Nine-figure trust resource subject to equal sharing in Family Court: The striking case of TP v TF

Generally speaking, in its search to achieve an outcome that is ‘fair’ regarding the financial aspects of divorce, the family court in England and Wales will apply one of two principles: the first being known as the ‘needs’ principle, the second the ‘sharing’ principle. The sharing principle typically applies in HNW and UHNW cases, and under it matrimonial assets are likely to be shared; non-matrimonial assets are, accordingly, more likely ring-fenced. Pursuant to the recent Supreme Court decision in Standish v Standish, it is also possible, in certain circumstances, that non-matrimonial assets may be converted into matrimonial assets, via a process of ‘matrimonialisation’. 

In TP v TF, the ‘overwhelming focus’ of the dispute between the husband (‘H’) and the wife (‘W’) was the extent to which certain trust resources were available to H, and if they were so available, whether they were matrimonial or non-matrimonial in nature. 

For context, the parties’ combined, non-trust matrimonial assets were found to be c. £35m net, including pensions. In addition, and notwithstanding its pre-marital origin, a trust resource of H’s referred to as ‘CAP’ (c. £291m gross; c. £229m net) was found to be entirely matrimonial. As a consequence, the court’s order for H to pay W c. £120.4m reflected a sum of c. £114.5m in respect of the value of CAP (i.e. more than 95% of the wife’s award was attributable to CAP’s value). 

The trustees of CAP (and the various other family trusts) are described by Garrido J as being ‘independent, regulated professionals who are advised by solicitors and Leading Counsel’. 

Relevant facts

At the time of the judgment, H and W were both 63. They married in 2001 and separated in 2024. Their two children are now adults. 

H’s family had, since the 1950s, settled various family trusts, including life interest trusts and discretionary trusts. Those trusts were noted as holding shares in the company ‘ABC’ ‘and/or’ other ‘diversified assets’ worth ‘many billions of pounds’. 

Between April 1994 and 2020, H worked for ABC. In 1995, prior to the marriage, the then trustees agreed to set aside a notional 2.5% (subsequently agreed to be 2.1%) of the equity in ABC for H, for it to be held for his benefit and allocated to him over the course of an anticipated 30-year career. It is this notional allocation that is referred to as ‘CAP’ in the court’s judgment. Separately, in 1997, H settled two life interest trusts (‘LIT1’ and ‘LIT2’), in respect of which he is the life tenant. He appointed W as the successive life tenant of those trusts in 2001, three days after their wedding. H’s income from LIT1 and LIT2 increased over time, latterly to £955K gross per annum. A further life interest trust (‘LIT3’) was originally settled in 1958, with H’s interest appointed in 1997. W’s successive interest was appointed in June 2010. Since 2001, the total income distributions from LIT3 amounted to £20.4m, though these were modest for most years save for 2003/4 (£6.7m); 2015/16 (£5m); and 2016/17 (£8.5m); the judgment records that H had not received any capital distributions from LIT3. 

In a letter from 1995, H’s mother and uncle wrote jointly to say that they wished CAP to be ‘distinct from any funds which may become available by reason of your inheritance’ and that it was their wish that H ‘will be provided with an appropriate benefit’ on his ‘making a major contribution to the family by enhancing the ongoing relationship between the family and the firm [i.e. ABC]’. 

Although the judgment is thoroughly anonymised, there is an allusion to there having been subsequent (i.e., post-2001) disputes between family members about the trust arrangements, leading to legal proceedings in a ‘non-UK jurisdiction’. 

On being asked the ‘Charman question’ (see below) at an unusually late stage in the proceedings, the current trustees of the various family trust resources, including CAP, commented that: ‘CAP is subject to different considerations to the other trusts within H’s silo, something which is understood to be accepted within the wider family’, adding that they ‘would be minded to make available to H, the vast majority, and potentially the entirety, of the value of CAP’, whose purpose they stated was ‘to recognise H’s contribution to the family wealth through the senior management role with the company which he undertook’. In addition, the trustees stated that they could not envisage a scenario in which they would distribute funds to H over and above the value of CAP.  

Why was CAP H’s resource?

