- H and W had a long marriage of over 25 years. They had two adult daughters aged 28 and 25. At the time of separation the parties had a very substantial property investment portfolio developed over the years through a property letting business (‘the family business’).
- In 1994, H incorporated the family business into an offshore company (‘C Limited’). H claimed that W has no legal or beneficial interest in the shares in C Limited at the time of incorporation and that there was a clear understanding between the parties that the shares would go to the children. W argued that she and H each held a 50% beneficial interest in C Limited at the time of incorporation.
- H incorporated two further businesses during the marriage: (a) D Limited, which was used to acquire a property portfolio in North London and in respect of which W and H were equal shareholders at the time of the hearing, and (b) N Limited, which held the legal title to C Limited from 2006 until 2014 (in 2014, the legal title was transferred to an employee of H’s lawyer (‘PH’)).
- H set up an offshore trust (‘the ABC Trust’). On 3 August 2007 a deed was executed, naming the parties daughters as beneficiaries (‘the Deed of Settlement’).
- Roberts J. was concerned with the resolution of a preliminary issue. H’s case was that, with W’s agreement, he had settled the vast majority of the wealth built up over the course of the marriage into the ABC Trust. W contended that the ABC Trust was a sham. Alternatively, she sought to set it aside pursuant to s.37 MCA 1973.
- Roberts J. also had to determine the true beneficial ownership of the shares in C Limited and whether H had declared a trust in respect of his interest in D Limited.
- Prior to 2007, the shares in C Limited were beneficially owned 50% as to H and 50% as to W. W’s beneficial interest in the shares was unaffected by the Deed of Settlement.
- In order to establish a sham, W had to establish (a) that H had a dishonest intent in that he regarded the Deed of Settlement as being no more than a ‘paper’ which created no legal rights or obligations as between himself, the trustee and the purported beneficiaries, but he also had to establish that the trustee either shared that dishonest intent or was recklessly indifferent to the fact that it was entering into a document which on its face purported to impose on it, qua trustee, onerous fiduciary obligations towards the beneficiaries and the trust property which it had no intentions of honouring.
- W had not made out her case as a matter of law that the ABC Trust or the Deed of Settlement were a sham. The deed of Settlement therefore had the effect of settling into the ABC Trust H’s beneficial interest in (a) 50% of the shares in C Limited and (b) 50% of the shares in D Ltd, for benefit of the children of the family.
- As a result, PH held the shares in C Limited at to 50% for the children of the family (in accordance with the terms of the ABC Trust) and as to 50% for W.
- W retained a 50% beneficial interest in the C Limited shares. She was entitled to declaratory relief to that effect and to call for an immediate transfer of those shares from PH.
- The transaction could not however be set aside under s.37 MCA 17973 as the Deed of Settlement did not constitute a reviewable disposition under s.37(2)(b) as the parties had not separated when the ABC Trust was set up and it had not been set up for the purpose of defeating W’s financial remedy claims.