John Hooper & Co

Solicitors

Newsletter 6 – Trust Funds and Lump Sum Orders

All marriages are equal – but some are more equal than others

The latest episode of the long running saga of Charman v Charman recently once again hit the headlines when the Court of Appeal rejected Mr Charman’s appeal against the decision of Mr Justice Coleridge and confirmed an award of £48 million to Mrs Charman. This award was emblazoned across the national newspapers because it was believed to be the highest amount paid in a divorce settlement in England after contested proceedings.

During the course of the judgement Sir Mark Potter referred to general legal gossip which described London as the divorce capital of the world.

Mr Charman was incensed by the first decision (hence the appeal) and his sense of injustice has been aggravated by the Court. He probably knew what was coming because when the marriage broke down in 2004, he endeavoured to pursue proceedings in Bermuda where he was then living. However Mrs Charman had beaten him to it by three weeks and when the matter of jurisdiction came before the Court, Mr Justice Coleridge (again) found very firmly in Mrs Charman’s favour.

That decision was the first of several high profile and very expensive applications that were made to the Court. In fact Mr and Mrs Charman have indulged in a total of seven applications to the Court over three years. Mr Charman seeks to take the matter further and is applying for permission to appeal to the House of Lords.Mr Charman was unhappy with two particular aspects of the decisions that were made in the English Courts:

1.In 1987 Mr Charman set up a Trust fund in respect of which he was a primary beneficiary. The Trust fund contained £68 million worth of the total assets in the marriage which amounted to £131 million. Mr Charman argued that these funds should be kept out of the matrimonial “kitty”. Neither Mr Justice Coleridge nor the Court of Appeal was having anything to do with that. They concluded that he had the capacity to draw on the whole of that fund if he so required and that as the monies in the fund had been acquired during the course of the marriage it should be brought into account.

2.Mr Charman believed that his wife should be able to meet her needs easily with a much lower level of settlement than what she was seeking from the Court. He first of all offered her £6 million (to include the matrimonial home which was worth £3 million) then he increased that proposal to £12 million and then raised it again to £20 million. He was genuinely bemused that Mrs Charman should regard his offer as anything other than reasonable or, indeed, generous.

Nonetheless, the Court still recognised that the marital wealth has arisen as a result of Mr Charman’s special abilities. In consequence, the total matrimonial wealth of £131 million was apportioned as to 63.5% to Mr Charman and 36.5% to Mrs Charman.

Therefore, the lurid headlines only arose because the total monies at stake were so high.

The Court of Appeal made a point of stating that where the Court was satisfied that the husband had made a Special Contribution then that should be recognised by a division of the capital in the husband’s favour which would be of significance. The Court of Appeal said that the applicable figures would be “more than” 55/45 in the husband’s favour but probably not more than 66/33. Apart from the decision in Lambert v Lambert (when the wife got 50%) the headline figures in cases subsequent to White v White – where the “yardstick of equality” was first referred to – most of the reported big money decisions have fallen in the bracket 65/35 to 62/38.

Although the case of Charman achieved much publicity, in reality it is unlikely to affect the bulk of standard matrimonial cases before the Court because most divorcing couples simply do not have the funds and in consequence, the parties’ needs (particularly the needs of any children of the marriage) take precedence. In those cases where there is an excess of funds over needs, the starting point will be equality – which will be subject to adjustment depending on the circumstances of the case.

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