MAGAZINE - TRUSTS, INTERVENORS & THIRD PARTIES IN DIVORCE - ISSUE 6 - Thought Leaders 4
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ThoughtLeaders4 HNW Divorce • October 2021
MAGAZINE ISSUE 6
TRUSTS, INTERVENORS & THIRD PARTIES IN DIVORCE
ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
INTRODUCTION CONTENTS
“But I always say, one’s company, two’s 60-Seconds with: Dawn Goodman,
Partner, Withers ......................................................... 4
a crowd, and three’s a party” Divorcing the in-laws: marital disputes
6
Andy Warhol and its effect on wider family finances ...................
We are delighted to publish this issue of HNW Divorce Magazine Matrimonial and non-matrimonial
ahead of our HNW Divorce Litigation Conference taking place on property on divorce ................................................... 9
24th November 2021.
60-Seconds with: the RT Hon Sir Mathew Thorpe,
In this edition, our authors focus on trusts, intervenors and third
formerly Lord Justice of Appeal .............................. 12
parties in divorce; looking at the effect on the wider family, the
division of matrimonial and non-matrimonial assets, and protecting Grandparents: the forgotten consequence
trusts post-divorce. Together with these thought-provoking articles,
of divorce ................................................................... 14
we find out more about our community with a series of 60 second
interviews including some of our speakers at the upcoming HNW
Investment portfolios in trusts post divorce .......... 17
Divorce Litigation Conference.
Thank you to all of our authors for providing engaging and refreshing 60-Seconds with: Lucy Loizou, Managing
content, and thank you to our members and partners for consistently Partner, The International Family Law Group ............ 20
supporting our growing community. We hope to see you all at our
upcoming events, meanwhile please sit back, relax, and enjoy our The cost of protecting trust assets
latest edition. in a divorce ................................................................ 21
The ThoughtLeaders4 HNW Divorce Team Keeping it in the family: what to do
when wider family members are drawn
Paul Barford Chris Leese into the divorce process ........................................... 24
Founder / Director Founder / Director
020 7101 4155 020 7101 4151
60-Seconds with: Nicholas Allen QC,
email Paul email Chris
Barrister, 29 Bedford Row Chambers ...................... 27
The tension between domestic abuse and parental
alienation and how the passing of the domestic
Danushka De Alwis Maddi Briggs abuse act 2021 might impact upon such
Founder / Director Content Production issues in family proceedings ................................... 29
020 7101 4191 Manager
email Danushka email Maddi To share or not to share: that is the question. The
division of assets on divorce: what is shared? ...... 33
How UK capital gains tax is applied to uk property
when non-uk resident spouses divorce .................. 37
ABOUT 60-Seconds with: Jenny Judd, Director,
London & Capital ....................................................... 40
Through our members’ focused community, both physical
and digital, we assist in personal and firm wide growth.
Working in close partnership with the industry rather than
CONTRIBUTORS
as a seller to it, we focus on delivering technical knowledge Dawn Goodman, Withers
and practical insights. We are proud of our deep industry Sarah Bailey-Munroe, Conyers
knowledge and the quality of work demonstrated in all our Adam Paterson, Schneider Financial Solutions
The Rt Hon Sir Mathew Thorpe, Formerly Lord Justice of Appeal
events and services.
Ellie Hampson-Jones, Stewarts
Become a member of HNW Divorce and... Joe Donohoe, Asset Risk Management
• Join a community of experts, referrers and peers Lucy Loizou, The International Family Law Group
• Attend events in all formats Jessica Henson, Payne Hicks Beach
Rebecca Moseley, Payne Hicks Beach
• Immediately benefit from our Virtual Forward of events
Cate Maguire, Kingsley Napley
• Interact using our digital Knowledge Hub Nicholas Allen QC, 29 Bedford Row Chambers
• Learn and share expertise through the Community Magazine Natasha Slabas, DMH Stallard
• Grow your network and business Stuart Clark, The International Family Law Group
Laura Harper, Kingsley Napley
• Build relationships through a facilitated Membership directory
Jenny Judd, London & Capital
2
HNW Divorce Litigation -
Flagship Conference
A True Cross-Section of the Industry
24th November 2021
Merchant Taylors Hall, London
ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
60-SECONDS WITH:
DAWN
GOODMAN
PARTNER,
WITHERS
hat would you be doing if you
W the ground. One of the hardest is hat one positive has come out of
W
weren’t in this profession? advising trustees what to do when COVID-19 for you?
caught up in a divorce with one or more
I’d always hoped to become an opera eing for nearly 18 months with my
B
beneficiaries involved. Gauging how
singer. That’s what I told the Law adult children and learning how
the Family Court will react to the
Society when I was asked why I wanted differently they do things as Milennials/
protective measures you advise putting
to become a solicitor – and very nearly Gen Z. I’ve become convinced they
in place in any particular case and how
didn’t get admitted. But otherwise I’d have so much to offer and are right
to get the tone of communication just
have liked to be an architect about so many things!
right definitely requires both trust and
specializing in restoring old buildings
divorce skills.
