Neutral Citation Number: [2015] ewhc 2507 (Fam)

My assessment of W's credibility

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My assessment of W's credibility

  1. The accuracy of W's recollection and the veracity of its presentation both came under intense fire in her cross-examination by Mr Pointer. My conclusion is clear. What she says must be subjected to close scrutiny and approached with a degree of scepticism having regard to the many extravagant and often inconsistent observations to which she committed herself. That of course is not to say that a great deal of what she told me was not true, or that it may not have contained some substance however exaggerated. Nor, self-evidently, does it follow that whenever H gave a different account I should take it as accurate. Both throughout these bitterly-fought proceedings have given no quarter, and each has consistently determined to win their corner. Many statements on either side have been clearly self-serving.
  1. I shall allude in outline only to some of the areas of W's evidence which I found unsatisfactory, without descending into the detail. I do not believe that she believes that a loan she made to H of £5000 in 2002, which he repaid with interest, contributed in any way to the start-up of LCAL. I do not accept that many of the inconsistencies she betrayed resulted from losses in translation or from the fact that the subject of a line of questioning happened a long time ago. The topics in question ranged from what she was told by H and/or what she believed to be the progress of his divorce from W1; the year in which she became first aware of the existence of NHT; who threatened whom on a particular occasion and whether with a knife (large or small), a corkscrew or nothing at all; and whether or not, and then (having admitted it was not never) how often, she had abstracted emails or other documents online or from his computer which found their way into the French proceedings. I bear in mind (as part of the evidence in the domicile proceedings) her surreal presentation of an email exchange involving H and a woman he says was an innocent acquaintance as erotic when there was nothing remotely erotic to be read out of it, and the frenzy to which that belief drove her.

  1. I should mention that I was invited on behalf of H to make findings adverse to W in relation to some tape recordings he had obtained, more or less covertly, of W and the children. In the end I drew back from making findings in an area of enquiry which seemed to me very much the province of the French court before which an active reinvestigation of the children's living arrangements has been sought by H. It was represented to me that there might be questions as to the admissibility of that evidence in the French proceedings, and I was anxious to do nothing which might by a side wind prejudice the French Court's investigation of any such objection. Furthermore I came to the view that neither in relation to my evaluation of W's financial entitlements nor in relation to credit would I be additionally assisted by reaching a conclusion on the issues raised by the recordings. In final submissions Mr Pointer urged me to reappraise that stance, but for the reasons stated I have determined not to.
  1. H's account of their sometimes joint but often several accommodation arrangements and travels during the period after they met until they visited his parents over Easter 2003 in Miami and then went on to Cuba is the more detailed and consistent. W repeatedly replied that she was at a loss to establish dates and durations, that she could not say or that she could not remember. She describes them as going on extended boat trips shortly after they first met at which point matrimony was already in the air even though references to it may have been more flirtatious than serious. H says that the sailing trips which she describes took place in 2003 rather than in 2001, and denies that he ever suggested that as captain of the boat he was in a position to celebrate their marriage at sea. I think it unlikely that he did so, but if indeed he did then at the stage of their acquaintance at which W places it I would not treat this as contributing any scintilla of nuptial element to the trust. But I am not persuaded either that for a period of about four months in 2002, after his divorce from W1 and its financial consequences had been resolved, he and W1 resumed cohabitation in Bequia to see whether they might restore their relationship, a proposition which he advanced for the first time only a fortnight before the final hearing and which (although she had not been on the island at that time) did seem to be the first which W had heard of it.

  1. As to marriage, in my view there clearly came a stage when it must have seemed to both of them to be likely at some point, but I doubt whether they ever formed any mutual understanding of quite when that might be. External events and considerations however brought this to a head after their first child was born in September 2005 in Martinique. As neither of his parents is French he did not at birth acquire French citizenship. As both of them were born outside England and as the law then stood he did not at birth acquire English citizenship. He was stateless, and the marriage of his parents was one of the steps they had to take in order to be able to bring him to England. His British passport was issued the day after their marriage.

Was NHT from the outset nuptial?

  1. The information available about NHT is limited because of the stance taken by TB/RFG and authorised by Bannister J's order of 28 June 2013, that RFG has no obligation to provide any information to H. That has not however seemed an obstacle which has prevented TB from releasing documentation when he regarded it as helpful to NHT to do so. Indeed he went so far, in his Note of the 3 December 2013 Hong Kong meeting, as to say that:

"the Trustees stated that they were however prepared to provide SDM/H with copies of all documents that positively benefit the Trust and the Trust position. Accordingly, the Trustees will provide all security-type documents which prove that specific assets that are in H's name are not beneficially his."
  1. He did not do so immediately, nor when he said he would in relation to some specific documents, and not until the very end of the proceedings in the case of the great bulk of them. The flow has been sporadic and incomplete. This has particularly been the case in relation to the very late disclosure, effectively on the eve of the hearing and indeed at its conclusion, of documentation which has made clear the structure of the Car Portfolio with which I shall deal as the next topic. Mr Pointer's complaint that the section 37 application was in itself so late instituted does not meet this point, although he is it seems to me correct in asserting that until then the focus had primarily been upon the extent to which the vehicles constituted an available resource for H. The Special Agency Agreements (described from paragraph 128 below onwards), for instance, were documents only available at a very late stage which were key to an understanding of the arrangements documented between H and Anthology. Even before the fall-back section 37 application was instituted it was very evident that these arrangements and their effect were the subject of probing and pertinent scrutiny.