When considering whether a trust is a resource to a party in financial proceedings on divorce, the question for the court is: if that party were to request it, would the trustees be likely to advance to him the whole or part of the trust’s assets now or in the foreseeable future? This is known as the Charman question, from the eponymous case of Charman v Charman. Courts will bring a ‘judicious mixture of worldly realism and of respect for the legal effects of trusts, the legal duties of trustees, and, in the case of off-shore trusts, the jurisdictions of off-shore courts’. Other key considerations from the relevant case law are noted in the TP v TF judgment, including that the question is not ‘one of control of resources; it is one of access to them’ (Whaley v Whaley). The court may also draw adverse inferences from the absence or silence of a witness (such as a trustee) who might be expected to have material evidence to give on the issue. 

The Charman question being answered in the affirmative, Garrido J found that CAP was a resource of H. Chiefly this was because of the contents of the trustees’ response itself, whose language the court interpreted as meaning the entirety of the value of CAP was available to him. 

That H had, earlier in the proceedings, recorded £378m of trust assets (‘including the entirety of CAP and all the life interest trusts’) in his section of an asset schedule, and subsequently changed his position late in the day (his section of the updated schedule instead giving a nil figure), was prejudicial to his position. It should be noted that the court was not persuaded by W’s arguments as to H’s other trust interests also being resources, despite the magnitude of some of the income distributions he had received from the same, during the course of the marriage. 

Why was CAP a matrimonial asset? 

Having found CAP to be one of H’s resources, Garrido J then sought to determine whether it was matrimonial, and to what extent. 

Declaring that the decision in Standish ‘undoubtedly ushers in a new and authoritative perspective on the consideration of matrimonial property’, the judge determined that both the value of CAP that accumulated during the marriage (i.e., between 2001-2020) and the passive growth following that accumulation were matrimonial in nature. The accumulation and subsequent passive growth represented, variously, the fruits of the marriage partnership; a reflection of the marriage partnership; or the product the parties’ common endeavour, per Standish. 

In respect of the pre-marital CAP accumulation, Garrido J held that the first two of the three ‘matrimonialisation’ examples endorsed by the Supreme Court in Standish applied. It should be noted, for the avoidance of doubt, that Standish makes clear that the three examples are not intended to be exhaustive, and that matrimonialisation involves considering how the parties have been dealing with the relevant asset and whether this shows that, over time, they have been treating that asset as shared between them.

The first example relates to situations in which the percentage of the asset which is said to fall outside of ‘non-marital’ endeavour is ‘not sufficiently significant’ to warrant an evidential investigation. I.e., where the matrimonial element, over time, has become so much greater than the asserted non-matrimonial element that it is ‘not worth the candle’, with fairness (in saving needless expense) demanding that the entire asset should be treated as matrimonial. Crucially, it was held that the ‘dramatic’ increase in the value of the underlying ABC stock took place during the marriage, and at a time when H was employed in roles significantly more central to the business’s growth than he was prior to the marriage in 2001. 

The second example is relevant to situations where, over time, the asserted non-matrimonial element has been mixed with the matrimonial element in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial, or in which the task of identifying its current value is too difficult or not possible to do with any degree of accuracy or reliability. 

Outcome

The nine-figure sum payable to W, the vast majority of which relates to CAP’s value, will no doubt prompt the widening of eyes. 

The judgment in TP v TF records that the court received ‘uncommonly extensive’ submissions by an array of leading and junior counsel specialising in family, tax and trust law, and that H instructed his representatives to take every possible point in his (arguably futile) attempt to ‘protect his wealth’. Accordingly, it is surprising that no pre- or post-nuptial agreement appears to have been discussed at any stage in the parties’ relationship (certainly, none is mentioned within the judgment). Given H’s robust position regarding CAP and his other trust interests, it also remains to be seen whether W will in due course need to bring enforcement proceedings. 

Most significantly, the case raises important questions for trustees, protectors, family offices, wealth managers, and the many other professionals advising HNW and UHNW families in respect of their trust arrangements, particularly post-Standish and in light of the family court’s power to find that a trust resource, such as CAP, has been matrimonialised.