(which I dabble at) or a vigneron, which ho would you most like to invite to
W
I still hope to be one day. a dinner party?
hat is the best piece of advice
W
anyone has given you in your oris Johnson. Apart from finding out
B
hat’s the strangest, most exciting
W and giving him his least favourite dish
career?
thing you have done in your career? I’d like to talk to him about the
hen I was a raw trainee the senior
W
ot long after I started at Withers I
N rudiments of trust and what it means to
partner of the firm told me never to be
acted for trustees of a Cayman Islands act solely in the interest of those to
ashamed to admit that I didn’t know the
trust who were some of 84 defendants whom a fiduciary duty is owed.
answer, but to add that I’d reflect on it/
to London proceedings impugning the
research it and get back to the client.
validity of the trust and claiming breach ow the world is beginning to open
N
of fiduciary duty. It was a mammoth up again, what are you most looking
hat has been the most interesting
W
piece of litigation with the government forward to doing?
HNW Divorce case you have seen so
of the country supporting the Claimant eeting clients, colleagues and being
M
far in 2020/2021?
voting to spend the equivalent of the able to go to see trustees and others in
legal aid budget for the year on the cting –as we often do - behind the
A
their own environment once more. And
case. I was anxious to separate out the scenes in advising offshore trustees on
carrying out mediations face to face.
invalidity issue from the remaining how to address an attempt to pull them
allegations and so with the benefit of into English divorce proceedings.
hat does the perfect weekend look
W
advice from Robert Walker QC (Lord Working with local counsel orders were
like?
Walker) we issued trust proceedings for secured prohibiting any participation or
determination of that issue alone in the disclosure to the other side or ate breakfast on the terrace, a day
L
Cayman Islands and then defeated the beneficiaries (who would have been out in a historic city or magnificent
Claimant’s attempt to challenge the vulnerable to third party disclosure countryside, back for a swim and dinner
jurisdiction of the Grand Court. My orders), the offshore courts involved before a concert or opera in the open
assistant, who telephoned with the accepting that this was in the best air on a glorious summer day. And
news shortly thereafter, had to tell me interest of the beneficiaries. And it strolling around just about anywhere
three times before the enormity of the worked- the trust funds were not chatting with my children.
news sunk in – that the Claimant had touched.
discontinued in London against all 84 s chair/speaker at our upcoming
A
defendants. I can only imagine the total If you could learn to do anything, HNW Divorce Litigation conference,
of all parties’ costs that they had to pay. what would it be? what are you most looking forward
to at the event?
So many things! But perhaps top of the
hat is the easiest/hardest aspect of
W list would be a fluent linguist, a vigneron Interacting with other practitioners in
your job? and a perfumier. the field and sharing not just knowledge
orking with the support of my
W but also experience and thoughts on
amazing colleagues – it’s uncommon hat is the one thing you could not
W how this area is going to develop. I’ve
not to find someone in the firm who live without? never been at such a conference and
knows the answer, whether its tax, not felt that I’ve come away having
eauty, in so many forms – the
B
probate, property, divorce, corporate, learned so much!
countryside, music, architecture,
art law, succession in the EU or just literature, theatre etc etc.
about anything. The one exception I’ve
discovered so far is buying dinosaurs in
4
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Universally high that they are so
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ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
DIVORCING THE IN-LAWS:
MARITAL DISPUTES AND ITS EFFECT
ON WIDER FAMILY FINANCES
Authored by: Sarah Bailey-Munroe - Conyers
In most cases, a marriage represents mushroom as family one’s name before divorce was on the
the joining of two families, rather cards, may now be treated as property
than simply the two individuals who members taking umbrage owned equally by both spouses.
take vows. It is perhaps unsurprising at the idea of family
therefore that the emotional fallout of a The unexpected nature of this
divorce can similarly involve the wider funded assets being used realisation can create strong emotional
family, however few expect to find to meet the needs of an reactions (particularly in circumstances
themselves embroiled in ensuing legal where they feel a loved one has already
proceedings. “undeserving ex-spouse”. been a victim within the divorce).
Disputes over the availability of family It is important to ensure
wealth in trusts or businesses are
common and those who employ such
that these emotions do not
structures to organise their finances overshadow the interests
have usually received advice as to
their vulnerability on divorce. However,
and wishes of their
the gifting or loaning of property and loved one and separate
cash during a marriage can often take representation should
place on an informal basis with little
consideration or legal advice as to the therefore be considered as
consequences upon divorce. Such fluid soon as a third party claim
family finances provide fertile ground
for disputes over ownership during a appears likely.
divorce.
All parties will need to keep a firm eye
The complexity (and as on the merits of any third party claims
such the costs) of these
Client Care and their proportionality within the wider
proceedings.
disputes can quickly spiral Wider family members can often be
surprised to learn that the family court’s
as a result of the number powers may extend to an asset which
of transactions and parties on its face belongs to them rather
than either spouse. Conversely, upset
involved. The level of may be caused by the realization that
acrimony can also quickly property gifted or placed in a loved
6
ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
Chancery v Of course, property Whilst TL v ML makes clear that third
parties should be joined at the earliest
Family principles transferred as part of opportunity, in Bebehani the court
The key difference to keep in mind
wealth planning may well confirmed that the question of joinder
remains a discretionary one and
when dealing with a third party claims escape equal division on there is no hard and fast rule. Given
is that they will be determined by
reference to the applicable rules of
divorce, by virtue of being the cost implications of joinder it will
be important to consider whether
commercial or property law . The treated as an advanced appropriate alternatives exist.
