NR v AB [2016] EWHC 277 (Fam): A licence made sense

If a matrimonial home is owned by a limited company, shares in which are held - and financing for which was provided - by a spouse together with his wider family, can the ownership of such a matrimonial home (and of other property similarly held) be construed as a nuptial settlement capable of variation under s 24(1)(c), Matrimonial Causes Act 1973?

If so, is that still the case even if the matrimonial home was occupied pursuant to an informal licence?

Does the court have the powers to vary the settlement so as to alter the beneficial interest in the property, so long as the third parties have been joined to the proceedings?

Will a court order a formal lifelong licence to occupy a matrimonial home as a way of resolving a dispute where the home is already held pursuant to the other spouse's family arrangement?

In NR v AB, BCO Ltd, MB and LB [2016] EWHC 277 (Fam), Roberts J considered NR's (W's) application for a financial order with respect to the dissolution of her marriage to AB (H).

Background

H was aged 45 and W aged 37. Both parties were from wealthy Saudi families, H having dual Saudi and British nationality. The parties became engaged in April 1999, marrying in London in May 1999. They moved into a leasehold property, 18 SP Mansions ('18SPM'), in Kensington, London, in the summer of 1999. They had three children, aged 15, 12 and 7. H worked as an international banker, whilst W devoted her time and energies to the care of the family and children. An adjacent flat in the same mansion block was purchased in 2008 ('18A'), and used by the parties, and by the husband's mother (MB) and sister (LB), as a place where nannies and relatives could stay. Legal title to both properties was held by a company, BCO Ltd ('BCO') in which H, through two Jersey nominee companies, had an interest (quantum being in dispute). Both MB and LB also asserted an interest in the shares held in BCO. BCO was itself an offshore property-holding company incorporated in St VIncent and the Grenadines.

H had further property interests in the form of a share in his mother's Kensington flat ('19LTC') a share in a villa in BB Road, Jeddah, and a share in a beach-front villa in Jeddah, each share being with various family members in various different ways.

The parties had finally separated circa August 2012 and decree absolute had been pronounced in July 2014.

The task for the court was to determine:-

Wider family background

W’s father was a Saudi national, 'by all accounts a man of very significant wealth' (para [5]). He had paid c. £1m towards W’s legal fees, the parties having incurred costs of circa £2m between them.

H’s father, who died intestate in 1991, had set out his testamentary intentions in a formal letter of wishes. The court was 'left in no doubt that [H’s family] are a close, tight and loving family unit who have supported each other over the years' (para [3]). The letter of wishes had stated, in short, that H’s mother and sister would 'share equally in the assets of BCO and in any assets which fell into his estate upon his death' (para [31]).

The parties had spent two years in New York in 2004, and had moved to Saudi Arabia in 2009 following some tensions in their relationship, living separately for a while before a temporary rapprochement. H had been surprised that W had suddenly in August 2012 moved with the children back to London, issuing her Form A a year to the day thereafter.

In the ensuing litigation, W had 'plainly been at a significant disadvantage' in that she had borne 'the burden of unravelling a complex financial structure without the benefit of a full narrative explanation which was not advanced until this hearing' (para [42]). Somewhat 'late in the day' (para [76]) H had disclosed an interest in two French apartments and two (further) properties in Jeddah which had been MB’s homes. On 21 May 2014, Sir Peter Singer had ordered the joinder of BCO, H’s mother (MB) and his sister (LB), each of the latter, and a director of the former, giving oral evidence at the final hearing.

What caused the parties and family members to adopt such 'polarised positions' (para [5])?

W’s case – H not being truthful as to property ownership

In short, W’s case was that 'the picture which was presented to her during the marriage in terms of the ownership of various assets is wholly inconsistent with the financial presentation which H now asks the court to accept as reflecting the underlying reality' (para [3]).

W asserted that under Saudi law H would have a fixed entitlement to 58.33% of the BCO shares, and that he in fact held the entirety of the beneficial interest in the two adjacent properties in Kensington. Furthermore, H had always told her that he was the owner of the flats, and MB and LB were – in reality – in full agreement that the entirety of the beneficial interest in these properties belonged to H. W contended that H had an asset base of £17.4m (para [36]).

W sought a clean break in the form of a lump sum of £7.5m. In default of payment, she sought a transfer into her sole name of the two properties in SPM in part satisfaction of that sum. The sum comprised a housing fund of £5.5m and an income fund of £2m. In addition, she sought costs of c. £1.2m and £25,000 for a new car. W sought child support maintenance of £15,000 per annum per child together with school fees (para [37]).

W’s suggested income fund was not a full Duxbury fund but was informed by the principles in Fournier v Fournier [1998] 2 FLR 990, and based upon 14 years of support, W being a relatively young woman. The court noted that under the Saudi 'forced heirship' law, W would in any event inherit 'a substantial fortune' on the death of her father (para [65]).

In W’s view H’s family arrangement was effectively a 'family store room' into which H can dip at will, and she therefore required the court to determine the extent of H’s interest in pooled funds, and the true position of the ownership of the two adjacent Kensington Flats (para [68]).

The case advanced by H, MB and LB

H’s case was that the power of attorney given to him by MB and LB to deal with his father’s estate was subject to an 'express agreement between them that the estate would be held by the three of them in equal shares' (para [31]), and superceded any legal entitlement under Saudi law. The entire legal and beneficial interest in the adjacent Kensington flats belonged to the company, and said H he had never represented otherwise to W.

MB and LB supported H’s contentions, and stated that any money he had spent on the adjacent flats was 'a reflection of his occupation' (para [32]).

H disputed W’s computation of his asset base, and stated that a figure of £1.75m was more accurate (para [36]).

H’s proposal 'which appeared to carry the imprimatur of consent from his mother and sister as the other beneficial owners of BCO' was on the basis of payment to W of £2.5m, with W and the children remaining in sole occupation of the adjacent Kensington flats until their eldest son reached the age of 18 years. W would be expected to relocate thereafter. H implied that W should look to her father for any unmet needs. He offered child maintenance at the rate of £12,000 pa.
During the hearing H offered to meet the income fund sought by W in full (para [67]) – such offer requiring some borrowing from his family, but the concession was predicated on 'allowing [W] to retain exclusive occupation (but not ownership) of the family home at 18SPM and 18A, albeit on terms as to her remarriage and/or inheritance' but not just, now, until the eldest child attained the age of 18.

Needs not Sharing – agreement as to approach

In spite of the acrimony, the parties 'accepted … that this is a case which falls to be determined on the basis of an overall assessment of W's needs. Because the provenance of most of the available wealth in this case is inherited funds, it is common ground that this is not a sharing case' (para [64]).

Hearing

The court described that much of the oral evidence – from the parties, MB, LB, a conveyancing solicitor and a director of BCO – was adduced 'in the context of an OS v DS (Oral Disclosure: Preliminary Hearing) [2004] EWHC 2376 (Fam) type of hearing', it not being until Day 4 that 'the full picture in relation to the family arrangement and the funds held within it began to emerge with any degree of clarity' (para [39]).

Having heard the evidence, the court was 'entirely persuaded' that H had renounced his formal entitlement under Saudi law to his father’s estate (para [69]): 'following his death, I am entirely persuaded that there was a specific agreement between the three surviving family members to hold what he left to them on an equal basis. That was the clear import of the letter of wishes' (para [69]). The evidence of H’s family, and of the professional witnesses supported this.

The court noted the 'strong feeling which H's family members hold that W's father should be sharing in the responsibility for providing for his daughter, particularly in circumstances where the scale of his personal wealth is said to eclipse whatever resources are available to [H’s] family'.