Tchenguiz -Imerman v Imerman

In financial remedy proceedings involving trusts, the court must consider the interests of beneficiaries when deciding whether and how to exercise its powers. Significant adult beneficiaries may be joined where their participation assists the resolution of disputed issues and promotes the overriding objective. Joinder may give them disclosure obligations and the ability to examine evidence, but those matters should ordinarily be determined after joinder rather than imposed as conditions of it. The requirement for separate representation of any child whose rights or interests may be adversely affected by a variation of settlement is not confined to a child of the family. It requires separate representation, not automatic joinder.

The wife sought financial relief and variation of trust settlements in heavily contested financial remedy proceedings. The trusts held substantial assets and the husband’s adult children were discretionary beneficiaries. The trustees had been joined to the variation application but had obtained approval from overseas courts not to participate. The adult children, having supported that position, applied to be joined in order to protect their interests. The court determined whether joinder was desirable under Rule 9.26B of the Family Procedure Rules 2010, and also considered the meaning and effect of Rules 9.11 and 9.26B.

1. The adult beneficiaries were joined as parties. Although their support for the trustees’ non-participation was unattractive and inconsistent with their application, they were not bound by the trustees’ decision. Their direct participation would assist the investigation and resolution of the disputed issues, promote the overriding objective, and potentially assist enforcement.

2. Under Rule 9.26B of the Family Procedure Rules 2010, joinder was desirable because the beneficiaries’ participation would help the court resolve all matters in dispute and issues connected with the wife’s variation application. As parties, they would be subject to disclosure obligations, liable to cross-examination, entitled to cross-examine witnesses and parties, and bound by the court’s decision. The court considered this the second-best course because the trustees, who could represent all trusts and beneficiaries, had declined to participate.

3. The court declined to impose conditions requiring disclosure or undertakings to facilitate enforcement as a condition of joinder. Such matters should be addressed after the beneficiaries became parties.

4. The court rejected the suggestion that the family court’s focus was limited to justice between the spouses. It had a mandate to consider beneficiaries’ interests when deciding whether, and how, to vary settlements. The court endorsed the approach that innocent third parties should not ordinarily be deprived of their settlement rights without proper consideration.

5. Rule 9.11 was not confined to a child of the family. In the context of a variation application, “any child” could include an actual or potential beneficiary whose rights or interests might be adversely affected. The word “must” required separate representation, but did not require joinder. The proposed variation potentially diminished the resources of a trust of which the child was a beneficiary, so the exception was not satisfied. The trustees were invited to express their views on the appropriate representation of the child.

6. There was no order for the adult beneficiaries’ costs of the joinder application, because their position was inconsistent with the stance they had previously supported before the overseas courts.