notions of fairness which guide the inheritance. But pursuit of
division of assets between spouses, Family members may seek to resist
have no place in resolving disputes over a claim that the parent has joinder preferring to advance their case
property ownership or the enforceability retained beneficial interests through evidence or even submissions
of debts. As a result, cases need to be as was suggested in BY v MJ. Personal
pleaded with precision as they would in will achieve little besides a claims relating to outstanding liabilities
the chancery division. heavy costs bill. Clarity as will often be dealt with in this way. Whilst
this approach will prevent the court’s
Whilst it may not be uncommon for a to the case being claimed findings being binding on the third
spouse’s stance to shift in relation to
what is fair within substantive financial
is essential. parties [Tebbutt v Haynes], the familial
relationship between debtor and creditor
remedy proceedings, shifting narratives will usually mean that this approach can
in third party claims are often fatal to be undertaken by agreement.
credibility and as a result their claim.
How an asset came to be transferred However, where family members seek
should therefore be scrutinized with to defend or assert a beneficial interest
forensic detail before it is set out in in property, joinder or consolidation of a
correspondence or statements. property claim will likely be necessary.
A spouse pursuing a beneficial interest
There may be little understanding of the against a family member will almost
legal implications of transactions which certainly seek their joinder.
were completed without advice and
careful instructions will be needed to Some UK courts have developed the
ensure the parties’ respective intentions pragmatic approach of delaying joinder
and contemporaneous conversations in these cases until after a Financial
are properly understood. For example, Dispute Resolution hearing (FDR),
it is all too common for parents to albeit with full pleadings and statements
erroneously believe that evidence being directed in advance. This is a
that a property was transferred for tax Party status sensible option to pursue where joinder
planning reasons will defeat a claim that is likely unavoidable in the long run.
the property was gifted to the couple. In Where the value of a third party claim
reality transferring a property to escape is low, a family member may prefer to
inheritance tax is successful precisely accept their loss, resolving the issues
within the family once the divorce is
because the transferor‘s property rights
over. However, where outstanding
Conclusion
were extinguished and passed to the
loans or property interests are
recipient.
significant enough to warrant pursuit,
The best advice for family
consideration will need to be given to members seeking to
whether party status is necessary.
protect family wealth from a
divorce is (unsurprisingly)
to seek advice and act
before a separation is ever
on the cards.
Prenuptial agreements offer the
opportunity to comprehensively set
out family intentions in relation to any
and all financial support and therefore
provide the best protection available.
Where there is little appetite for this,
family members with firm views as
to the terms of any ad hoc financial
support should ensure that they are
properly recorded. Documents should
be drafted setting out the terms of any
transfer or loans (including repayment
dates) even if only in the form of texts
and emails.
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ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
MATRIMONIAL AND
NON-MATRIMONIAL
PROPERTY ON DIVORCE
Authored by: Adam Paterson – Schneider Financial Solutions
From my time in practice, it always of being settled, just that it It is fairly common for the parties to
seemed that clients felt a great deal of make the family home in a property
indignation on being advised that cash makes it harder. owned by one of the parties prior to the
or property obtained independently marriage:
from their role in the marriage could be This article looks at some of the basic
awarded to their ex-spouse as part of principles and solutions, before and In Miller v Miller; McFarlane
a “fair” outcome. “Fair” in this instance after the fact.
having the meaning ascribed by the
v McFarlane [2006] UKHL 24
Family Court rather than the lay client Lord Nicholls tells us that
(the two inevitably not always being the
same). Taking the family lawyer hat off,
the home has a “central
it is not difficult to sympathise. If your place in the marriage”
parents decided to leave some of their so should “normally be
wealth to you as their child, it seems
vanishingly unlikely that the intention treated as matrimonial
behind that gift was that the Family property”. But Mostyn J
Court would then take some of it and
give it to your estranged spouse. in JL and SL (No 2) [2014]
EWHC 360 (Fam) points out
The combination of
that an unequal division
indignation and fertile Classification of the
of the family home can
legal ground for argument Assets
be justified by virtue of
often makes a case that It is sometimes very easy to classify
unequal contribution to its
much harder to settle: this assets as non-matrimonial, for example,
savings accumulated by one of the acquisition. Room for an
polarising issue of principle parties prior to the marriage which have
argument, therefore.
that stands at the gates of been kept in a sole-name account and
never touched. Such a simple situation
any negotiation/mediation. rarely seems to be the case. In Hart
That is not to say that all v Hart [2017] EWCA Civ 1306 we are
reminded that the idea of property
cases where a complex being marital or non-marital is a “legal
issue arises are incapable construct” and that an asset can be both.