  1. Thus no copy of the trust deed has been made available, nor any accounts or comprehensive list with regard to NHT's assets. Whereas one might have expected that letters of wishes from H to RFG (although not of course binding the trustees in the exercise of their discretion) might have supported various of the otherwise unsupported propositions upon which they have relied from time to time as to H's long-term intentions regarding the trust he had settled, reference is only made in passing to one of them, said to be the most recent, dated 18 October 2011 whereby H apparently notified RFG formally (although it is inconceivable that he had not told them earlier) of the divorce proceedings which W had commenced the previous July. One would suppose that something must have been changed in that expression of H's wishes by comparison with what they had been previously, but their latest version is said by TB to have reflected no change, and H maintained he did not know what was in the document he signed (as to which I do not believe him).
  1. It is of course the case that trustees' duty is to their beneficiaries and that they may be entitled and even obliged (or at least as in this case authorised) to withhold information and documentation in situations such as this. They are also of course entitled and sometimes obliged to avoid involvement in proceedings such as these, conducted in what for the trust is an alien and must sometimes appear a hostile environment. NHT and its trustees have been entirely entitled to decline to submit in any way to this court's jurisdiction, and TB was free to decline (as he did) this court's invitation that he attend the hearing. But the fact that those duties and obligations, and the choice whether or not to attend, do exist does not render the trustees or TB immune from the court's findings drawn from such evidence as it does have available. Nor should a court shrink from drawing justifiable conclusions from that evidence which the trustees or TB may find unpalatable, nor abstain from expressing them because the distance they have kept from the enquiry entails that if they are criticised the trustees and TB were not here to speak in their own defence. I have had in mind the observations of Mostyn J (very much in line with what I have just stated), as to the inferences that may be drawn where trustees do not participate, at [18] in BJ v MJ [2011] EWHC 2708 (Fam)[2012] 1 FLR 667 (although he was there considering the different context of forecasting whether trustees will likely benefit their beneficiary if called on to do so).

  1. From a variety of sources I can be tolerably sure of the following very outline background history leading up to the formation of NHT in December 2002. That trust was preceded by another trust, the Huerto Trust (HT) settled by H in 1988 (or it may be in 1998). Little is known about HT except that it most likely contained within its structure GPH Ltd (the company which in 1999 acquired the Milner Street property). In 2001 TB/RFG took over as trustees of HT. H in his past written and oral evidence has been inconsistent in his assertions about the role which HT may have played in protecting assets from W1 at the time of their marriage breakdown. At times H has denied that HT fulfilled this function, whereas at others he accepted in his evidence what one of his professional advisers had noted to be the case some years ago, that HT did play such a defensive or deflective role.

  1. By the date of H's divorce from W1 and the early months of his involvement with W in 2001 H was emerging from a protracted period of great financial strain. He had been involved in at least two punishing sets of arduous litigation arising from his commercial activities. He had retreated and withdrawn to live in Bequia at the end of 2000. After his financial settlement with W1 was finalised he was, he maintains, without capital or income. He was living a very simple life supported financially in part by his parents and (as it were) licking his wounds, recharging his batteries and on the lookout for fresh entrepreneurial inspiration.
  1. Against that background and with advice and guidance from TB H settled NHT in December 2002. By that date his relationship with W (intermittent at least physically as for a number of periods they were not together in Bequia or elsewhere) has not been established, on my findings, as committed to the point where marriage was in contemplation save as an uncertain future contingency.

  1. About NHT I can be tolerably sure on some of the evidence (and wholly sure from what derives from the judgment of Bannister J in November 2013) that:

•    On 6 December 2002, NHT was established by H as a discretionary settlement with two classes of beneficiaries: H alone in Class A in his capacity as settlor, and H's children and remoter issue within Class B.

•    W has never been nor could she become a beneficiary.

•    On 26 June 2004 LCAL was incorporated and was from the outset and has throughout been owned by RFG as trustee for NHT. The shares, according to H's evidence, are bearer shares. H has never been nor has he been registered as a shareholder, per TB. The foundation of LCAL's fortune was not laid until the month following incorporation when contracts were agreed for the purchase of the aircraft with which the company traded.

