.  She replied that she did not.  There was also discussion about the husband's debts and the children's schooling.  In her oral evidence the wife said it was made clear at a meeting in 2007 that the husband's family was very unhappy about his having debts again and that they would have to think very seriously before he would be bailed out again.  However, it is the wife's belief that the family would never say no to the husband. 

17. The husband's evidence was starker in that he says it was made clear that no further loans would be made to meet expenditure in excess of his income.  In fact the trustees and the husband's father had continued to provide the husband with loans principally, it is said, in respect of the costs of these proceedings.  In April 2010 the husband's father lent the husband £28,000 to enable him to repay his director's loan account.  In December 2010 one of the trusts lent the husband just over £6,000 to pay his legal costs.  In April 2011 the husband's director's loan account was overdrawn and the No. 2 Discretionary Trust lent the husband a further £60,000 to clear the account, which is said to have been incurred largely to meet legal costs.  In July 2011 the 1982 Trust lent the husband a further sum of just under £20,000 for his legal fees. 

As for schooling, the wife says she was told that the husband's father would pay for the children to attend a private school until they took their GCSEs.

The Hearing
18. I have heard oral evidence from the wife, the husband and, the PT of the trusts.  The professional trustee ("PT") is a partner in the same firm as the solicitor acting for the husband in these proceedings.  I have also been provided with a large volume of documents, although reference has been made to only a few of them during the course of the hearing.  I propose only to refer to elements of the evidence during the course of this judgment, but I have taken it all into account when determining the issues in this case and how to exercise my powers under the Matrimonial Causes Act 1973.

SECTION 25 FACTORS
Financial Resources
19. (a) Capital
The husband's investment property has been valued at £112,000.  It is subject to a charge in favour of one of the trusts, so that the net equity is currently in the region of £7,000.  The property is let and produces a gross before tax income of approximately £6,000.  The husband's bank accounts have a net balance of approximately £4,000.  He has credit card debts of approximately £18,000.  The other sums lent to the husband by his father and the trusts total £194,000.  In addition, according to his form H, the husband has unpaid costs of £64,000.  His director's loan account with FC is again overdrawn, in the sum of £36,000.

20. The husband's current position is, therefore, that he has net liabilities of just over £300,000.  There is no prospect of the husband being able to pay these debts from his earned income having regard to his obligations.  The only reasonable conclusion to draw is that when the husband was lent significant sums by the trusts and by his father it was acknowledged by them that they would not be repaid unless the husband was provided with funds either by one of the trusts and/or possibly from other source, such as his father, so as to enable him to do so.  I do not therefore consider them to be debts which the husband will have any obligation to repay in the foreseeable future out of his income or other limited capital resources.  In addition, the husband has pension funds totally £230,000 of which £208,000 is a FC pension. 

21. In her form E the wife refers to the husband telling her shortly before their separation that his father had told him that in the months to come he would be transferring shares in FC into a family trust and that the husband would be a beneficiary of this trust.  In her s.25 statement she makes reference to the shares in the company being passed down.  In his closing submissions Mr. Brazil accepted, in my view correctly, that the evidence in this case is not such as to establish that the husband is likely in the foreseeable future to receive any inheritance by way of gift or otherwise.  This leaves the issue of the extent to which the resources of the various trusts are resources which the husband has or is likely to have in the foreseeable future.  I will return to this later in this judgment. 

22. The wife's financial position is that she has no assets apart from a pension with a fund value of £8,000.  She has debts totalling approximately £245,000 of which just over £200,000 is in respect of her costs of these proceedings.

23. (b) Income and Earning Capacity
Dealing first with the husband's income, the husband receives a gross income from his employment of £80,000.  In addition, he receives substantial benefits in kind.  In 2010 these were valued for tax purposes at £33,700 and in the year ended 5th April 2011 at just under £35,000.  A modest proportion of these are deductible as business expenses.  They include the provision of housing and a car and the payment of council tax, water, electricity, heating, telephone, gardener's wages, private medical cover and participation in a shoot.  In addition, the husband receives gross rental income of £6,000 and gross income from the trusts, taking the sum for 2010, of approximately £10,500 per annum. 

24. The husband's net income, reflecting the receipt by him of the benefits in kind, is approximately £49,000.  In fact the husband's current net monthly income is significantly lower as a result, as I understand it, of the manner in which national insurance s charged.  However, his net annual income is approximately as I have stated.  Accordingly, the husband receives a net income of £49,000 and benefits in kind valued at, say, £33,000 (to allow for an element of business expenses) making a combined total of £82,000.

25. The husband has suffered from a bad back for many years.  This has led to a degree of uncertainty over the security of his employment.  This is not an issue which impacts significantly on this judgment largely because maintenance is variable. 

26. Turning now to consider the wife's position; as set out earlier in this judgment the wife has not been in paid employment since the marriage save that she has been "employed" by FC.  The wife's income of £5,300 from FC ceased when she vacated the former matrimonial home.  Her other income consists of child benefit of approximately £2,400 per annum and child tax credit of approximately £7,000 to £8,000, a combined total of approximately £10,000.  At present, the husband pays maintenance of £6,000 per annum. 

27. In a letter dated the 20th July 2011, which sets out the wife's then settlement proposals, it was said that the wife expected to be able to earn £15,000 per annum as a caterer.  In her s.25 statement the wife says that she does not expect to be able to earn an income for a few years whilst she retrains.  In Mr. Brazil's written opening submissions it is stated that if the wife could set up her own catering business she believes she could earn, in the medium term, £15,000 gross per annum.  In her oral evidence the wife said that she would require a significant capital sum in order to set up a catering business and her hope that she might be able to earn £15,000 was theoretical.  She was uncertain about any other employment opportunities given the ages of the children and the availability of work. 

