Agreements – Ancillary relief – Reliance – Trust funds – Time limits – Notice to show cause

S v S (2008): Fam Div (Mrs Justice Eleanor King): 20 August 2008.

The court was required to determine case management directions in relation to proposed ancillary relief proceedings between the applicant (W) and respondent (H).

W and H had been married for more than 20 years. They had three adult children (C) and very substantial assets. Following their divorce, a roundtable meeting was held in an attempt to resolve the ancillary relief proceedings and it was agreed that W should have 45% of the assets and H 55%. A large share of the total assets was held in a trust and part of the agreement was that a sub-fund would be created in W’s name, with her as the principal beneficiary and C as secondary beneficiaries. H was to have no entitlement under the sub-fund and was to be specifically excluded from being a beneficiary. H and W agreed the relevant draft order and a letter of request to the trustees to create the sub-fund. The documentation also dealt with the parties’ home abroad, vested one-third in the sub-fund and two-thirds in the original trust. W later sought assurances from H that he would not enforce any of the agreed provisions to sell the property. H had transferred to W, or her trusts, 45% of the total assets, pursuant to the agreement. Following tax changes to the treatment of funds in trusts, W took independent advice and brought proceedings to transfer a large capital sum of the assets in the sub-fund to herself. The remainder was to be transferred into a new sub-fund, although W was not appointed as its principal beneficiary. C, as secondary beneficiaries, had not supported W’s lump-sum advance from the initial sub-fund and so had not agreed to the appointment. W later applied for full ancillary relief proceedings. H sought to stay the proceedings and issued a notice to show cause why an order should not be made in the terms of the draft order that had already been agreed between the parties. W submitted that: (1) there was no concluded agreement between the parties, only a headline agreement as to the proportions in which the assets should be divided; (2) in the alternative, subsequent changes in circumstances since the initial roundtable meeting meant that W should no longer be held to the agreement and ancillary relief proceedings should be circumscribed by disclosure; (3) such changes meant that it was no longer possible to implement the agreement. W further argued that, as she was no longer the principal beneficiary under the new trust fund, the original objective of the agreement had not been achieved and the letter of request had never been executed.

Held: (1) There was a very strong case to support H’s assertion that there was a concluded agreement. W did not seek to go behind the 45/55 split agreed at the initial roundtable meeting and H had already transferred the money to W in reliance on the agreement. In seeking assurances that H would not sell the property abroad, W appeared to have regarded herself bound by the agreement. She had taken independent advice and decided to move on from the structure created under the terms of the agreement.

(2) The relevant time lapse was not from the date of the initial roundtable meeting, but rather from the last occasion on which W was seen to be relying on the terms of the agreement, being only a few months before her application for ancillary relief. In that time, there were no changes of circumstances that would inevitably have led a court to conclude that the original agreement could not stand, Beach v Beach [1995] 2 FLR 160 Fam Div distinguished.

(3) The original objective of the agreement had been achieved. W had used her position as principal beneficiary to obtain an advance from the sub-fund, thus putting that sum out of the reach of C, as the other beneficiaries. W would not have been able to do so other than in reliance on the agreement. W’s loss of position as principal beneficiary was not as a consequence of the original agreement being incapable of being implemented, but as a consequence of the action she took subsequent to the implementation of the agreement. Had W chosen to keep her assets under the original sub-fund, she would have remained the principal beneficiary for her lifetime. In addition, the letter of request had been drafted on behalf of both parties and had been the backdrop for the implementation of the agreement at every stage.

(4) Although it was necessary to consider all the circumstances under section 25 of the Matrimonial Causes Act 1973, it was clear that the agreement was a factor of such magnetic importance that it should necessarily dominate the discretionary process, Crossley v Crossley [2007] EWCA Civ 1491, [2008] 1 FLR 1467 applied. The notice to show cause would be determined at the next hearing.

Directions given.

Martin Pointer QC, Justin Warshaw (instructed by Withers and Co) for the applicant; Jeremy Posnansky QC (instructed by Farrers & Co) for the respondent.