Penningtons Manches successfully defends £8 million plus of family interests under attack in complex dispute following Middle Eastern wife’s financial claim in London

Posted: 07/11/2018

The case concerned ‘Part III’ proceedings, commonly brought in international cases with a connection to England
Penningtons Manches acted for a prominent Middle Eastern family who intervened in the proceedings in order to protect substantial family wealth which was under attack by the wife
The judgment demonstrates that whilst the English courts have wide redistributive powers in determining financial claims between a husband and wife, this does not extend to third parties forced to intervene in family proceedings
These claims are determined by strict reference to the law of contract and equity, and, as in this case, the application of resulting trusts

NN v AS & Ors – [2018] EWHC 2973 (Fam)

Judgment has been handed down today by the Honourable Mrs Justice Roberts in the case of NN and AS (1) SS (2) AS (3) and LS (4). The substantive application as between the Husband and Wife was under Part III of the Matrimonial and Family Proceedings Act 1984[1]. Within the context of these proceedings, the Wife, NN, asserted that her Husband, AS, had significant world-wide assets and in particular, was the sole legal and beneficial owner of three substantial properties in London and a yacht (together worth around £8 million). The Husband, whilst accepting that he had a beneficial interest in one third of two of the London properties, denied having any beneficial interest in the third London property (a mortgage free property worth some £5.7m) or the yacht. Whilst the Part III proceedings commenced on 22 March 2017, it was not until 7 March 2018 that the wider family, the second, third and fourth respondents, were joined to the proceedings in order to assert their claim to ownership of the properties and yacht which were under attack by the Wife in the context of her Part III claim.

Penningtons Manches partner, James Stewart, together with associates Kate Molan and Gill O’Connor acted for the second, third and fourth respondents, all members of an influential and highly regarded Egyptian family. Following a ten day final hearing, which was attended by all parties, the second, third and fourth respondents were successful in asserting their legal and beneficial ownership in the various properties and the yacht and obtained the declarations which they had sought pursuant to s14 of the Trusts of Land and Appointment of Trustees Act 1996.

Tim Amos QC (QEB) and Michael Gleeson (Harcourt Chambers) were instructed by Penningtons Manches on behalf of the second, third and fourth respondents.

Facts

Over the course of ten days in July Mrs Justice Roberts dealt with the final hearing of the cross-applications made by the Wife and the second, third and fourth respondents. Notably, the Husband and Wife had already divorced in Egypt and under the terms of an Egyptian Divorce agreement, the Wife’s financial claims in that jurisdiction were compromised by agreement. There were very considerable differences between the Husband and Wife’s positions, the Wife contending, initially that the Husband had global assets worth in excess of £100 million and the Husband contending that he had less than £5 million.

The Wife also alleged that documents produced by the Husband and second, third and fourth respondents in support of their position as to ownership were forgeries and sham transactions, created with the intention of misleading the Wife and the court. Her allegations in this regard ranged so widely as to impugn the honesty of the second, third and fourth respondents’ professional advisers. She also alleged metadata manipulation of electronic documents. Her claims gave rise to the need for expert evidence on metadata as well as handwriting analysis.

After hearing the evidence which included evidence from all parties, the family’s Egyptian lawyers and accountant, as well as expert evidence on issues relating to the metadata manipulation, sham and forgery allegations, Mrs Justice Roberts held that documents executed in Egypt in relation to two of the London properties operated as trust instruments to establish that the beneficial ownership of those properties was held by the Husband and his two sisters (the third and fourth respondents) in equal shares; and that the entirety of the third property was held by the Husband for the benefit of his father, the second respondent.

Unusually for a case in the Family Division, the court was obliged to carefully consider the law in relation to the counterclaim made by the second, third and fourth respondents, in particular as to whether payments made by the father to the Husband should be treated as outright gifts, or as payments referable to the purchase of the properties, giving rise in the alternative to resulting trusts or constructive trusts in favour of the second, third and fourth respondents.

This case is interesting for the demonstration of the interrelationship – or lack of it - in practice between, on the one hand, proprietary claims in equity, which are non-discretionary in legal character (and not part of the court’s discretionary jurisdiction) and, on the other hand, parallel discretionary redistributive financial remedy claims as between spouses. The characteristically careful and full analysis of Mrs Justice Roberts should serve as a further and stark reminder that the discretionary redistributive jurisdiction under the Matrimonial Causes Act 1973 exists only between spouses, and in relation only to what the spouses actually own (at least in equity); and does not extend also to property which one often-disgruntled spouse simply asserts that the other owns through their wider family. As such the present case - without in any way derogating from the Thomas principles in relation to family subsidy - is a worthy successor to Prest v Petrodel and Mrs Justice Roberts’ own decision in ND v SD [2017] EWHC 1507 in consolidating the profile of English Family Law, both in other jurisdictions and in other divisions of the English High Court, by continuing to put the law back into family law.

This case will be of particular interest to family offices, trustees and other third parties who may find it necessary to intervene in divorce or, as in this case, Part III proceedings involving family members.

[1] The English court can make financial orders for following an overseas divorce under Part III of the MFPA 1984. The court's permission is required prior to any application. The court has jurisdiction to hear such an application in any of the following circumstances (section 15, MFPA 1984):

Where either party is domiciled in England and Wales (on the date of application or foreign decree).

Where either party was habitually resident in England and Wales for one year prior to the application or foreign decree

Where there is a matrimonial home situated in England or Wales.

If permission is granted, section 18 MFPA 1984 sets out a (broad and non-exhaustive) list of factors to which the court must have regard, similar to those considered on a domestic divorce.

At both stages (permission and substantive hearing) the court must also consider whether it is appropriate to make an order in England and Wales and if it is not satisfied, dismiss the application. The relevant facts to which the court will have regard are contained in section 16(2) and include the following:

The relative strengths of the parties' connection to England and Wales and the foreign jurisdiction(s).
The jurisdiction in which the marriage was dissolved.
The ability of the applicant to apply for financial orders in that jurisdiction and compliance with that order.
The availability of any property in the jurisdiction of England and Wales.
The extent to which any English order is likely to be enforceable.
Any delay since the foreign divorce (especially if such delay is seen as "tactical" (Zimina v Zimin [2017] EWCA Civ 1429)).

The court has a wide discretion as to the level of provision it makes, but the emphasis is on fulfilling the parties' needs. The Supreme Court case of Agbaje [2010] UKSC 13 has confirmed that it is not necessary for the applicant to prove that any financial award made by a foreign court has resulted in a real hardship or serious injustice. At the same time, the court will not intervene merely because one party wants their financial award "topped-up" to the equivalent award that would have been granted under English law.

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