P v P: CoA uphold variation of post-nuptial settlement
|Lady Justice Black|
The case concerned an appeal by the trustees of a post-nuptial settlement against an order of Mr Justice Mostyn, which varied the settlement by way of ancillary relief.
The trust property is a farmhouse, which had been the matrimonial home. The trust was established in 2009. The settlor was the husband's parents, and he was the principal beneficiary. Essentially, the trust provided that the husband could occupy the farmhouse during his lifetime, whereupon it would pass to other members of the settlor's family.
The husband and wife separated in 2012 and a joint residence arrangement was reached between them in relation to their child.
Mr Justice Mostyn varied the trust to provide that a sum of £23,000 was to be paid to the wife absolutely and that a sum of £134,000 was to be provided for the benefit of the wife for life, to be held by independent trustees, with the wife entitled to use the capital sum for or towards the purchase of a property for her occupation. The order would mean that the farmhouse, in which the husband intended to reside, would have to be sold, unless the husband's family were able to satisfy the order (which Mostyn J clearly considered was a possibility, if not a probability). The trustees appealed, saying that the order was wrong in that it exceeded the proper ambit of the judge's discretion, or failed to balance the relevant factors properly.
Lady Justice Black gave the leading judgment in the Court of Appeal. She held (at paragraph 45) that:
"The breadth of the discretion to vary a nuptial settlement is considerable, including the power to exclude a beneficiary entirely from the settlement and to transfer an asset to a non-beneficiary free from all trusts (Ben Hashem §290(i)). In theory, therefore, it is wide enough to encompass the order that Mostyn J made. The appeal can only succeed if the exercise of the discretion in this case was flawed."She found that Mostyn J's exercise of his discretion was not flawed. He had based the award upon the wife's need to rehouse herself, and she was not prepared to interfere with his assessment of that need. As to the husband's needs, Mostyn J did not accept that it was necessary for him to live in the farmhouse, as he was housed elsewhere in family property.
Mostyn J had had no option but to turn to the trust in order to provide for the wife. Thus:
"The question becomes whether the order that he made failed to pay sufficient regard to what might be called compendiously "the trust considerations". The judgment leaves one in no doubt that Mostyn J gave full attention to these considerations. He said that he gave "heavy respect" to "the intention of the settlor and the knowledge of the parties that ultimately the value of the settlement would revert to the estate" and it is apparent from his judgment, both in terms of what he said and what he ordered, that this was not merely lip-service. He referred in §54 to the tension that the court had to resolve and in §55 acknowledged that the case was not a straightforward case because of the "trust complications". In the paragraphs that followed, his efforts to provide for the wife, whilst still respecting the existence and purpose of the trust, are clear. And his choice, at §60, of a life interest rather than an outright payment in respect of the bulk of the money that was to come from the trust, reflected that this was not a straightforward ancillary relief situation."As to the effect of the order upon the purposes of the trust, Lady Justice Black made three points:
1. Had the marriage persisted, the wife would have enjoyed the benefit of the trust property for life by virtue of her occupation of it with the husband as the family home. The order merely built upon this by enabling her to continue to be housed in accommodation purchased with the assistance of an appropriate proportion of the trust funds, the balance being left available for the husband's needs.
2. The other beneficiaries would, in any event, have been likely to have to wait for a long time before they could hope to benefit - they could expect nothing until the husband's death. A life interest to the wife (who is of similar age to the husband) does not therefore prejudice them materially.
3. "Thirdly, it cannot be ignored that there were powers under the trust to transfer the property to the husband for his absolute use and benefit, thus depriving the other beneficiaries, and the husband's brother and his issue as remaindermen, of their chance of benefit. In the event that the husband chose to sell the property thereafter, it would be lost to the estate as well."
Lady Justice Black continued:
"To my mind, these points show that the detriment to third parties from the variation of the trust should not be overstated, and nor should the weight to be given to the settlor's intentions in setting up the trust. I do not think it can be said that innocent third parties have been inappropriately deprived of their rights under the settlement, nor do I consider that the settlement has been varied with an inappropriate disregard for the intentions of the settler or further than was necessary to make provision for the wife and the child (also a beneficiary) when with her. The route chosen by Mostyn J was the least intrusive available. The trust had no assets other than the farmhouse and, having no income, had no way in which to raise money against the property ... His order was to be met from the assets of the trust and the trustees' complaint is, in reality, about the fact that there was no alternative way to satisfy the order here than a sale of the trust property."Accordingly, the appeal was dismissed.
In a concurring judgment Lord Justice Jackson also had something to say about seeking permission to appeal, pointing out that it was good practice to apply to the lower court for permission, rather than pursuing an application for permission directly to the Court of Appeal without reference to the judge of the lower court (as had occurred here, much to the displeasure of Mostyn J).