Whaley v Whaley: English matrimonial proceedings concerning Jersey trust assets

Whaley v Whaley: English matrimonial proceedings concerning Jersey trust assets

Introduction

Whaley v Whaley [2011] EWCA Civ 617 is an English matrimonial case in which the Court takes into account the resources of two Jersey law trusts and the likelihood of the trustees making payments to the husband, notwithstanding that the husband was not included within the beneficial class of one of those trusts.

Facts

Mr Whaley and Mrs Whaley separated in January 2008 after over 20 years of marriage. They have 4 children.
On an ancillary relief application before Baron J, the judge had valued the resources available to the parties at £10.4M. This figure included assets of two Jersey trusts (the Farah Trust and the Yearling Trust) valued at £7M, the judge having accepted Mrs Whaley’s case that they should be seen as resources likely to be available to Mr Whaley.

The Farah Trust had been created by Mr Whaley’s father, and Mr Whaley was a beneficiary.

The Yearling Trust was created by the trustees of the Farah Trust, the only beneficiaries being the grandchildren of Mr and Mrs Whaley Senior. Mr Whaley was not a beneficiary of that trust, but the judge found that its value should be taken into account because Mr Whaley could be added as a beneficiary at any time.

Baron J ordered Mr Whaley to pay a lump sum of nearly £3M to Mrs Whaley, plus periodical payments until the lump sum was paid. This gave Mrs Whaley approximately 36% of the assets.

Mr Whaley appealed Baron J’s decision, one of the grounds of appeal being those relating to the judge’s treatment of trust assets. He argued that the judge’s order:

1. Put improper pressure on the trustees of the Farah Trust which would require them, against their stated intentions and ignoring their duties to the other beneficiaries, to realise assets at a time that would be unpropitious commercially.
2. Was wrong to take account of the assets within the Yearling Trust as the husband was not a beneficiary.

Held

Mr Whaley’s appeal was dismissed.

The Court found that Baron J had asked the proper question of whether the trustees were likely to advance capital to Mr Whaley, and had arrived at the answer that the trustees of both trusts were likely to do as Mr Whaley asked, including making capital available to him (and adding him as a beneficiary of the Yearling Trust). The law did not require that the trustees would definitely provide the funds - just that it was likely.

The Court also found that Baron J had considered the liquidity of the assets, and the judge’s award had not failed to give due regard to their source.

Comment

The appeal decision confirms the English approach of looking at resources available to a divorcing spouse, as opposed to property or ownership. With respect to trusts, the resource must be one that is “likely” to be available:  if the relevant spouse was to ask the trustees to advance to them capital, would the trustees be likely to do so?  The question is not one of control of the resource - it is one of access to it.

Arguably, this is a relatively low threshold for the attacking spouse to establish, particularly given that the Jersey Courts have consistently said that there is nothing improper in a trustee taking into account and acceding to a request of a settlor or other beneficiary, and a history of doing so does not render the trust a sham or suggest that the trustees have not independently exercised their discretion when considering such requests.

However, the case is yet another reminder that the placing of assets in a discretionary trust does not remove them from the reach of the matrimonial courts.

About Ogier

Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice