STOP PRESS: Whaley v Whaley: attacking offshore trusts

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20 July 2011

In a recent divorce case the Court of Appeal has once again shown the willingness of the family courts to look behind trust structures. In the case of Whaley the court decided that a Jersey based trust should be counted in the parties' assets, even though the husband was not a beneficiary.

Mr and Mrs Whaley were married for 20 years and had four children.   Mr Whaley put the total assets at about £3million and Mrs Whaley at nearer £12m, because she argued that the trust assets should be included.  The trust assets were largely inherited on the husband's side, and so there were arguments that the assets should not be divided equally. The Judge at a hearing in a lower court adopted a value of £10.4m and awarded the wife a lump sum of almost £3m (36%).

Mr Whaley was a beneficiary under the first trust. However, for tax reasons he was not a beneficiary under the second trust – nevertheless, the Judge felt the value of both should be included. This was because the husband could be added as a beneficiary of the second trust.

Mr Whaley appealed and claimed that:

  1. the judge's order put improper pressure on the trustees of the first trust;
  2. the second trust should have been left out of the account altogether;
  3. in light of the above, the division was unfair.

The Court of Appeal said that the key issue was whether the trustees were likely to comply with what was requested of them.  Lewison J stressed, "The question is not one of control of resources: it is one of access to them."  The Judge had found that the trustees "could be expected to comply absolutely with the husband's requests" in respect of both trusts. Therefore the trust assets were to be included in the husband's resources and there was no undue pressure on the trustees; the original order should be upheld.

The history of dealings and the relationship between the husband and the trustees were crucial to this decision; it shows once again that the divorce courts will look to the reality rather than the strict legal nature of the relationship between trustees and the families whose assets they hold.

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