9
ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
Further arguments arise (the detail Does the other party and pence) and then step back and
of which is beyond the scope of this take a view as to how that can be fairly
article) when the assets in question are need or seek a share in represented, rather than adopting the
shares in a company in which one of the
parties works. Assuming they are pre-
the property? more formulaic approach advocated by
Mostyn J and set out in Jones v Jones
marital, they will have a non-matrimonial Once you have managed to establish [2011] EWCA Civ 41.
background but if one party continues that there are some assets under
to work within the company to improve Whilst that may ultimately lead to
consideration that are non-matrimonial
the business during the marriage then the Court having the necessary
you can work on how to treat those
that will give the shares a matrimonial tools to decide a case fairly (in Hart
assets in the overall division.
flavour. On the specific facts, has the for example, the husband’s woeful
value been created pre-marriage, during It is a fact of financial remedy decisions disclosure deprived the Court of the
the marriage or post-separation? Expert in England and Wales that the needs of ability to assess his pre-marital wealth),
input will normally be vital. the parties trump all. If the only asset of it does mean that advising a client on
a family is non-matrimonial, then it must the potential outcome at an early stage
The case law tells us there is a sliding be utilised to meet the needs of both (and therefore deciding whether any
scale of classification and assets can be parties. Similarly, if an equal division offer is reasonable) becomes more
“matrimonialised”. It stands to reason of the matrimonial assets leaves one difficult.
that the longer the asset is held and party unable to meet their needs, then
the more it has become mingled with the non-matrimonial assets of the other Reaching an Outcome
other assets, the harder it will be for party can be reallocated to square the
the benefiting party then to claim that it circle. Ideally, of course, the parties would
should be treated as non-matrimonial. have entered into a Radmacher-
One sympathises with the spouse However, the “sharing” compliant pre- or post-nuptial
who, for example, uses a part of their agreement detailing exactly how they
inheritance to carry out renovations on principle will generally want such assets to be treated on
the family home, only to find that on not apply. In In JL v SL separation. In addition, that agreement
separation their spouse claims that the will have been revisited regularly to
inheritance is there as a sink fund for [2015] EWHC 360 (Fam), ensure that its terms remain relevant.
the family and should be divided. Mostyn J said that a claim However, where a family lawyer
becomes involved after the fact,
Note also “unilateral assets” as to share non-matrimonial the real challenge is how to reach
identified in Miller. An asset obtained property – as opposed to settlement without wading through court
during the life of the marriage but proceedings to Final Hearing.
treated separately so as not to become the Court dipping into the
matrimonial despite the chronology. non-matrimonial pot for When a more artistic
The impact can be seen in the Court of
Appeal decision in Sharp v Sharp [2017] additional capital – is “as approach is required,
EWCA Civ 408. rare as a white leopard”, two artists might paint a
This was a short, childless marriage and in Hart Moylan LJ noted different picture despite
where both parties had a good (but not using the same palate
that he was not aware of
equal) income. The wife had received
bonuses during the marriage of any case post-Charman and formulaic guidance is
£10.5m not matched by the husband. (Charman v Charman [2007] unlikely to be forthcoming
The ultimate outcome was that the
properties they owned jointly were EWCA Civ 503) where a from the higher courts.
shared and the husband was then given party had been awarded
a sum to meet needs - the departure It seems to me that the situation is
from equality justified by the unilateral non-matrimonial property perfect for arbitration if the question is a
assets of the wife. It’s worth noting narrow one surrounding the treatment
by virtue of the sharing
that Mr and Mrs Sharp had kept their of non-matrimonial assets. Arbitration
finances unusually separate during their principle rather than continues to receive judicial support and
marriage going so far as to split the bill according to needs. anecdotally has grown substantially in
in restaurants. popularity during lockdown. The Court
system has been put under a great
However, there is still scope for
deal of stress by COVID and the idea
argument. White (or certainly snow)
of waiting months or years for a Final
leopards do exist, after all.
Hearing is likely to result in significant
If some of the property in question is costs to a client. Far better to select
to be shared, how much? Given the an experienced tribunal, decide what
general preference for discretion and expert evidence is required and have
broad overview in the Family Court the issue decided, potentially with the
it is unsurprising that the preference full section 25 exercise to take place
of the Court of Appeal in Hart was after if the parties can’t agree settlement
to take a more artistic approach that following determination of the discrete
gives the Court the freedom to identify issue.
non-matrimonial property (without
necessarily doing so in exact pounds
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60-SECONDS WITH:
THE RT HON
SIR MATHEW
THORPE
FORMERLY
LORD JUSTICE
OF APPEAL
Was there ever a time you would have considered What is the one thing you could not live without?
a different profession? If so, what would that
have been? Beauty.
Architect.
What one positive has come out of COVID-19
for you?
What was the strangest, most exciting thing you
did in your career? A quieter life.
I loved trials in Hong Kong when I was in silk.
Who would you most like to invite to a
dinner party?
Whatwas the easiest/hardest aspect of being a
Judge in the Court of Appeal? My old friends.
Workingin a court of three where there were such
opportunities to learn from others.
Nowthe world is beginning to open up again,
what are you most looking forward to doing?
What was the best piece of advice anyone gave
you in your career? Writing another book.
To relish the first years in silk earning more for
working less. What does the perfect weekend look like?
Anywhere in Steiermark, but preferably Grobming or
Ifyou could learn to do anything, what would Festenfeld.
it be?
Speak fluent German.