28. I have no doubt that the wife has an earning capacity.  Equally, I have no doubt that it will take some years before she is able fully to exercise this capacity and that the amount she will be able to earn is not currently capable of determination.  There are too many uncertainties for me to be able to identify what the wife will be able to earn.  In order to reduce the need for future debate about this subject, I propose that the maintenance order I make for the benefit of the wife should not be reduced at all in respect of earnings up to £5,000 net per annum, should be reduced by half in respect of earnings between £5,001 and £10,000 per annum, and should be reduced pound for pound above that sum.  If the wife's tax credit is reduced as a result of the wife's earnings and income then any such reduction would need to be deducted from the wife's net earned income before this calculation is undertaken.  This is to reflect that the wife's expenditure – in child care expenses and work related costs - are likely to increase when she is working and that the wife is entitled to a higher level of income which is currently constrained by the income available to the husband.
 
29. Standard of Living
The standard of living enjoyed by the family was significantly enhanced by the provision of accommodation and other benefits provided by FC.  It is also clear that the family's expenditure exceeded the available income, requiring loans from the trusts to enable the husband's debts to be repaid.

Financial Needs and Obligations
30. (a) Housing
There is a relatively modest divide between what the wife says she requires to obtain accommodation of a reasonable standard and what the husband and the trustees put forward.  The wife's case on housing has not been consistent.  In the letter dated the 20th July 2011 the cost of reasonable housing for the wife was put at £350,000 and £400,000.  With her s.25 statement the wife produced particulars for three properties on the market for between £425,000 and £450,000.  Prior to the hearing the husband produced particulars for properties near those produced by the wife and also for properties near to the former matrimonial home and the children's current school.  These properties ranged from £350,000 to £375,000. 

In her oral evidence the wife said that she wants to live in a different village.  This led to both parties adducing particulars for properties in that village during the course of the hearing.  This was a regrettable development because the wife's reasons for wanting to live in this location appeared to me to be very understandable and she had in fact already seen several properties there.  The wife produced particulars for two properties on the market for £400,000 and £425,000 (down from £500,000).  The husband produced particulars for properties on the market for between £330,000 and £375,000. 

31.    In respect of her other capital needs, the wife accepts the proposed provision of £10,000 for a car and £15,000 for furniture and other costs, including stamp duty.  The issue therefore is the cost of the property itself. 

32. The wife produced a schedule of her income needs totalling £36,000 with her s.25 statement.  In her oral evidence the wife said this contained the bare bones of what she would need to meet her and the children's living expenses.  It is clear from only a cursory examination that the schedule is not complete.  It does not include significant items such as the cost of maintaining a home, other than its structure, or replacing household goods or a car.  I accept the wife's description of it, generally, as reflecting her and the children's basic needs.

33. The husband's schedule of income needs as set out in his s.25 statement totals, excluding maintenance, approximately £24,000 per annum, a significant part of which reflects payments in respect of his credit and other card debts.

34. I propose at this stage of my judgment to assess the wife's housing and income needs.  Ultimately, of course, the level at which the wife's needs can be met will depend on my determination of the resources likely to be available to meet those needs.  However, I consider it appropriate in this case for me first to assess the wife's needs by reference to the other factors in this case to set a fair benchmark which I can then use to determine whether resources are likely to be available to meet her needs at that level or only at a lower level.  I consider that this is more likely to result in a fair and just determination in this case, particularly as I have to assess the resources which the trustees will be likely to make available for this purpose. 

35. The difference between the housing fund sought by the wife and that proposed by the trustees and the husband is, as I have said, relatively modest.  The family courts have long approached the issue of housing and income needs from the perspective that, in general, it is not in the interests of minor children, to whose welfare the Matrimonial Causes Act requires the court to give first consideration, for there to be too marked a disparity between the standard of living each parent can provide for the children.  There are of course limits to this proposition, including frequently the resources which are available.  However, looking at the standard of the former matrimonial home, which will be the husband's home in the future, and comparing this with the alternative properties put forward by the wife and by the husband, it is clear to me that the wife's claim to a house costing in the region of £400,000, excluding associated costs, is entirely reasonable. 

36. When assessing the wife's income needs for herself and the children, I give particular weight to the standard of living enjoyed by the family during the marriage and to the standard of living which the husband is able to enjoy through his income and benefits in kind.  In my judgment, the wife has currently pitched her income needs at a relatively modest level, no doubt recognising the limited resources available to meet those needs.  The level I propose to take in this judgment is what I regard as a fair sum.  If resources - and I emphasise if - are available, in my judgment it would be fair to assess the wife's income needs at being not less than £40,000 per annum. 

37. Contributions
Each of the parties has made a full contribution during the marriage and will continue to make substantial contributions until, at least, the youngest child attains the age of, say, 21.  By then, they will have each made contributions to the welfare of the family for just under 30 years.  Insofar as relevant, I have referred to the other s.25 factors elsewhere in this judgment.

The Trusts
38. I now return to the trusts.  There are 8 relevant trusts (the 9th on the wife's schedule has been distributed).  The number of beneficiaries or potential beneficiaries varies as between the trusts, but the smallest class consists of the husband, his two siblings and their five, soon to be six, children.  The largest class numbers at least 20 plus spouses.  The pattern of income distributions to the husband has been fairly consistent.  The trusts have also made very modest capital distributions to the husband - in the 5 years to April 2008 the husband received a total of £18,000.  This does not include the sum of £25,000 received by the husband under a deed of variation under his grandmother's will in 2009. 

39. The trusts have very significant illiquid capital resources and limited liquid resources.  Mr. Brazil has calculated that the liquid resources are in the region of £650,000.  In his oral evidence the PT was unable to be precise but recalled that they were somewhat less than this, namely in the region of £540,000. 

40. As the trusts are the only potential source of significant resources in this case the trustees have rightly been involved in the proceedings from very early in the case, not directly but by way principally of correspondence.  I will return to this correspondence later in this judgment.  The trustees were involved directly in the proceedings at the financial dispute resolution hearing at which they appeared, represented by counsel, at the invitation of the court. 

41. The PT of all the relevant trusts, gave oral evidence.  He came to court pursuant to a witness summons served on behalf of the wife.  His evidence is clearly of considerable relevance to the issue at the centre of this case and, in that respect, it might have been more helpful if he had supplied a written statement for the court.  However, he was not asked to do so and he was not asked why he did not do so, so I cannot criticise him for failing to do so.  His evidence was considered and balanced and I have no hesitation in accepting it.  However, before dealing with his evidence, I propose to set out extracts from the letters which were sent by and to the trustees during the course of these proceedings.

