(Family Division; Munby J; 29 January 2007)
The matrimonial assets included almost 56% of the shares in a family company. A trust created by the husband's parents shortly before the husband was divorced from his previous wife held 54% of the shares. The wife alleged that the main trust, and another family trust created by the husband's brother, were shams and, if not, that the trust-held shares in the company were to be treated as available to the husband under Thomas v Thomas  2 FLR 668. The trustees had been replaced on a number of occasions over the years.
While there was no difficulty in pleading inconsistent cases in the alternative, it was important to recognise that some of the relevant doctrines operated only as alternatives. A spouse who sought to extend her claim for ancillary relief to assets which appeared to be in the hands of someone other than her husband had to identify, by reference to established principle, some proper basis for doing so; the court could not grant relief merely because the husband's arrangements appeared to be artificial or dodgy. In deciding whether or not, and if so, in what manner, the principles applied in any particular case the court would of course have regard to the particular context and factual matrix; inferences normally applied in the Family Division might be different to those normally applied in the Chancery Division. However, precisely the same legal principles had to be applied in the Family Division as in the other two Divisions. Vigorous case management of such claims was vital, and directions should normally be given for such issues to be properly pleaded by points of claim and points of defence, although the appropriate directions to be given in any particular case had to reflect the case managing judge's appraisal of how, given the forensic realities of the case, the issues could best be resolved. As a matter of principle, a trust that was not initially a sham could not subsequently become a sham, unless all the beneficiaries, with the necessary intention, joined together for that purpose with the trustees. A trust that was originally a sham could become a genuine trust if a new trustee accepted appointment believing the trust to be entirely genuine and intending to perform his fiduciary duties conscientiously. Common intention was required to establish a sham, but reckless indifference would be taken to constitute the necessary intention. The wife's case on sham made no logical sense: if the trusts were sham the shares in question would not be deemed to be a gift to husband, but would be held by the settlors. There was nothing illegitimate or sham-like about a settlor who created a trust because he did not want a soon-to-be former daughter-in-law to be able to claim assets that he was contemplating transferring to his son, the divorcing husband. The principles in Thomas did not apply: to suggest that the trustees would make capital distributions from the trusts for the benefit of the husband would pass beyond judicious encouragement to improper pressure. The wife was awarded slightly over 50% of the matrimonial assets.