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GRANDPARENTS:
THE FORGOTTEN
CONSEQUENCE OF DIVORCE
Authored by: Ellie Hampson-Jones - Stewarts
Grandparents provide a Grandparents can (and often do) court under section 8 of the CA1989.
seek Special Guardianship Orders Under paragraph 10 of the CA1989, a
range of support to their in respect of their grandchildren. A parent and/or a person with parental
grandchildren. Research Special Guardianship Order appoints responsibility for the child may
one or more individuals to be a child’s automatically apply to the court to start
by Age UK suggests that ‘special guardian’. This allows the child the process.
40% of grandparents over to live with someone other than their
parent(s), usually until the child is 18. Unfortunately, grandparents do not fall
the age of 50 have provided Parental responsibility is conferred on within this automatic category. As such,
regular childcare for their the special guardians, enabling them to if a grandparent is denied access to
make decisions concerning the child’s their grandchild and they have been
grandchildren and that nine care and upbringing. The court often unable to resolve the issue directly with
out of ten grandparents, favours making Special Guardianship the consent of the child’s parents, then
Orders over adoption by a grandparent, a grandparent must apply to the court
including those who which can blur and interfere with natural for permission to make an application.
do not provide regular biological lines.
childcare, feel close to their This article focuses on private law
Pursuant to paragraph 10 (9) of the
grandchildren. proceedings rather than proceedings
CA1989, when determining whether
involving adoption, Special
permission to apply will be granted
It is, therefore, surprising for many Guardianship or a child in the care of a
to a grandparent, the court will have
who have been so integral to their local authority (to which different factors
regard to:
grandchildren’s day-to-day lives that and processes apply).
they do not have an automatic right for (a) T
he nature of the proposed
a child to see or spend time with them What rights do application,
under the Children Act 1989 (“CA1989”)
if they are prevented from doing so
grandparents (b) T
he grandparent’s connection
by a parent (or parents). Sadly, the have in private law with the child,
severance of a grandparent relationship
can often happen on divorce, where proceedings? (c) Any risk there might be of that
one parent has fallen out with the other proposed application disrupting
When a dispute arises about who a the child’s life to such an extent
and considers the grandparent to be
child is to live with, spend time with that they would be harmed by it.
an extension of their former spouse’s
or otherwise have contact with, this
‘team’.
can be resolved by applying to the
14ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
The latter can include the harm caused Unless there is agreement between What are the
to the child due to conflict between the the parties before or at the FHDRA, a
applying grandparent and the parent judge cannot make a final order at the alternatives?
preventing contact. FHDRA. Instead, the judge will make
directions to manage the case to a Before making any application to the
When preparing this article, the writers final hearing where a determination court, the grandparent will need to
came across pieces dating back can be made. The child’s welfare will demonstrate that they have explored
as far as 2007 discussing the hope be the court’s paramount consideration alternative forms of dispute resolution.
for potential reform in this area and when reaching a decision. While there This means they will need to attend
members of parliament proposing is a presumption, unless the contrary a ‘Mediation Information Assessment
amendments to the CA1989 to give is shown, that the involvement of a Meeting’.
children the right to have a relationship parent will further a child’s welfare, the
with their grandparents. Indeed, If possible, grandparents should first
same presumption does not apply to
the role of grandparents has been explore whether mediation can be
grandparents.
identified in public law proceedings used as a forum for resolving the
as being increasingly important. It is The court will weigh up the dispute. This will help ensure a court
recognised that ongoing relationships grandparent’s involvement with application is avoided and is usually a
with grandparents are beneficial against regard to: much quicker process, helping prevent
non-relative placement and can help any further decay in the relationship
support a child’s awareness of their he child’s ascertainable
T between grandchild and grandparent
origins. While reported decisions wishes and feelings from settling in.
seem to acknowledge the significance
of grandparents, there has been no
he child’s physical,
T
Conclusion
change in the law itself. There is a view
emotional and educational Given the crucial role grandparents
that grandparents should be given leave
needs play in providing support for their
if such an application is made.
grandchildren, it can be incredibly
he likely effect on the child
T difficult for grandparents to have
What is the process? of any change in their their relationship with their grandchild
circumstances disrupted seemingly through no fault
Once permission has been granted,
the grandparent may proceed with of their own. The process can be
he child’s age, sex,
T
their application. The grandparent will painful and frustrating for grandparents.
background and any
be required to follow the usual court Grandparents are advised to move
characteristics the court
procedure for making an application quickly in these scenarios to maintain
considers relevant
under section 8 of the CA1989: the bond between them and their
ny harm the child has
A grandchild so that it doesn’t become a
hey will need to complete a
T suffered or is at risk of fatal by-product of a difficult divorce.
Form C100, for which the fee suffering
is £215
ow capable each of the
H
hey will need to include
T child’s parents or any other
within the application (if person in relation to whom
known at that stage) the type the court considers the
of contact order the question to be relevant is of
grandparent is seeking the meeting their needs
court to make, ie direct
contact (face-to-face he range of powers
T
meetings) or indirect contact available to the court under
(cards and letters, phone
the CA1989
calls, video calls)
To the extent the grandparent does not
know what order they are seeking, this
will be influenced by recommendations
made by the court-appointed social
worker (Children and Family Court
Advisory and Support Service,
‘CAFCASS’).