42. On the 24th February 2010 the wife's solicitors wrote to the trustees of each of the trusts inviting them to set out what financial assistance they were prepared to offer the wife and/or the children.  The trustees replied collectively, through the PT, on the 6th April 2010.  They said:

"We enclose copies of the triennial accounts for each of the trusts to the 5th April 2007.  As accounts are only prepared every three years more up-to-date accounts are not yet available.  You will see that most of the trusts contain assets represented by shares in the issued capital of private companies and/or land.  The trustees would not be able to disturb those investments because, amongst other things, they are not marketable.  All of the said trusts were essentially created for the principal benefit of the lineal descendants of the various settlors.  The assets settled, to the extent that they comprise shares in the issued capital of private companies and land, have been retained in specie.

[The husband's father and mother], who in various instances are both settlors and trustees, have very clear views as to the purpose of the trusts.  Nevertheless, they are not blind to their obligations as trustees.  However, they are not prepared to continue to see resources frittered away in the manner which sadly has been a feature of the marriage between [the husband and the wife].  The breakdown of that marriage has given rise to considerable rancour and bitterness.  Moreover, considerable resources have been diverted to meet the cost of legal representation.  Consequently, [the husband's mother and father] in their capacity as trustees would only be willing to assist your client if they could be assured that:

1.  Such assistance formed part and parcel of a settlement of all litigation between the husband and the wife.
2.  The three children of the family are spared further anxiety about the future arrangements for their care, residence and schooling …
3.  The wife is to accept as part of such assistance that she will have to relinquish all further potential interest in the family trusts and sign such documents to give effect to such agreement.

Subject to the aforesaid, the trustees of the 1987 Settlement and the 1997 Settlement might be willing to consider the funding of suitable housing for [the wife] and the girls.  The provision of such housing would be subject to a life interest determinable upon whichever of the following events first occur: 

(a) The wife dies or remarries;
(b) The youngest child of the family ceases full-time education;
(c) The property or any agreed replacement property ceases to be the wife's principal residence;
(d) The wife cohabits with another man for a continuous period of six months in circumstances such that it can be reasonably construed that they are living together as husband and wife;  or
(e) By earlier agreement or order of the court.

Plainly issues as to the type, location and cost of such housing will need to be agreed and the trustees would invite the wife to indicate whether such an approach would, in principle, find favour with her."

43. This letter shows that the trustees, rightly, acknowledged that they have had a significant part to play in seeking to resolve the wife's financial claims and in meeting her and the children's financial needs. 

44. In his oral evidence the PT acknowledged what in my view was inevitable, namely that the provision offered in this letter was, to use his words, "perhaps unduly unfair", and later "parsimonious", in that the proposed property was going to be provided only until the youngest child ceased full-time education or the wife cohabited or remarried.

45. The wife's solicitors replied on the 16th June 2010 to the matrimonial solicitor rather than the trustee, indicating that a substantive response would be given once advice had been received from counsel.  On the 28th July 2010 the wife's solicitors replied stating, baldly, that the offer had been considered with counsel and was rejected.  This was an unhelpful response, tempered only by the fact that a proposal for a meeting was taken up.  It was unhelpful because the wife and her advisers, for good reason, had themselves invited the trustees to consider how they might assist and a bald rejection gave no indication to the trustees of what the wife's position was or how an agreed resolution might be achieved. 

46. The trustees wrote again on the 13th October 2010. 

"We confirm that the trustees had a meeting on the 8th October and considered their position.  The trustees have not expressed that they are willing to consider the judgment of the court."

I interpolate that, in the course of his oral evidence, the PT said that this part of the letter was badly expressed as the trustees are willing to consider the judgment of this court when deciding how to exercise their discretion.

"The trustees are properly considering the interests of their beneficiaries and it is on that basis that this letter is written.  The help which the trustees are prepared to make available is broadly as set out in our letter of the 6th April to your client's previous solicitors.  As before, the trustees will need assurance that:

1.  The trustees' assistance is part and parcel of a settlement of all litigation between the husband and the wife, including the cessation of the wife's employment ...

2.  The wife accepts that as part of such assistance she will have to relinquish any further potential interest in the family trusts and sign an appropriate document to give effect to that agreement.

The trustees are prepared to make available funds of £350,000 for the purchase of housing for the wife and the children, such sum to include stamp duty, land tax and expenses.

(i) The provision of such housing would be on the basis of a life interest for the wife determinable upon whichever of the following events occurs."

The terms then proposed mirror those set out in the letter of the 6th April 2010, so I do not propose to repeat them.  The letter continues:

"You and we would need to agree the type and location of the property.  We envisage that the trust will be responsible for structural repairs and insurance but that internal repairs and decoration would be the wife's responsibility and she would be expected to keep the property in good decorative order.  Any alterations would need to be agreed with the trustees.

The trustees are prepared to consider the discharge by them directly of the wife's debts, including your fees, up to a maximum of £50,000 inclusive of VAT. 

The trustees are prepared to purchase a suitable family car for use by the wife and the children which, after purchase, the trustees would transfer to the wife.  The wife would be responsible for running it and all expenses.

No doubt you will let us know whether this is of interest.  The trustees wish the divorce to be finalised quickly now before any more money is wasted in fees."

47. On the 10th December 2010 the trustees sent a without prejudice letter which has been produced to me.  In this they amended their offer of the 13th October by deleting the provisions relating to the wife's remarriage, cohabitation and the youngest child.  This was repeated as an open offer on the 13th April 2011.  The wife's solicitors responded on the 14th December 2010 stating that they would be able to advise the wife once they had received full disclosure from the husband. 

