Wrath of the tigress

They say that the couple who plays together, stays together. Unfortunately, as a number of recent high profile divorces have shown, the same cannot be said for the couple who donate together. One case in particular has highlighted the importance of considering carefully, at the outset, the intentions behind a couple's charitable giving.

As of December 2015, 141 billionaires, including 75 couples, have signed the Giving Pledge, committing to give the majority of their wealth away for philanthropic purposes. Mark Zuckerberg and Priscilla Chan's announcement that they would donate 99 per cent of their Facebook shares (currently worth approximately $45bn) to good causes made headlines around the world.

However, not all of these headlines were positive. A large amount of the criticism was levelled at the decision to make the donation to a private company, the Chan-Zuckerberg Initiative, rather than a charity. While this decision has been vigorously defended by Zuckerberg, the recent divorce case of Quan v Bray [2014] EWHC 3340 (Fam) in the UK has highlighted some real concerns for couples making use of such structures.

Stuart Bray and Li Quan worked together on a project to save the endangered Chinese tiger during their 11-year marriage. Ms Quan established Save China's Tigers (SCT UK), a charitable company registered with the Charity Commission of England and Wales. In addition, a Mauritian trust, Chinese Tigers South Africa Trust (CTSAT), was established in great haste. The sole beneficiary was the UK charity.

In July 2012, Ms Quan was removed as a director of SCT UK and, shortly thereafter, she filed a divorce petition. The High Court judgement describes Ms Quan as being beside herself with grief and anger at her removal from the SCT UK board. This was demonstrated by her emails from the time, which included her saying, 'Now that you have taken hostage of my charity/project, I have NOTHING to lose', (sic), and were signed off with, 'Wrath of the tigress whose baby has been taken away'.

At the time of the divorce proceedings, CTSAT had assets worth tens of millions of pounds. There were almost no marital assets outside of it. While the assets
of SCT UK were, from the outset, agreed to be outside the scope of the divorce proceedings, the more complex offshore trust of CTSAT was challenged.

Ms Quan claimed that CTSAT was established, not only to advance the cause of the Chinese tiger, but also to provide personal financial benefit to the couple, and that the funds could be returned to the couple at the end of the project. On this basis, it was claimed that it was a post-nuptial settlement. This would make CTSAT a matrimonial asset, which could be varied by the court and, as such, its funds distributed to husband and wife.

As the sole beneficiary of CTSAT, SCT UK found itself embroiled in the divorce proceedings in the High Court. The most recently filed accounts of SCT UK state that donations of £888,460 were received to defend the legal action.

Fortunately for STC UK, the judgement in the High Court found against CTSAT being a post-nuptial settlement, concluding that, on the evidence, it had a sole purpose being to further the charitable work of SCT UK for the Chinese tigers. However, as this publication went to press, Ms Quan has been granted leave by the Appeal Court to appeal the decision,
so SCT UK's position remains unclear.

This case highlights the importance of couples explicitly considering what will happen to their philanthropy in the case of a divorce. How will charitable funds already donated be dealt with? If both parties are serving on the board, what will happen in the case of a split? How should independent trustees act in such a scenario?

While the happy couple may not wish to contemplate such issues, a good adviser should ensure that they do. Clear, consistent and consensual decision making at the outset could, in the long run, avoid charities becoming, like is often said of children,
the real victims of a divorce.  

Pippa Garland is an associate at Bates Wells Braithwaite 

She writes the regular philanthropy comment in Private Client Adviser