Before the pandemic, applications made
under the CA1989 were supposed
to be listed for a first hearing dispute
resolution appointment (FHDRA) within
four to six weeks of an application being
issued. In the writer’s experience, it
can now take up to three months for an
FHDRA to be listed. This can add even
more delay to an already protracted
process.
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@1GCFamilyLaw www.1gc.comThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
INVESTMENT
PORTFOLIOS
IN TRUSTS POST DIVORCE
Authored by: Joe Donohoe – Asset Risk Management
From lawyers advising and the trustees are requested to pay A transfer in specie would
away the investments to one of the
on asset protection trusts beneficiaries. This does not differ from not remove all of these
to jurisdictions imposing any other request for a distribution issues but would put
and the trustees will follow the same
firewalls against foreign process. The investment question for control of the process into
judgements, there is still the trustee is whether to transfer out the the hands of the beneficiary
investments in specie or to liquidate the
a school of thought that portfolio and pay away the proceeds. A which might be preferable.
number of factors might influence this
assets in trust might be decision. A second scenario we have seen
is where the trustees are asked to
ring fenced in the event The trustees might first seek advice manage the assets to benefit one
of a divorce settlement. on whether the tax impact on the trust of the beneficiaries, typically the
and the beneficiary would be more spouse on the receiving end of the
This may sometimes hold true, but more or less onerous in either scenario. settlement. How the trustees deal
often than not the parties will agree that Assuming the tax position is neutral, with this request may depend on the
assets held in a trust should form part there are then investment and practical current arrangements for the portfolio.
of the calculations of family wealth. And concerns. A liquidation of the portfolio Assuming it is in a discretionary portfolio
even if a judgement is not made against might crystalise losses where individual with an investment manager, the first
the trust assets per se, the trustees investments are sitting at valuations thing for the trustees to do will be to
may be requested to make changes below their original purchase price. conduct a new risk assessment and
to the way in which they manage trust An instruction to liquidate the portfolio suitability review for the beneficiary
assets in order to allow a beneficiary to would override the managers own to establish whether the existing
meet their obligations under a divorce decisions on what to do about these policy will work for them and meet
settlement. Where the trust assets investments. There is also a timing their requirements. If, for example,
comprise investment portfolios, this can issue as some of the investments the portfolio is being managed for
lead to a variety of problems. might not be liquid and could require long term capital growth but the new
notice periods or a delay until the next beneficiary requires a regular income,
The most straightforward position for dealing day. This could upset the then the mandate for the manager may
the trustee is where a payment away is overall financial arrangements of the need to change. It is also possible
requested. Typically this is where both divorce and create additional costs and that the beneficiary will be unhappy
divorcing spouses are beneficiaries of expenses. with the incumbent manager, perhaps
the trust, perhaps with one being added because of an association with the
as a result of the divorce settlement, other spouse, and will ask the trustees
17ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
to make a change. Such a request
can pose problems of both principle
and practicality for the trustee. If the
existing manager has been doing
a good job then the trustees might
struggle to justify a change which will
almost certainly result in additional fees
and a negative impact on investment
performance.
If the trustees are happy to
accommodate the request for a change
of manager, then they will be faced
with the practical difficulties of finding
a new manager and then organising
the transfer between the managers.
The decision for the trustees might be
made easier if the existing manager
would not be an ideal choice for the
new set of objectives. A top performing
manager for capital growth might not be
the number one choice for a portfolio
designed to produce income. If this is
not the case, and the trustees would be
happy to stay with the existing manager,
then it might be sensible to persuade
the beneficiary of the benefits of leaving
the manager in place, at least until their
track record under the new mandate
can be established.
The final scenario to consider is where
the trustees are asked to separate the
portfolio into two, with one pot notionally
or explicitly designated for each spouse.
This is the most complex situation for
the trustees and brings together the split happening at trust level. Sadly, The key for the trustees
problems of the previous two scenarios post a divorce this level of harmony
and adds a few more for good luck. and cooperation is rare so it is more is to ensure that they
likely that the trustees will be asked do not lose focus on the
to make greater changes. The same
manager might stay in place but with investment portfolios while
Questions around in- different investment objectives for each sorting out the requested
new portfolio. Or one or other spouse
specie versus liquidation, arrangements.
might ask the trustees to find a new
suitability and choice of manager. As discussed previously, the
manager will all need to issue is getting from one arrangement
to the other at the least cost in fees and
be answered. The added All of the regular disciplines around
damage to investment performance.
performance monitoring must be
difficulty is that the same The investment issues identified in this maintained. It is ultimately not in
answer might not work for article can all occur outside of a divorce the interests of either spouse, or the
situation but the added personal issues trustee, to see the portfolio diminish
each spouse. which a divorce brings can make the in value as a direct result of a badly
decisions seem more difficult and the handled transition.
pressures on the trustees can be more
If the trustees are lucky, both spouses intense.
will be happy to continue with the
existing manager following the existing
mandate. This would allow the
manager to simply divide each holding
and segregate into two accounts. There
may be practical problems relating to
minimum holdings or other conditions
specific to individual investments but
with the same manager in place these
might be easier to overcome. It may
even be that the manager can continue
with a single portfolio with the notional
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60-SECONDS WITH:
LUCY LOIZOU
MANAGING
PARTNER,
THE
INTERNATIONAL
FAMILY LAW GROUP
hat would you be doing if you
W hat has been the most
W ow the world is beginning to
N
weren’t in this profession? interesting HNW Divorce Case open up again, what are you
you have seen so far in most looking forward to doing?