48. The financial dispute resolution hearing took place on the 11th July 2011.  As I have said, at the invitation of the court the trustees attended that hearing with counsel.  On the 20th July 2011 the wife set out her settlement proposals:

"We set out below our client's proposals for resolving this matter in order to meet the reasonable needs of our client and her three children.  Those needs she believes amount to the following:

1.  Reasonable housing provision for her and the children, and she believes it is generally agreed that such housing would be relatively modest compared to the current house and would cost in the region of £350,000 to £400,000.

2.  A small lump sum to assist with removals, refurbishment and the provision of a small motor car to the value of, say, £10,000, total, say, £30,000.

3.  Meeting our client's debts, which include £27,500 credit cards and her legal fees which in total, including the Children Act proceedings initiated by your client, are currently in the sum of £175,000.

4.  Meeting our client's income needs for herself and the children, including payment of school fees if possible.  Our client expects to be able to contribute to her income by earning the sum of, say, £15,000 as a caterer …

Our client's proposals are predicated upon the basis that your client will have to do all he can for the family with his own resources to maintain his family given the substantial provision and assistance made by the trust and the company to your client's own needs in the past and the ongoing willingness of the trust to assist him personally, not least in meeting the entirety of his substantial legal costs incurred to date …

Your client has a substantial gross income and thus a substantial borrowing capacity in his own right, a borrowing capacity that will be unencumbered on repayment of the debt to the trust on the sale of his (investment) property.  On that basis your client can, without any difficulty or substantial cost to the company or trusts:

(a) Borrow £350,000 to £400,000 whether from the company, trusts or external providers to provide a property for our client in her name and to contribute towards acquisition, refurbishment and removal costs.  He would of course irrevocably undertake to the wife fully to repay the borrowing so that in due course she would own the same outright.  If she wishes to move house the balance of the mortgage would transfer with her.

(b) Transfer his pension funds, currently valued at £230,000, to her.

(c) Contribute the sum of £175,000 to provide her with a small car and provide towards her debts and legal costs."

49. In respect of income, a global amount of £30,000 is sought on a joint lives basis RPI linked, and on the basis that the husband will take out a suitable life insurance policy to secure the payment of maintenance and of the mortgage.  It is also proposed that the husband pays school fees.  Then the letter continues:

"We do hope your client, in conjunction with the trustees and the company, will agree to the above which, whilst not perfect from our client's perspective, is clearly the best that can be devised in these circumstances, requiring all parties to use their very best endeavours to provide a roof over the head of our client and the children, together with her debts discharged and a small income which she will have to supplement."

50. On the 3rd August 2011 the trustees wrote again.

"We must preface this letter by emphasising that the trustees bear no ill-feeling towards your client.  It is their profound wish to see an end to this litigation because of the adverse impact it is having upon the family and for your client and the three children of the family to be settled and happy.  To this end, the trustees have offered your client financial assistance so as to provide her with the use of a secure home for life.  Nevertheless, there is only so much that they can do to help given the limited liquidity within the trusts and their legal obligations to the other potential beneficiaries.  The interests of the other beneficiaries cannot and should not be ignored.

The trustees are extremely concerned about the significant costs of the litigation arising out of the breakdown of the parties' marriage because of the impact it is having upon all concerned.  As we believe you are aware, the trustees have previously expressed concerns about the parties' inability to live within their means.  They were therefore astounded to discover the present level of the parties' unsecured liabilities. 

Your client, acting through her former solicitors, has expressly asked the trustees for financial assistance.  In response to that request the trustees indicated a willingness to help but regrettably your client and those advising her declined to discuss matters with the trustees.  The trustees are still willing to contemplate the provision of some financial assistance to your client and the husband in order to allow them to move on with their respective lives and to provide a home for the children.  The trustees have now incurred costs of about £46,000 in connection with this litigation.  These costs have reduced the liquid capital which is available from the trusts.  The trustees are not able to provide any assistance over and above that which is offered in this letter.  There would be very limited liquid capital available within the trusts for provision to your client or the husband in any event.  This is the trustees' final position and it will not be improved upon either by reason of further attempts to persuade the trustees by yourselves or by judicial pressure.

In essence, with this offer the trustees draw a line under the matter and wish to have no further involvement in the proceedings.  If your client continues to litigate she does so at her own cost.  The trustees do not wish to receive any further communication from yourselves in relation to your client's claim against the husband save to acknowledge this letter and/or to accept the terms of the same.  The trustees are not a party to the litigation and they will take no further steps to be involved if their proposal is rejected …

In the light of your client's request for financial assistance, the trustees are prepared to make available funds of £400,000 for the purchase of housing and a replacement motor vehicle for the exclusive use of your client and the children.  The offer of assistance is part and parcel of a settlement of all litigation between your client and the husband.  The offer is as follows:

1.  The trustees will make available a capital fund of £400,000 to be utilised as follows:
(a) £10,000 to purchase a suitable motor car for use by your client and the children. The cost of running the car, to include fuel, tax, insurance, maintenance and repairs, will be your client's responsibility.  The trustees will be the legal owner of the vehicle.  This will be a one-off purchase.

(b) £15,000 to purchase furniture/white goods for the new home and to defray the cost of decorations, moving, etc.

(c) £375,000 to purchase a suitable property, inclusive of stamp duty and the costs of purchase, to be located within a 25 mile radius of the children's current school …

It will be apparent from the above that the trustees have amended their offer of the 13th October 2010, as amended by the subsequent letter of the 13th April 2011, to provide your client with a greater housing fund.  Sadly, your client's personal debts have become out of control and the trustees have neither the funds nor the inclination to settle those debts.  Whilst they are saddened by the position that your client finds herself in they recognise that had she accepted the offer in October 2010 then she would have been in a position to settle her debts.  The course of action that she has taken since that time has led inexorably to her own insolvency.  Whilst they are sorry for your client, the trustees are not responsible for her or for her actions.  The trustees do not consider that settling your client's personal debts would be an appropriate use of the trust assets.

There will obviously be further details to be ironed out before the proposals can be finalised and implemented but, nevertheless, please would you confirm within the next seven days whether the trustees' offer for financial assistance is accepted.  This offer will not necessarily remain open for acceptance beyond the above date, especially if further litigation and costs ensue." 

