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AF v SF [2019] EWHC 1224 (Fam)

Judgment of Mr Justice Moor following financial remedy proceedings in which almost all of the assets were held in Trust funds of which the husband was a beneficiary. The Husband lacked capacity to conduct litigation and was consequently represented by the Official Solicitor. The Court considered the appropriate inferences which could be drawn against the husband as a result of his lack of full and frank disclosure.

The parties had been in a cohabiting relationship since 2002, and married in 2004. They had two children together aged 14 and 12. The wife also had an older child from a previous relationship, aged 18, who was treated as a child of the family throughout the marriage and the husband had an older daughter aged 20.

The husband had failed to engage almost entirely with proceedings and by the time of the final hearing was represented by the Official Solicitor having been found to lack capacity. 

The husband's family owned a valuable property portfolio which was held in a complicated trust structure under which the husband and other family members were life tenants with broadly equal notional shares. The husband's notional share was £106 million. There was power to advance up to 70% of this to the husband in theory, but the trusts were dynastic in nature and there had been no significant capital distributions to date. The trustees attended the hearing and gave evidence that if a request for capital was made to them, they would have to consider as an important factor the opposition of the husband.

The husband received a large income from the trust fund and this funded a very high standard of living throughout the marriage. His estimated net income over the coming 5 years was £1.185 million per annum.

The only other tangible assets were the FMH (valued at £2.63million) and a South American holiday home of which there was no valuation as a result of the husband's failure to engage. The wife estimated this property to be worth £772,500. In addition there was money which had been frozen in the husband's bank accounts totalling £1.75 million after costs had been paid.

The wife did not seek a capital distribution from the Trust fund, but invited the Court to provide her with "a sensible, fair and reliable way of having an income fund made available to her which doesn't involve a lot of future litigation".

The Judge considered a number of key themes in reaching his judgment:

Marital Standard of Living
It was accepted that the sharing principle was not engaged, other than potentially in relation to the FMH, as all of the assets had emanated from the husband's family estate and were thus non-matrimonial. This included the future income stream. Similarly the compensation strand was not engaged – although the wife had given up a good career to care for the children, her award in this case would clearly be higher than anything she might realistically have earned by continuing.

Accordingly it fell to the court to consider the wife's needs. In doing so the Judge made reference to the parties' standard of living during the marriage but reminded himself that this was not determinative. He also stated that consideration must be given to whether the standard of living during the marriage was excessive and whether there had been overspending.

The court rejected the wife's "need" for a second home in London as the parties had not had a home in London for the vast majority of the marriage. Reductions were also made to the wife's projected needs in relation to renovation of the FMH and new vehicles for herself and the au pair.

Trust Assets
The court approved the oft-cited dicta of Waite LJ in Thomas v Thomas [1995] 2 FLR 668  and drew a distinction between dynastic trusts, such as the one in this case, and a trust which has been settled by a spouse.

The wife's concession that the court should not make an order requiring a capital distribution from the Trustees was correctly made given the many reasons in this case which would make it highly likely that the Trustees would refuse to exercise their discretion in favour of such a capital distribution. 

Adverse Inferences
At paragraph 63 the Court gives a useful summary of the law in relation to drawing adverse inferences as a result of one party's failure to provide full and frank disclosure. In this case the court declined to draw any inference that the husband had assets about which nothing was known, but was willing to accept the figure which the wife had attributed to the South American holiday home and proceeded on the basis that the husband had been able to retain all of the money in his account at the time of his Form E in addition to the entirety of the sum of £723,018 which had been forwarded to Monaco on his behalf the following year.

Contingent litigation fund
The wife had also sought provision of a contingent litigation fund. The court declined to make such provision on the basis that there was no immediate need for litigation and had been no previous unjustified litigation. Whilst it was acknowledged that the award made in this case would mean that the wife would be unlikely to secure legal fees funding in any future Children Act proceedings, the Court took into account the fact that the history of this matter meant that unjustified Children Act litigation could "most certainly" result in a costs order against the husband.

The high standard of living during the marriage, the length of the marriage and the fact that the wife will continue to be virtually solely responsible for the children for several more years supported a finding that she could not adjust without undue hardship to the termination of her maintenance claim without a significant capital payment. This was calculated on a Duxbury basis.

W contended a budget of £352,992 per annum. The court found this not to be reasonable and reduced it to £175,000 per annum. This figure was not reduced by reference to W's earning capacity (accepted as being £20,000 - £25,000 per annum), the Court taking the view that this additional income would merely enable her to have a slightly higher standard of living, including holidays.

Structure of the award
The wife was awarded a total sum of just over £7million, necessitating a lump sum payment of £4.25million from the husband. Given the difficulties in securing the husband's compliance with any orders, it was directed that the entirety of the £1.75million which had been frozen in the husband's accounts should be transferred to the wife. The remaining £2.5million was to be paid over 5 years at a rate of £500,000 per annum. As a result of being kept out of part of her award for 5 years, the wife was also entitled to additional, reducing, maintenance payments over the next 5 years.

The order which had been in place throughout the litigation, for £38,400 out of the husband's monthly income from the trust to be paid directly to the wife, remained in place. The balance of the payment due each year is to be made up every August when the retained income in the fund is distributed. 

Case summary by Anna Sutcliffe, barrister, 1 King's Bench Walk

Full judgment of AF v SF [2019] EWHC 1224 (Fam) on BAILII