I would love to be a professional 2020/2021?
golfer. It is a game that requires a pending a few weeks in Cyprus
S
lot of skill and concentration yet at cting for an intervenor in family
A enjoying the warm temperatures
the same time is very relaxing. law proceedings who is seeking to and swimming in the ocean.
safeguard his family wealth that
has been generated over many
hat’s the strangest, most
W decades. hat does the perfect weekend
W
exciting thing that you have look like?
done in your career?
If you could learn to do eading, walking my dog, catching
R
he most exciting thing that I have
T anything, what would it be? up with sleep after a busy,
done is addressing circa 500 productive week and seeing friends
delegates at the annual Resolution o become and astronaut and
T and family.
Family Conference about the future travel to space.
of family law.
hat is the one thing that you
W
hat is the easiest/hardest
W could not live without?
aspect of your job?
y beloved dog, Mylo and the
M
he easiest part of my job is
T sunshine!
Interacting with people and helping
them to find solutions to the
challenges that they face. The hat one positive thing has
W
hardest part is finding enough come out of COVID for you?
hours in the day to get everything
done! o be grateful for all I have and to
T
never take anything for granted.
Life can be too short.
hat is the best piece of advice
W
anyone has given you in your
career? ho would you most like to
W
invite to a dinner party?
ork hard and you will succeed. I
W
became Managing Partner of the ll of my favourite iconic Greek
A
International Family Law Group singers for a evening of Greek
LLP on 1 August 2021. It shows food, singing and dancing.
that hard work and determination
pays off. I am relishing my new role
and looking forward to embracing
all new challenges that come with
it.
20ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
THE COST OF
PROTECTING TRUST
ASSETS IN
A DIVORCE
Authored by: Jessica Henson and Rebecca Moseley – Payne Hicks Beach
John Steinbeck once said fund by divorce proceedings that do not Does this mean that one should turn
concern them. to the Civil Procedure Rules and the
that “anything that just default rule that costs follow the event
costs money is cheap”. Against that context, we consider in under CPR 44.2(2)(a)?
this article the applicable cost rules
and what trustees can do to limit cost No – that’s not applicable either:
Trustees joined to financial remedy
exposure once they are joined, and FPR 28.2(1) disapplies CPR 44.2(2)
proceedings are unlikely to agree with
submit, to financial remedy proceedings expressly. So where does this leave
him on this: they rarely have to endure
in England & Wales.2 trustees in this procedural no-man’s
the emotional turbulence that divorce
land?
wreaks on its protagonists, but they
would still be unlikely to accept that it’s What The applicable rule is simply that “the
cheap. procedural court may at any time make such order
as to costs as it thinks just.” (FPR
Of course, no litigation is cheap, and the rules apply? 28.1). This is likely to be frustrating for
reality is that trustees joined to financial
trustees who seek certainty as to the
remedy proceedings – an essentially
consequences for the trust fund.
inquisitorial process – have relatively
limited opportunity to recover their costs The general rule under the Family
from the applicant. The result is that Procedure Rules 2010 (FPR) regarding
usually most, if not all, of the trustees’ financial remedy proceedings is that the
legal costs will be borne by the trust court will not make an order requiring
fund in question. one party to pay the costs of another
(the “no order as to costs” rule) (FPR
Usually, discretionary 1 beneficiaries 28.3(5)).
who are not party to the marriage in
question will accept (begrudgingly) that When it comes to third parties, however,
this is the justified cost of giving their their costs are not subject to the same
interests a voice in the proceedings. regime: the “no order as to costs” rule
But that is not always the case: some does not apply (see Baker v Rowe [2009]
beneficiaries will be understandably EWCA Civ 1162 which dealt with the
aggrieved by the erosion of the trust equivalent provision in the old FPR 1991).
1 Where the divorcing spouse has a vested interest or an appropriated fund, the cost can of course be allocated to his or her share.
2 This article does not consider trustees’ personal exposure: ordinarily, trustees should expect to obtain Beddoe relief as a preliminary step to ensure that they
may rely on their right of indemnity in respect of the legal costs incurred.
21ThoughtLeaders4 HNW Divorce Magazine • ISSUE 6
Beyond this ‘clean sheet’ procedural Specifically, where trustees adopt a Raise the issue of
rule, case law provides a little more neutral stance on the issues in the
another party’s conduct
guidance: proceedings and merely assist the court
by furnishing it with information, it might When deciding what (if any) costs order
be said that vis-à-vis the trustees, there to make, the court must consider all the
“the fact that one party has is in fact no issue in dispute that could circumstances of the case, including the
determine where costs fall.