The offer was structured as it was in part because the trustees had become aware that the wife had entered into what is called a "Sears Tooth agreement" with her solicitors.  As the wife's costs were then in the region of £150,000, the trustees were clearly seeking to ensure that the provision they made was available to the wife for the purposes for which they intended.

51. On the 4th August 2011 the husband set out his settlement proposals.  He offered maintenance for the wife and the children of £22,500 per annum, an equal division of his company pension fund and a division of the contents of the former matrimonial home. 

52.    The trustees wrote again on the 1st November 2011, reinstating their offer of the 3rd August until 4 p.m. on the 3rd November.  On the first day of the hearing, namely the 7th November, the trustees provided a further letter yet again reinstating their offer of the 3rd August.  In this letter they said:

"This offer is intended to form part and parcel of a settlement for all capital claims, including costs, between the husband and the wife.  The offer will need to be reviewed if the wife pursues the husband ... and recovers any additional capital provision or costs.  In that event, we feel that we will have to review and possibly revise the said offer.  The offer would need to be suspended pending a review of the parties' respective financial positions."

53. The PT indicated in his oral evidence that the trustees, mindful of the interests of the other beneficiaries, were reluctant to "empty the coffers entirely" of the liquid funds in the trust in making provision for the husband and/or the wife and children.  This led Mr. Brazil to explore ways in which the trust's liquid resources might be increased by the repayment by the husband of the loan secured against his investment property and/or by the purchase by FC of some of the shares held by one or other of the trusts.  In putting forward the latter option, Mr. Brazil was able to rely on the purchase by the company of a significant number of shares from the husband's aunt in 2009. 

54. In his oral evidence the PT made it clear that the trustees are not currently minded to make provision beyond the total amount proposed of £400,000.  He explained the connection the trustees see between the proposals they have made to the wife and any further capital claims the wife might make against the husband.  He said that the trustees would need to know their total potential exposure before they committed themselves finally to a specific level of provision for the wife herself as a beneficiary.  This was based on their understanding that any substantive capital award against the husband could only be met if resources were to be provided to him also from the trust. 

55. The PT made the same point in respect of any capital award I might make.  He said that the trustees would want to take this into account when deciding how to exercise their discretion.  This was not an indication that the trustees would necessarily make additional resources available but they would want to have the whole picture before making a final decision.  In making any such decision they would, of course, have to consider the implications for the other beneficiaries. 

56. From his oral evidence it became clear that the husband did not consider himself under any obligation to seek to ascertain from the trustees what resources might be made available to the wife either directly or through him.  He seems to have regarded this as solely a matter for the trustees.  This is, in my judgment, to misunderstand the obligation placed on him as a respondent to a financial application.  In the passages I will refer to later in this judgment, Glidewell LJ refers to a husband seeking to 'persuade' trustees to release more funds.  Wilson LJ (as he then was) refers to a husband requesting resources from the trustees.  In this case, as the wife is herself a beneficiary, she has also been under an obligation to ascertain what resources the trustees will or might make available to her.  However, this does not negate the obligation on the husband to seek to obtain the information necessary for the court properly to ascertain what resources are available to him and/or the parties.  The husband's obligation in this case is the greater as the relevant trusts are all his family's trusts of which the wife is only a beneficiary by virtue of her marriage to him. 

57. It was clear from his evidence that the husband wholly failed even to attempt to comply with this obligation.  I regret to say that I found his approach bordering on the petulant.  He agreed that there is a very significant contrast between the former matrimonial home, which will be his future home, and the properties he was proposing for the wife and the children but did not consider it was reasonable for him even to request the trustees to make greater provision.  He considered all the offers made by the trustees to be generous, even those which the PT himself had accepted were unfair.

Authorities
58. I have been referred to a number of authorities which address the court's approach to resources held within trusts.  In Thomas v. Thomas [1995] 2 FLR 668, Waite LJ made the following general observations at p.670:

"The discretionary powers conferred on the court by the amended sections 23 to 25(a) of the Matrimonial Causes Act 1973 to redistribute the assets of spouses are almost limitless.  That represents an acknowledgement by Parliament that if justice is to be achieved between spouses at divorce the court must be equipped, in a society where the forms of wealth-holding are diverse and often sophisticated, to penetrate outer forms and get to the heart of ownership …

But certain principles emerge from the authorities.  One is that the court is not obliged to limit its orders exclusively to resources of capital or income which are shown actually to exist …

Another is that where a spouse enjoys access to wealth but no absolute entitlement to it (as in the case, for example, of a beneficiary under a discretionary trust or someone who is dependent on the generosity of a relative) 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 judicious 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 his judgment Glidewell LJ said, at p.678:

"(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 exercise 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 will probably 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."

59. In Charman v. Charman [2006] 2 FLR 422 Wilson LJ addressed the approach to be taken when trust assets are being considered:

"[12] There has been some debate at the hearing of this appeal as to the nature of the central question which, in this not unusual situation, the court hearing an application for ancillary relief should seek to determine.  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 Matrimonial Causes Act 1973 ...  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 a 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 LJ in this court in Browne v. Browne [1989] 1 FLR 291 ... 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 1973 Act, the question is surely whether the trustee would be likely to advance the capital immediately or in the foreseeable future."

60. Framed in this way the question is one of fact.  Resources held within a bona fide discretionary trust are a party's resources to the extent which, on the balance of probabilities, they are likely to be made available to that party either now or within the foreseeable future.  This would encompass provision for that party's own needs as well as provision to enable that party to meet an award made against him or her in favour of the other party.  The form in which the provision can be made available or might be made available will of course vary.  It might be by way of income or capital distributions, by way of loans or by way of occupation of a trust property. 

61. In determining this issue of fact the court must assess the evidence available to it.  There is a very long tradition of the courts seeking to ascertain the reality of a situation.  As Melville L said in N v. N [1928] 44 TLR 324, the ecclesiastical courts "showed a degree of practical wisdom …They were not misled by appearances …they looked at realities".

62. In Re: The Esteem Settlement [2004] JRC 92, The Royal Court of Jersey said, at para.166:

"In our judgment, where the requests made of trustees are reasonable in the context of all the circumstances, it would be the exception rather than the rule for trustees to refuse such requests." 

