Charman v Charman

On an application for ancillary relief, the court must first identify all financial resources and then distribute them fairly by reference to need, compensation and sharing under Matrimonial Causes Act 1973. Equal sharing is a principle, not merely a final cross-check, although there may be good reason to depart from equality.

A discretionary trust may be treated as a spouse’s resource where the evidence shows that its trustee would probably advance assets on request. A special contribution remains a narrow and gender-neutral basis for unequal sharing. It requires an exceptional, unmatched contribution to family welfare and calls for a significant, but not formulaic, departure from equality.

Following a marriage of almost 28 years, the wife obtained ancillary relief in the Family Division. Coleridge J found total resources of about £131 million, including the assets of an offshore discretionary trust established by the husband, and ordered him to pay a lump sum of £40 million. The award left the wife with assets of about £48 million, or 36.5% of the total.

The husband appealed. He challenged the inclusion of the trust assets as his financial resources, the method by which the judge allowed for his exceptional wealth creation, the treatment of tax and the valuation of his Axis shares, options and warrants. The central issues were the proper application of the sharing principle and special contribution under Matrimonial Causes Act 1973.

1. Appeal dismissed. The judge was entitled to treat all the assets of the Dragon discretionary trust as the husband’s financial resources. The necessary question was whether the trustee would probably advance them if he requested it. Although the judge had not expressed that finding in those words, he had effectively made it. The evidence amply supported it: the husband was settlor and primary beneficiary, the wealth reflected investments made at his direction, his letters of wishes sought extensive access, and he had substantial influence over the trust’s administration.

2. The statutory enquiry has two stages: computation of resources and fair distribution. At distribution, the three principles identified in Miller v Miller, McFarlane v McFarlane—need, compensation and sharing—must be applied in the light of the resources. Equal sharing may be considered from an early stage. It is not confined to a final check after a separate assessment of needs, and the court should not ordinarily divide only a surplus left after both parties’ needs have been deducted.

3. A special contribution remains possible but is exceptional and must be approached without gender discrimination. It may be financial or non-financial. In wealth-creation cases, the size of the fortune is relevant, but the court must usually identify exceptional and individual qualities in its generation. No monetary threshold should be set. Where special contribution is established, a departure from equality should be meaningful; the judge’s 63.5%–36.5% division was within the proper range and was not excessive.

4. The judge was also entitled to reject a deduction for tax savings, to use a contingent repayment mechanism for an uncertain and belatedly raised future tax liability, and to prefer a realistic economic valuation of the Axis instruments over an immediate hypothetical-sale value. The post-separation bonus was an asset, although the broader treatment of post-separation property was left open.

• Court of Appeal (Civil Division): Dismissed the husband’s appeal in [2007] EWCA Civ 503.
• High Court, Family Division: Coleridge J, by order dated 27 July 2006, awarded the wife a £40 million lump sum and made a contingent repayment order concerning specified future tax payments.