been unsuccessful, and conduct of the parties (CPR 44.2(4) and
(5)). Specifically, this includes:
must therefore usually be In those circumstances, it is likely that
a court will make no provision as to the conduct before, as well as
regarded as responsible trustees’ costs. during, the proceedings;
for the generation of the
Where an order is silent on costs (and whether it was reasonable for a
successful party’s costs, the no order as to costs rule does not party to raise, pursue or contest
will often properly count as apply) the general rule is that no party is a particular allegation or issue;
entitled to their costs.3
the decisive factor the manner in which a party has
So, if trustees want to ‘win’ a substantive
in the exercise of the issue (so that they are able to claim their
pursued or defended its case or
a particular allegation or issue;
judge’s discretion” costs from the applicant), they will need
to venture a positive case against the
(Baker v Rowe 25). applicant – most likely on the issue of
and
whether the trust is nuptial in character whether a claimant who has
and, by extension, whether it should be succeeded in the claim, in
The case of Gojkovic v Gojkovic (No 2)
varied by the matrimonial court. whole or in part, exaggerated
[1991] 2 FLR 233 also gives authority
for the idea that there should be a its claim.
Naturally, the approach taken will need
rebuttable presumption that costs will to be informed by the merits of the The acrimonious nature of many
follow the event. This approach also case. If the trustees are not sufficiently divorce proceedings means that they
received approval more recently in confident in their case, they will not can be fertile ground for unreasonable
Solomon v Solomon & Ors (Rev 1) want to risk running a positive case conduct. If the trustees’ costs have
[2013] EWCA Civ 1095. which could fail and result in adverse been disproportionate because of
costs. another party’s actions, the trustees
The question then is, when it comes to
trustees, what is the “event” in question should consider making representations
So, other than ‘winning’ substantive
that costs should follow? Or to put it to the Court that the unreasonable
issues in dispute, what else can
another way… party should bear the burden of those
trustees do to recoup, or otherwise
excessive costs.
minimise, their legal costs?
How can “Winning” interim
trustees “win” What should trustees do applications
in financial to limit cost exposure?
The summary assessment of costs
remedy Deal with trust issues on interim applications can provide a
valuable means of recouping costs
proceedings? only for trustees. Unlike the substantive
First and foremost, trustees would issues in dispute where (as discussed
Where a third party, such as a parent,
be well-advised to avoid incurring above) it may be more difficult for the
has been joined to financial remedy
additional costs by becoming embroiled trustees to adopt an adversarial stance,
proceedings for the determination of a
in issues as between husband and wife. interim applications will usually involve
particular issue such as the ownership
This might sound obvious, but it is often procedural issues of dispute on which
of a particular asset, it may be very
a delicate balance to strike: ensuring the trustees can more easily be said
apparent where success lies and where
that the trustees and their legal team to have ‘won’. As such, it can often be
the costs should fall.
are kept apprised of any procedural worth trustees seeking the summary
When it comes to the joinder of developments or correspondence that assessment of their costs – especially
trustees, however, the position may not has a bearing on trust matters while where the interim application process
be so clear-cut. This is particularly the avoiding involvement in issues that goes hand-in-hand with the issue of
case where trustees adopt a ‘neutral do not. A clear protocol should be set unreasonable conduct, whereby a party
role’ as between the husband and down from the outset. will make multiple interim applications in
wife – precisely so that they avoid an order to delay the proceedings.
adversarial stance that could incur an
adverse costs order.
The difficulty is that by adopting a
wholly neutral role, the trustees may
also be losing the opportunity to benefit
from a costs order in their favour
against the applicant.
3 This is provided for by CPR 44.10(1), which also applies to family proceedings (FPR 28.2(1). However, this is a general - not an absolute - rule and the court may make a
retrospective order, where no order has previously been made (Timokhina v Timokhin [2019] EWCA Civ 1284).
22“They are as strong on money as
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KEEPING
IT IN THE
FAMILY
WHAT TO
DO WHEN
WIDER FAMILY
MEMBERS ARE
DRAWN INTO
THE DIVORCE
PROCESS
Authored by: Cate Maguire – Kingsley Napley
Common issues include: • Family members with a beneficial
interest in a property legally owned by
• Parents (or indeed grandparents or the divorcing party may similarly find
other relatives) who have permitted that this interest is disputed.
For relatives of those the divorcing couple to reside in
properties they own may find that • Where financial support has been
getting divorced, their offered to the divorcing couple during
their former son or daughter-in-law
concern for their loved now brings a financial claim against the marriage, whether directly from
family members or via a trust, it
one can be compounded the property in question. Such claims
may be argued that the court should
may also be pursued against family
by the fear of wider trusts in which such properties are rely on the likelihood of such future
financial support to order the recipient
financial repercussions held, with a view to varying the trust
to provide financial support to their
to benefit the non-beneficiary spouse.
for the family. This can former spouse.
be particularly worrying if • Parents seeking to recover loans
made to their child used towards It can be a source distress to the
family assets have been the purchase of a property may find divorcing spouse that their family
that their child’s spouse disputes the members may be drawn into the legal
‘intermingled’ with the disputes in this manner, and their assets
validity of such loans.
couple’s marital assets, made potentially vulnerable. In turn,
this can often put great pressure on a
opening up potential claims party’s relationship with their support
against those assets, network at the very time they need them
most. How then, can family members in
whether held in immediate such a position protect themselves and
or extended family their loved ones?
members’ names, within
family financial structures,
or by a spouse on behalf of
other family members.
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