In Whaley v. Whaley [2011] EWCA Civ 617 the Court of Appeal again considered the dividing line between judicious encouragement and improper pressure, in a case where no trustee had given direct evidence to the court.  In the course of her judgment Black LJ repeated that the issue was always to be approached by asking the question set by Wilson LJ in Charman.  She then added that in answering the question the court will have regard to "the circumstances of the particular trust, how it came into being, who the beneficiaries are, what duties the trustees have, what other relevant terms there are, how it has been administered in practice and so on". 

In the course of his judgment Lewison J (as he then was) said, at para.114:

"In deciding that question [that is the question identified in Charman] the court must look at the facts realistically.  The court will not put 'undue pressure' on trustees to exercise their discretion in a particular way, but may frame an order which affords 'judicious encouragement' to provide one spouse with the means to comply with the court's view of the justice of the case ...  The cases do not say what amounts to 'undue pressure'.  But in Thomas Glidewell LJ said what would not be undue pressure (viz. if (a) the interests of other beneficiaries would not be appreciably damaged and (b) the court decides that it would be reasonable for the husband to seek to persuade trustees to release more capital to enable him to make proper financial provision for his former wife).  Even if the court makes such an order the trustees are not bound to comply with the husband's request; but it is 'plainly proper for the trustees to take it into account ... and commonly it will be decisive':  Lewin on Trusts [18th revised edition 2007] para.29-157."

63. It will be seen from both Re Esteem and Whaley that in some respects the debate is circular.  The court will expect trustees to respond positively if the court concludes that the interests of the trust and of the other beneficiaries would not be appreciably damaged if the trustees were to provide the husband with the resources he requires to enable him to make proper financial provision for his wife and children.  They would be expected to respond positively because the court would have concluded that the husband would be making a reasonable request and trustees are expected to act reasonably in the discharge of their duties.  This requires the court and the trustees both to reach the same or a sufficiently similar conclusion as to what is reasonable, which would appear to assume that the former, that is the court, has sufficient knowledge of the matters which the latter would take into account; in other words, that they are surveying a broadly similar landscape and from a broadly similar perspective.

Submissions
64. Counsel have both made extensive written and oral submissions.  I have taken all the matters raised by them into account when reaching my decision, but I propose to summarise their submissions briefly in this judgment. 

65. The focus of Mr. Brazil's submissions has inevitably been on what the trustees can be expected to provide.  He starts by pointing to the wife's and children's need to be provided with housing and income at an appropriate level.  I have already dealt with these issues earlier in this judgment.  He next points to the wife's need to have her debts, including her costs, met otherwise she faces the prospect of being made bankrupt. 

66. At times during the course of his submissions it appeared to me that Mr. Brazil was almost seeking to persuade me that, if I made the orders he sought, this would have, of itself, a decisive effect on the manner in which the trustees would subsequently decide to exercise their discretion.  As a result, they could be expected to make resources available either to the wife or to the husband so as to ensure that my orders were effected.  If he was seeking to persuade me of this, I do not accept this submission.  I consider that what Mr. Brazil was in fact seeking to persuade me was that the orders he was advancing would involve the trustees in no more than a reasonable exercise of their discretionary powers and, as a result, that the trustees would be likely to advance the necessary resources.  In support of this submission, Mr. Brazil contends that the interests of the other beneficiaries would not be appreciably damaged if I made the award he seeks, given the likely total value of the trusts' assets. 

67. Mr Brazil accordingly submits that it would be reasonable for the husband to seek to persuade the trustees to release further capital to enable him to make what Mr. Brazil contends is proper provision for the wife.  In addition, he relies on certain matters that he set out in his written closing submissions which he invites me to take into account when determining whether the trustees are like to advance or make available the necessary resources.  He points to the change in the trustees' position between their original offer and their later offers, the link that the trustees made between the offer they made and the husband's financial proposals, the acceptance by the trustees that their original proposals had been parsimonious, the extent of the other trust assets and the provision which has been made for the husband in the past and has continued to be made for him.

68. Mr. Brudenell submits that I should find the trustees are not likely to make provision in excess of that which they have already offered in correspondence.  He refers to the limited liquidity in the trusts, the interests of the other beneficiaries and the manner in which the trustees have responded to the wife's needs.  He submits that the trustees have responded sensibly and reasonably and relies on the evidence of the PT. 

69. Mr. Brudenell has been critical of the way in which this case has been litigated by the wife.  He submits that it has been without apparent acknowledgement of the fact that the husband has no capital of his own and that, accordingly, the wife's needs could only be met from the trusts' resources.  He further submits that given the course of these proceedings there is no justification for any award being made to enable the wife to meet any part of her legal costs.  Absent any justification for an order for costs, Mr. Brudenell submits that it would be wrong for any award to be made which was designed to provide the wife with resources to enable her to meet her costs, even if only in part.  He submits that the wife's approach to the case has not been reasonable in contrast to that of the husband and the trustees who, he submits, have both acted reasonably throughout.

Conclusions
70. In this case the essential finding I must make is the extent to which the trustees are likely to make resources available to the wife and/or the husband to meet the wife's and the children's needs and/or any order I might make against the husband in favour of the wife (so as to enable her to meet her needs).

71. I accept that the evidence of the PT accurately reflects the views of the trustees.  In my judgment, the broad position adopted by the PT on behalf of the trustees in his oral evidence is entirely reasonable.  I accept that the trustees are reluctant, and reasonably so, to use all the liquid funds in the trusts for the benefit of the husband and/or the wife.  There are other beneficiaries to whom significant loans have been made and who might be expected to have further needs in the future. 

72. As for the other routes by which the liquid assets could be increased, there is no evidence that FC is willing to purchase shares from the trusts or that the trustees would be willing to agree to sell any shares.  There is no history of the trustees realising any part of their shareholding and I accept that the trustees are retaining this asset for the longer term benefit of the trusts and their beneficiaries.  The PT was clear that the trustees would not want to and do not want to realise any of the shares or properties held by the trusts.  Whilst Mr. Brazil was right to comment that the shares could be sold by a trust of which all the current shareholders are within the class of beneficiaries, this would in fact have the effect of diminishing the overall percentage held within the trusts to the benefit of the other principal shareholders, being the husband's father and his uncle. 

73. I consider Mr. Brazil to be on stronger ground when he points to the effect of the repayment by the husband of the loan of £102,000.  This would increase the liquid funds available in the trusts by that amount and would only reduce the husband's net income by just over £3,000.  If the trustees are concerned about the level of liquid assets in the trusts, this would clearly be a relatively simple way in which they could be increased.  It would require the husband's co-operation but as the result would be the release of additional funds effectively for his benefit, I do not see this representing any significant hurdle. 

74. Although the PT was clear that the trustees are not currently, and indeed have not during the course of these proceedings been, prepared to make provision for the wife in excess of £400,000, he added that the trustees would reconsider the position in the light of my judgment.  He also commented that if a solution could have been found for an extra £25,000, for example, he would have been in favour of doing this.

75. I have already dealt with my assessment of the wife's needs.  In my judgment, given that any house purchased for the wife will remain within the trust structure, the trustees could provide marginally more than they have currently offered without in any way damaging the interests of the trusts or the other beneficiaries.  By this, I mean they could increase the capital fund they propose to provide from £400,000 to £425,000.  I fully appreciate the wife's case on housing has not been helpfully presented.  However, when assessing the wife's case, the focus of my consideration is to seek to ensure that housing at an appropriate level is available for the wife and three members of the next generation of the beneficiaries. 

76. The more difficult question is whether I should make any lump sum order against the husband to enable the wife to meet her other debts, including her legal costs.  In my judgment, the trustees were right to recognise, as they did by their offer of the 13th October 2010, that the wife has a strong need for a capital sum in respect of her debts.  Is it likely that the trustees will provide the husband with resources to enable him to meet any such award?  The wife has debts of approximately £40,000, excluding her liability for costs. 

77.   The wife, in my judgment, clearly has a compelling need to have her debts paid.  Her income debts mirror those incurred by the husband.  I also bear in mind that the PT frankly acknowledged that the proposals made by the trustees were too restrictive until their offer of December 2010, which only became an open offer in April 2011.  The wife had incurred a significant level of costs by even the earlier of these dates.

78. The husband has made no attempt, as I have referred to earlier in this judgment, to seek to procure a reasonable proposal in respect of the provision of housing.  This was largely for the reasons given above, namely that he wrongly considered he had no obligation to seek to persuade the trustees to make any provision and, despite the PT's position, the husband still considers, again wrongly, that the trustees' original proposals were generous.  I also take into account that the trusts have provided £86,000 to the husband in respect of his legal costs.  These have been provided by way of loans but, as stated above, the husband has no prospect of repaying them from his current resources or indeed from any resources he appears likely to have in the foreseeable future. 

79. To this I must add that the failure by the wife to respond openly at all to the trustees' proposals until the 28th July 2010 and then merely to reject them was also unreasonable.  Further, the proposals put forward on behalf of the wife in July 2011 were clearly unsustainable.  It was only at the commencement of this hearing that the wife in part put forward proposals that reflect the realities of this case.

80. There are therefore sound grounds for criticising the litigation conduct of the husband and of the wife.  In this I hold the husband responsible for the trustees' position as he must stand in their shoes for these purposes.  He adopted their position and made no attempt to change it.  Looking at the parties' respective positions, including, in particular, that the husband through the trusts had the means of resolving the wife's claims, I consider it would have been reasonable to make an order that the husband should pay a proportion of the wife's costs up to the date of the trustees' open offer of April 2011.  In coming to this conclusion I take into account the wife's conduct of the litigation both before and since April 2011.  I do not, however, in fact propose to make any order for costs as I propose simply to make an order for a lump sum which provides the wife with what I consider to be a fair amount in respect of her debts and which is also the amount which I consider the trustees will make available from the trusts' resources for this purpose. 

81. If the case concerned the distribution of wealth owned by the parties I would undoubtedly be making an order which enabled them both to discharge their own debts so that their remaining resources were available to meet their other respective needs.  This is not such a case and the evidence clearly establishes that the trustees are not likely to provide sufficient resources to the parties to enable them to discharge all of their respective debts.  I have to decide what sum the trustees are likely to provide to the wife and/or to the husband to enable him to discharge any order for a lump sum that I might make.  As I have already made clear, I am satisfied the trustees will not provide the sum sought by the wife, namely £245,000, and that it is reasonable for them not to make such provision.

82. When the trustees consider this issue, they will no doubt reflect on the fact that the wife came into this marriage with significant resources and leaves it with significant debts.  They will also reflect on the fact that she is the mother of three of the next generation of beneficiaries of the trusts.  I would also expect them to appreciate that this was a case in which the wife required legal representation at a level similar to that which was provided to the husband.  His legal costs by the date of the first appointment were £36,000. 

83. Looking at the landscape, as I would expect the trustees to look at it, I consider it likely that the trustees will agree to provide the wife direct and/or provide the husband with resources to enable him to pay a lump sum of £50,000.  This provides the wife with a reasonable sum in respect of her liabilities.  In my judgment, this would not appreciably damage the interests of the trusts or of the other beneficiaries.  The trustees, as I have said, have already provided the husband with £86,000 in respect of his costs.  Under this judgment they would be providing an additional £475,000 out of liquid capital of between £600,000 and £700,000 (if the husband repays the loan charged against his investment property).  This is not a sum sufficient to enable the wife to discharge all her liabilities but this reflects the fact that I consider the trustees would be acting reasonably if they declined to make any further provision available to the wife and/or the husband for this purpose.

