Dissecting the ambush

England does not have marital property regimes that determine what happens to assets on divorce. There is no strict rule that inherited or pre-acquired wealth will be excluded from consideration.

In White v White [2000] UKHL 54, Lord Nicholls stressed that it was not necessary to conduct a detailed examination into who owned precisely what. However, it is important to know the size of the cake for division and the provenance of the wealth can be relevant in deciding whether the end result is 'fair'.

The court exercises a wide discretion, taking into account the particular factors specified in the Matrimonial Causes Act 1973 (MCA), often called the section 25 factors.

The duty of the court is 'to have regard to all the circumstances of the case, first consideration being given to the welfare…. of any child of the family'. Subsection 2 lists the section 25 factors and (a) reads: 'The other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future'.

There is no definition of 'matrimonial property' or 'non-matrimonial' property in the MCA, but in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, the court highlighted a distinction between these two types of property. Both Lord Nicholls and Baroness Hale seemed to consider that non-marital property included property brought by a party into the marriage and property acquired during the marriage by inheritance or gift.

Charity maintenance

Quan v Bray [2014] EWHC 3340 (Fam) is an illustration of the court's attempts to grapple with different types of property. The issue was of particular importance in Quan because the assets held within a Mauritius trust called the Chinese Tiger South Africa Trust (CTSAT), potentially ran to tens of millions of pounds, but there were relatively few assets held by the parties outside of CTSAT.

The wife asked the court to determine, as a preliminary issue, whether CTSAT was a post-nuptial settlement (and so being capable of variation under section 24 MCA) and if not, the extent to which it was, if at all, a 'resource' available to the husband to meet the wife's financial remedy claims.

Sir Paul Coleridge concluded that 'CTSAT was always, and is, only for the Chinese Tiger. Accordingly it is not a post nuptial settlement which can be directly invaded by a court order'. He also decided that the assets of CTSAT could not properly be regarded as a 'resource'.

The parties married in 2001 and divorce proceedings were commenced in August 2012. Both parties devoted time and money to a venture called the 'Chinese Tiger Project'. In 2000, the wife established Save China's Tigers (SCT UK). Subsequently a framework agreement was signed between SCT UK, the parties, the Chinese government and CTSAT. This formed the basis of ongoing corporation for the shared cause.

When Mrs Quan started the proceedings, her primary concern was to ensure the preservation of the funds provided for the Chinese Tiger Project. However, her case came to be that CTSAT had been established not only to advance the cause of the Chinese tiger, but also to provide financial benefit for the parties personally over the longer term. This was strongly refuted by Mr Bray. The two charities, SCT UK and CTSAT, were also represented at the preliminary hearing.

Disputes of this nature often turn on their facts. Here the judge heard evidence from eight witnesses plus the parties over 25 days. Much of the background was uncontentious but there was a dispute about the motives behind and the precise purpose of the CTSAT.

The judge determined that an existing intention to benefit one of the spousal beneficiaries was a pre-requisite of a nuptial settlement. He also decided that a settlement which was originally non-nuptial could become 'nuptualised' if there was a flow of benefit to the parties from the trust.

He concluded that the mere fact that CTSAT was a conventional fully discretionary trust, capable of being varied to add other beneficiaries including the parties, did not make it a post-nuptial settlement. He was satisfied that nothing had been paid to the parties from CTSAT. There had not been a 'regular flow of receipts' to 'nuptualise' the settlement.

The judge was also not persuaded that the trust should be treated as a 'resource'. As the parties had been excluded as potential beneficiaries, and given his findings about the purpose of the trust, the judge decided that the Thomas v Thomas jurisdiction could not apply.

The wife has just been given permission to appeal by the Court of Appeal asserting that the judge was wrong to have made the findings he did.

John Darnton is a partner at Bircham Dyson Bell