BJ v MJ (Financial Remedy: Overseas Trusts)

In financial remedy proceedings, trust assets must be analysed according to the nature of the beneficiary’s interest and the trust’s true substance. A sham or cipher trust may be ignored. A nuptial settlement falls within the court’s variation jurisdiction, including where the trust is offshore if the order will be effective. A non-nuptial discretionary trust is assessed as a resource by asking whether the trustees are likely to advance capital or income in the foreseeable future. The court evaluates that likelihood realistically and may draw robust inferences where trustees decline meaningful participation. Once the available resources are identified, the ordinary principles of needs and sharing apply. Equal sharing may nevertheless be adjusted to respect a genuine family arrangement and the interests of innocent beneficiaries. Fairness may justify deferred provision or a charge despite the clean-break objective.

The applicant wife sought financial relief after a long marriage. The family’s principal wealth was held through two Jersey settlements and a British Virgin Islands company. The wife, husband and adult son had differing interests in the settlements, and the trustees declined to submit to the jurisdiction while offering limited financial provision.

The court had to determine the true character of the trust structure, whether the assets were matrimonial property, what resources were likely to be available to the parties, and how the principles of needs and sharing should be applied. It also considered alleged dissipation, the effect of the trustees’ non-participation, and whether provision could be made effectively against offshore assets.

1. Trust classification and jurisdiction. A trust which is a mere cipher for a spouse may be ignored. Fixed trust interests capable of valuation may be treated as the parties’ property. The No.1 Settlement was a post-nuptial settlement. Although the No.2 Settlement separately excluded the spouses, it was an integral part of the same tax and asset structure. The three entities had to be viewed as a composite whole, so that the arrangements constituted a variable post-nuptial settlement.
2. Resources under a discretionary trust. A discretionary beneficiary has no proprietary interest, but that does not answer the resource question under Matrimonial Causes Act 1973. The court must assess whether the trust fund or part of it is likely to be made available by income or capital distribution. The inquiry concerns access to resources, not legal ownership or control. It is a realistic fact-finding exercise, and the court is not bound by the trustees’ assertions.
3. Non-participation by trustees. The court may draw robust conclusions about likely future benefit where trustees refuse to participate meaningfully or helpfully. Participation as witnesses in the court’s inquiry need not amount to submission to the jurisdiction. Here the trustees’ correspondence demonstrated that funds could and would be made available.
4. Orders and distribution. The assets, including the trust property, were matrimonial property and were in principle subject to equal sharing. The sharing exercise had to reflect the parties’ arrangement during the marriage to preserve wealth for their son and future generations, as well as the son’s interests and the parties’ needs. The trustees’ offer did not meet the wife’s equal-sharing entitlement, so the settlements were varied to provide her with £500,000 outright, a £750,000 life settlement with power to advance capital, and a charge over Green Farm for the balance. The assets outside the trust were divided equally and a 50% pension share was ordered.
5. Fairness and clean break. A clean break should be made as clean as reasonably possible, but fairness is not to be sacrificed for finality. If the trustees did not co-operate, the wife’s entitlement would be secured by offsetting against assets within the court’s powers, potentially requiring the sale of Green Farm and allocation of most or all of the husband’s pension.
6. Other issues. The wife’s claim to add back gifts to the parties’ son was refused. Add-back is penal in substance and should be used only where dissipation is demonstrably wanton; reversal under section 37 is generally preferable because the disponee can be heard and statutory criteria apply. The court deferred perfection of the order pending the trustees’ position and reserved costs.