•    On 31 August 2010 a deed of appointment was executed under which H ceased to be eligible to receive benefits from the trust for a period of 7 years. The deed was revocable, and formed part of the "roadmap" planning whereby it was hoped to deflect potential liabilities to French tax.

•    On 10 September 2010 a similar deed for a similar period and for similar purposes was executed in relation to the interests of the Class B beneficiaries, the three children.

•    On 18 October 2011 H signed his most recent Letter of Wishes, the terms of which neither he nor the trustees has divulged.

•    On 28 June 2013 Bannister J in the BVI made an order recording that H has no present entitlement to benefit under the trust and no right to require any such an entitlement to be conferred upon him; and that the trustees have no obligation to provide H with any information.

•    On 8 November 2013 Bannister J dismissed RFG's application for approval of the draft deed they submitted seeking irrevocably to remove H from all potential benefit under NHT.

•    On 26 November 2013 RFG executed a deed which they maintain effectively and irrevocably removes H as a beneficiary of NHT.

  1. TB and H both maintain that no distributions were ever made by NHT to H. He was paid a salary, H said, starting in about September 2007 and ending with the payment in January 2010. His starting salary was US$20,000 per month, and in addition he received bonuses from LCAL. H maintains that the business was not initially hugely profitable but that it became so from about 2008 onwards. It would seem to follow that the US$2.1m which H deposited with EFG on his own back-to-back arrangement with the bank from and upon which he intended to finance family expenditure in France for up to 7 years was accumulated from late 2007 onwards but predominantly in the last two or so years before the move to France in 2010. Given the amount of H's salary and the limited period of about 2 1/2 years during which it seems it was paid it would seem again to follow that the bonuses he was awarded were prodigious.

  1. The full extent of the assets comprised within NHT has never been divulged, but apart from LCAL and Anthology it appears to encompass GPH Ltd (which now owns the two London Properties), Blue Orchid (the owner since 2008 of the erstwhile family home in Bequia, Alta Vista), and Orchard International (which owns or owned a sloop, to which a value of €700,000 was attributed in an early 2010 list of "Worldwide Property" adduced in evidence in the French proceedings involving these parties).
  1. I must therefore ultimately have regard to the question whether H settled NHT in contemplation of marriage. I accept the formulation contained in Burnett v Burnett [1936] P 1 at page 16, that "in order to bring the section into operation, there must be a marriage which is the subject of the decree of divorce, and it is in contemplation of this marriage and because of this marriage that the settlement must be made." The evidence I have heard and read falls short of establishing that matters stood thus between the parties in December 2002. Despite the breadth and diversity of arrangements which have been held to fall within the meaning of a nuptial settlement for the purposes of this provision, there must always be some nuptial element. Here that was lacking. The answer is as short and can be as simply stated as that and does not require further elaboration or citation of authority.

Has NHT since its inception become nuptialised?

  1. This question arises because Mr Bates submits that I should adopt the reasoning described by Sir Paul Coleridge in the case of Quan v Bray & Ors [2014] EWHC 3340 (Fam).

  1. The kernel of Sir Paul's proposition emerges from these three paragraphs from his judgment (with the same emphasis as is contained in the original):

58. I have also been addressed on the question of whether a trust , non nuptial at its inception, can later become nuptialised. (see Burnett v Burnett [1936] P1).

59. The essential features of a PNS [a post-nuptial settlement] seems to be an existing disposition in favour of, one, other or both parties to the marriage (in their capacity as husband or wife) andfor their present or future benefit. An existing intention to benefit one of the spousal beneficiaries is obviously a prerequisite.

60. In my judgment on the authorities, a settlement which is non nuptial at its creation could itself later become "nuptialised" if there was, in fact, a flow of benefit to the parties during the marriage from the trust . Alternatively a later disposition from the trust can itself constitute a post nuptial settlement without the main or superior trust necessarily becoming nuptial.

  1. He then asked himself these three questions, and gave himself these answers:

66 I have ended up with these essential questions (of law):

a. Neither party is identified directly on the face of the written instrument (in schedule 2), as a beneficiary of CTSAT. Only SCT UK. Can it nevertheless be categorised as a PNS and one or other of them as a beneficiary of that trust, merely because CTSAT, as a fully discretionary trust, is capable of being amended or adjusted (by adding trustees or terms) to make them such?

b. If not should CTSAT nevertheless be regarded as having become a PNS if there is, anyway by the time of the application to vary, an existing intention to benefit one or both of them which is evidenced by past receipts from the trust?

c. If the parties have not to date received such benefits is the mere intention (established by other evidence) to benefit one of the spouses in an unspecified way and at some unspecified time in the future sufficient of itself to constitute a PNS ?