84. Turning now to the issue of periodical payments, the wife has an income need of £40,000.  Following her vacation of the former matrimonial home she will have an income of approximately £10,000.  Can the husband afford to pay £30,000?  The husband's net income is approximately £49,000 or, if he sells his investment property, £46,000.  In addition, a significant part of his living expenses are met through benefits in kind.  In my judgment, albeit a small difference, the husband can currently afford to pay periodical payments of £28,000 pa for the benefit of the wife and children.  This will provide the wife with a total income of approximately £38,000, which is just below the level of her needs as assessed by me but is slightly above her schedule of basic income needs as set out in her s.25 statement.  This will leave the husband with a net income of between £18,000 and £21,000, plus his benefits in kind.  In my judgment, this will enable him to meet his income needs at a reasonable level which, with his benefits in kind, is at least comparable to that which the wife and children will be able to enjoy.

85. There are a few subsidiary issues I must determine, including the wife's claim to a painting and to one of the family dogs.  On the latter issue, I do not consider it appropriate to make any order in respect of one of the dogs because, on the evidence I have heard, they would seem to have been looked after principally by the husband. 

86. As to the paintings, there are three paintings of relevance; one of which the husband inherited on the death of his grandmother which the wife was told was worth in the region of £30,000, but the husband contends is worth in the region of £1,000.  The other two were purchased during the course of the marriage for £10,000 using part of an inheritance received from the husband's family.  The wife seeks one of the latter two, which the parties chose together.  The husband took these pictures with him when he left the former matrimonial home. 

87. The husband does not refer to these pictures in his Form E.  In his replies to questionnaire of January 2011, the husband says that the paintings are being held by his mother as collateral for his liabilities, which have been cleared, in particular his overdrawn director's loan account.  This is a puzzling assertion because there is no reference anywhere else in the documents to there being any such collateral nor to the husband's mother having lent the husband any money.  In his s.25 statement the husband says that his father lent him the sum required to enable him to clear his overdrawn director's loan account as at the 30th April 2010, and that the trustees of No. 2 discretionary settlement lent him the sum required to clear his overdrawn director's loan account in April 2011. 

88. In his oral evidence the husband went even further and said that he had transferred the paintings to his mother in 2007.  I have no doubt that this part of the husband's evidence was made up to seek to protect the pictures.  It was inconsistent with what he had said in his replies to questionnaire which was itself inconsistent with what he said in his s.25 statement.  The husband could not remember how much money his mother had given him.  His answers were vague and wholly unconvincing and I reject this evidence. 

89. It is not unusual for chattels which have been purchased during the course of a marriage with funds provided by a relative or by way of inheritance to be divided between parties as part of a fair division of the former matrimonial home's chattels.  In this case I consider it just that the wife should receive a fair share of the contents of the former matrimonial home which are owned by the parties, including one of the latter two Williamson paintings.  If the wife decides or is required to sell the picture this would assist her with meeting her financial needs.  Otherwise it will assist her with furnishing her and the children's new home.  The husband will retain the other two pictures which, if necessary, he can sell to assist him with meeting the lump sum I have ordered him to provide.

90. The children have all been attending private schools for varying periods.  It would be regrettable if this were suddenly to change as a result of the divorce of their parents.  I appreciate that it is a substantial financial commitment which will by next year have been met for five years.  However, if the resources are available it would undoubtedly be to the benefit of the children if their current schooling was not disrupted by their having to move schools, especially given all the other changes they will be having to accommodate.  This is clearly a matter for the trustees and the husband's father to consider.

91. The husband proposes that the wife should vacate the former matrimonial home within six weeks.  This again provides a clear window into what I regard as his inability to approach the issues in this case with any proper element of reasonable objectivity.  Given that the wife will need to find an alternative long-term home for the trust to purchase for herself and the children, and given today's date, in other words not long before Christmas, I consider that the wife should be required to vacate the former matrimonial home by the 1st May 2012. 

92. I do not propose to deal in this judgment with the terms of the sub-trust because the trustees will clearly require time to consider my judgment and the wife will clearly require time to consider their response.  However, as the issue has been raised, I do not consider it reasonable for the trustees to be required to permit the wife to rent out any property which is purchased for her by the trust.  It is being purchased to meet her need for a home and the children's need for a home and not to provide her with an income.  The trustees may want to reflect on how the maintenance of the property should be funded, given the limited resources currently likely to be available to the wife and the benefit which the trust would obtain if the property were properly maintained. 

93. Finally, I must refer to the agreement entered into between the wife and her present solicitors, commonly called a 'Sears Tooth' agreement.  As a result of the gradual erosion of the availability of public funding for parties engaged in ancillary relief proceedings, it has become difficult for impecunious parties to be able to fund legal representation.  This can impede the attainment of justice, so solicitors have sought to find ways in which funding can be obtained.  One of these is by means of a 'Sears Tooth' agreement under which an applicant assigns to his or her solicitors the benefit of their financial claims or orders.  Under the terms of the agreement in this case the wife has assigned to her solicitors all her interest in any financial provision or costs orders made in her favour.  Financial provision is defined as meaning any property or money recovered or payable to the wife, including, under periodical payments orders, property adjustment orders and lump sum orders. 

94.    I was concerned about the inclusion of periodical payments orders within the terms or scope of this agreement so, at the conclusion of the hearing, I asked counsel to provide written submissions addressing the enforceability of that element of the agreement.  I am grateful to them for having done so.  The validity of such agreements was considered, in particular, in the decision of the then Wilson J in Sears Tooth v. Payne Hicks Beach [1997] 2 FLR 116.  I have read the respective written submissions and although I can give no more than an indication in this judgment, having considered those submissions in the light of the circumstances of this case, I would be surprised if the purported assignment of any periodical payments order was enforceable in this case.

95. The only matter I have not dealt with is whether or not the maintenance payments should be index-linked.  Although in many cases this is an effective way of providing for fixed increases and, thereby, diminishing the prospect of dispute about the need to increase periodical payments in the future, in the circumstances of this case I do not propose to include such a provision.

96. As I indicated during the course of the hearing, what I propose to do is to approve a transcript of this judgment which can then be sent to the trustees.  An order will not be drawn until their response has been obtained and the parties can then provide written submissions to me, in the light of that response, as to the form the order should take.

Postscript
After considering this judgment, the trustees indicated that they would exercise their discretion to make provision in accordance with that set out in the judgment.