DR v GR & Ors (Financial Remedy: Variation of Overseas Trust) (Rev 1)

A family company structure may itself constitute a variable nuptial settlement where, viewed as a whole, it makes continuing provision for either or both spouses. The court may vary such a settlement and make orders concerning underlying assets held through interposed companies. Trustees and underlying companies need not ordinarily be joined for a variation order to be valid. They must be served and may seek intervention. Joinder requires compliance with FPR 2010 rule 9.26B and evidence that it is desirable to resolve an issue with the existing proceedings. Minor beneficiaries must ordinarily be separately represented under rule 9.11. A foreign enforcement advantage must be supported by evidence that joinder would make a practical difference.

The wife sought financial remedy orders and variation of a discretionary Jersey post-nuptial settlement under section 24(1)(c) of the Matrimonial Causes Act 1973. The settlement owned a Liberian company, which owned a UK company and subsidiary companies holding retirement villages and other UK assets.

The trustees and underlying companies had been joined without formal applications or notice. The companies sought removal. The central substantive issue was whether the interposed corporate structure prevented the court from treating the arrangement as a variable settlement or from making orders concerning the underlying assets. The procedural issues concerned service, joinder and representation of minor beneficiaries.

1. Substantive jurisdiction. The court held that “settlement” in section 24(1)(c) of the Matrimonial Causes Act 1973 has a wide meaning. It includes any arrangement making continuing provision for either or both spouses. The fact that companies are interposed between a trust and the underlying assets does not prevent the arrangement, viewed as a whole, from being a variable nuptial settlement.
2. The court distinguished the Court of Appeal’s decision in Prest v Petrodel Resources Ltd [2012] EWCA Civ 1395, which concerned the different statutory language of section 24(1)(a). The reasoning on corporate personality did not determine the section 24(1)(c) issue. The entire structure was therefore capable of variation, and the court was empowered to deal directly with assets held by the companies.
3. Joinder. Trustees and underlying companies need not be joined as a condition of a valid variation order. The default under rule 9.13 is service on the trustees and settlor, after which the trustees may provide evidence or seek to intervene. Joinder may nevertheless be appropriate where rule 9.26B is satisfied, but the application must follow Part 18, give the required notice and be supported by clear evidence.
4. The applicant must show either that an existing dispute cannot be effectually and validly resolved without the proposed party, or that a separate connected dispute should be determined with the main proceedings. A claimed foreign enforcement benefit requires evidence that joinder would make a difference. The companies had not been properly joined and no such case was shown; they succeeded in being disjoined.
5. Minor beneficiaries must ordinarily be separately represented under rule 9.11(1), although the court may modify that requirement sparingly. The court proceeded because the children’s interests were adequately represented in the circumstances.
6. Applying the substantive principles, the whole structure constituted a variable post-nuptial settlement. Balancing the matrimonial character of the assets against the interests of other beneficiaries, the court treated 80 per cent of the trust value as available for matrimonial division. The wife’s needs were met by a combination of property, cash and a secured charge of £391,000, payable within two years with 5 per cent simple interest. The order was in full satisfaction of her claims on a clean-break basis, taking effect upon payment.

First-instance decision in the High Court (Family Division). The judgment records that the Court of Appeal decision in Prest v Petrodel Resources Ltd [2012] EWCA Civ 1395 had been appealed to the Supreme Court, with judgment awaited, but this case was not itself an appeal.