69 My answers to the questions of law are as follows ;

a. (66a) NO. This is mostly agreed and straightforward. The mere fact that a trust is a conventional fully discretionary trust capable of being varied to add other beneficiaries including the parties does not of itself render it a PNS.

b. (66b) YES. If there has been a regular flow of receipts paid from CTSAT to the parties (in their capacity as spousal beneficiaries) for their benefit that could be evidence of a pre existing intention to benefit them whatever the instrument said on its face. It would evidence an existing disposition and render the trust a PNS

c. (66c) NO. In my judgment if all that is established is a vague, unspecified intention at some time in the future, depending on the circumstances then prevailing, to benefit the parties possibly by way of amending the trust deed or in other ways, that is not enough to turn a non nuptial settlement into a PNS. That cannot amount to an existing disposition.

  1. In the light of the contextual facts which Sir Paul Coleridge found in that case he determined that that trust had not become nuptialised. Mr Bates invites me to apply the same principle but to find that on the facts of this case NHT has undergone that transformation. Leaving aside any impact from the acquisition of Alta Vista, he suggests that "it is plain that H and the family have been continuing to live off borrowing 'collateralised' by NHT since 2010" and thus that the Quan v Bray (66b) question should be answered affirmatively.
  1. But before coming to the context I must ask myself whether I agree with the propositions of law. They are not of course binding upon me, although equally obviously entitled to respect and careful consideration having regard to their source. In the light of the result the judge's observations were obiter. But I have indeed reached the conclusion that they do not reflect the law.

  1. Mr Pointer in response directs me to Burnett
     once more and also to K v K [2007] EWHC 3485 (Fam), [2009] 2 FLR 936. He argues that from the passage commencing on page 15 of Burnett (quoted below) is derived the proposition that the settlement under consideration for the purposes of establishing its susceptibility to adjustment at the time of the divorce must at the time of its inception (in the case of an ante-nuptial settlement) have been in contemplation of that marriage, between those spouses. Ergo if the marriage in question was not at that time in contemplation, that is to say not looked forward to, then looking back at it cannot retrospectively change the settlement's characterisation from non-nuptial to nuptial. And that certainly was the view taken in the later case of K v K which, for Mr Bates to succeed, I would need to find was wrongly concluded. In K v K the conclusion (at [79] and [82]) was that Burnett "clearly establishes that a non-nuptial settlement cannot become a nuptial one."

  1. The passage in question in Burnett is the following, at page 15:

"[T]he principal settlement, in order to be 'ante-nuptial' within the meaning of s. 192 of the 1925 Act, must be made in contemplation of or because of a second marriage, although the settlor at the time when the settlement was made was already married. 1 do not think that s. 192 was intended to cover such a case as this. In order to bring the section into operation, there must be a marriage which is the subject of the decree of divorce, and it is in contemplation of this marriage and because of this marriage that the settlement must be made. I do not think that the Legislature intended a spouse of an existing marriage to contemplate a second marriage so as to be able to execute a settlement which is 'ante-nuptial' as regards such contemplated marriage, although at the time being he or she is married and, therefore, incapable of entering into a second marriage at that time. [My emphasis]

A second point taken on behalf of the wife on this petition to vary was that the appointment under settlement No. 3 by the settlor on his second wife under the powers confirmed by the original settlement No. 1 was clearly an ante-nuptial settlement within s.192. I think that this is so, but in my view the Court has no jurisdiction under s.192 of the Judicature Act, 1925, to vary an appointment in such a way that in the result the principal settlement is also varied although that settlement is not within s.192."

  1. In the Court of Appeal decision in Charalambous v Charalambous [2004] EWCA Civ 1030, [2004] 2 FLR 1093 Arden LJ at [53] when considering the scope of the word "made" within the statutory context of a "settlement … made on the parties to the marriage" reflected that "the word 'made' relates back to the moment of creation of the settlement. At that point in time it must be within the description 'made on the parties to the marriage.' It probably must also have been an ante-nuptial or post-nuptial settlement at the date of creation though it is not necessary to decide that point." In my view the question left open by the sentence I have italicised is answered conclusively (so far as previous consistent authority is concerned) by the meaning attributed to the second paragraph quoted from Burnett which was approved in K v K. Were it to be otherwise every truly dynastic settlement, bereft of nuptial character at the outset but providing benefits for an individual who subsequently becomes either a husband or a wife, would arguably become variable under section 24(1)(c) as soon as that individual, once married, received any benefits. I am satisfied that that is not the law, notwithstanding the breadth of attribution historically afforded to settlements treated as nuptial.

  1. For completeness I should add that in this case no circumstances arise, whether by virtue of any change of trustees or resettlement of the whole or part of NHT's corpus within a differently-constituted trust, which require consideration to be given afresh to ascertain whether the new arrangements of themselves give rise to a nuptial trust variable under this provision.

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