Charman v Charman

Ancillary relief requires computation of financial resources before their fair distribution through needs, compensation and sharing. Discretionary trust assets constitute a spouse’s resources where the trustees would be likely to advance them upon request, including to meet obligations arising on divorce. Equal sharing is a distributive principle which may be considered before needs. It applies to the property as a whole, rather than merely the surplus after meeting needs. A special contribution may justify unequal sharing only within narrow, exceptional bounds. Any adjustment should be significant, with the extent of an unmatched wealth-generating contribution informing its size. Valuations should reflect an asset’s realistic value in the holder’s hands, which may differ from its immediate sale value.

The husband appealed against Coleridge J’s ancillary relief order following a marriage of almost 28 years. The parties had begun married life without substantial capital. The husband’s insurance businesses generated considerable wealth, while the wife worked initially and subsequently cared for the family. The wife accepted that the husband had made a special contribution warranting unequal division.

The judge computed assets of £131 million, including £68 million held in Dragon, an offshore discretionary trust established by the husband. The husband was its settlor and primary beneficiary. Its corporate trustee, Codan Trust Company Ltd, had not provided the evidence sought in the English proceedings. The judge ordered a £40 million lump sum, leaving the wife with approximately 36.5% of the assets and the husband with 63.5%.

The husband challenged the attribution of Dragon’s assets to him and the method and extent of the allowance for his special contribution. He also challenged the treatment of tax savings and prospective liabilities, the valuation of insurance company shares and related instruments, and the inclusion of a post-separation bonus.

The appeal was dismissed. The court delivered a single judgment upholding both the method and the result of the ancillary relief award.

1. Before attributing discretionary trust assets to a spouse under section 25(2)(a) of the Matrimonial Causes Act 1973, the court had to be satisfied that the trustees would be likely to advance them upon request. Coleridge J had effectively made that finding, and the evidence justified it. Advancement conditional upon need was sufficient; meeting legal obligations following divorce could constitute that need. The enquiry required worldly realism alongside respect for trusts, trustees’ duties and offshore jurisdictions. Attribution of resources was conceptually distinct from variation of a nuptial settlement. The relevance of a fiduciary power to replace trustees was left open because other evidence sufficiently established likely advancement.

2. The statutory enquiry comprised computation followed by distribution. Financial resources, including likely future income, had to be appraised first. Distribution was informed by needs, compensation and sharing. Following Miller v Miller, McFarlane v McFarlane, sharing was a principle which could be considered before needs, particularly where substantial matrimonial property would satisfy them. Equal sharing applied unless there was good reason for unequal division. The court rejected the approach of deducting both parties’ needs and sharing only the surplus, suggested by Mance LJ in Cowan v Cowan.

3. Special contribution remained legitimate only in exceptional circumstances. The relevant disparity concerned contributions to the welfare of the family and had to be such that disregarding it would be inequitable. A special contribution could be non-financial. No monetary threshold could safely identify exceptional wealth creation. Where an unmatched wealth-generating contribution was established, greater wealth could justify greater proportional inequality. Adjustment should be significant. The court suggested a usual range between 55:45 and approximately 66.6:33.3, while expressly allowing departure where fairness required it. The division of 63.5:36.5 was permissible.

4. The suggested exclusion of unilateral business assets from sharing concerned short marriages and, in obiter guidance, certain dual-career arrangements. It did not exclude business wealth generated during this long marriage. Non-matrimonial property could provide a stronger reason for unequal division. The size of the fortune did not remove it from the court’s redistributive powers.

5. Asset valuations had to be realistic. The judge could prefer economic value reflecting the husband’s likely orderly disposal of restricted instruments over a hypothetical immediate sale value. Available trust liquidity supported the assumption that immediate realisation was unnecessary.

6. Tax savings remained part of the available assets. The wife’s failure to participate in the husband’s non-resident status justified no deduction. The judge could pragmatically address a belated prospective tax liability through repayment contingent upon actual payment. The post-separation bonus was a financial resource. Whether its non-matrimonial character required different distribution was left open because the amount could not affect the award.

• Court of Appeal (Civil Division): In [2007] EWCA Civ 503 , dismissed the husband’s appeal and upheld the ancillary relief award.
• Court of Appeal (Civil Division): In the earlier interlocutory appeal, [2005] EWCA Civ 1606 , [2006] 1 WLR 1053 , upheld the issue of a letter of request seeking evidence from the offshore trustee.
• High Court, Family Division: Coleridge J dismissed the husband’s application to stay the English divorce proceedings in favour of Bermuda. Following the substantive ancillary relief hearing and further submissions on the House of Lords’ decision in Miller v Miller, McFarlane v McFarlane, [2006] UKHL 24 , [2006] 2 AC 618 , he made the £40 million lump sum order on 27 July 2006. He also provided for a contingent contribution by the wife towards specified tax payments.