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Relationship Property, s. 182, trust

What makes a settlement nuptial?

Following the Supreme Court decision in Clayton v Clayton (Claymark Trust) fresh light has been shed upon the scope of s 182 of the Family Proceedings Act 1980 in the case of Da Silva v Da Silva.

By way of background s 182 gives the Court the discretion following divorce (the section does not apply to de facto relationships)  to make orders as to the application of property settled by way of a post-nuptial settlement, whether for the benefit of the children or a party to the marriage, such as in the case in hand, Mr da Silva.

Section 182 of the Family Proceedings Act 1980 provides:

182 Court may make orders as to settled property, etc

(1) On, or within a reasonable time after, the making of an order under Part 4 of this Act or a final decree under Part 2 or Part 4 of the Matrimonial Proceedings Act 1963, a Family Court may inquire into the existence of … any ante-nuptial or post-nuptial settlement made on the parties, and may make such orders with reference to the application of the whole or any part of any property settled or the variation of the terms of any such … settlement, either for the benefit of the children of the marriage … or of the parties to the marriage … as the court thinks fit.

(3) In the exercise of its discretion under this section, the court may take into account the circumstances of the parties and any change in those circumstances since the date of the … settlement and any other matters which the court considers relevant.

In da Silva v da Silva a trust was settled by Mrs da Silva’s mother some years after Mr and Mrs da Silva married. The trust was settled for the benefit of Mrs da Silva’s mother, Mrs da Silva and Mrs da Silva’s children.  Mr da Silva was not a beneficiary.  Regardless he argues that the settlement of the trust was a post-nuptial settlement for the purposes of s 182.

Clayton v Clayton considers the extent to which a settlement comes under s 182 at [33] and [34] and [114]:

[33] The Court of Appeal in Ward went on to say that to come within the term “settlement” as used in s 182, any arrangement must be one that “makes some form of continuing provision for both or either of the parties to a marriage in their capacity as spouses, with or without provision for their children”. It was also made clear that discretionary family trusts can be settlements for the purposes of s 182. Further, property acquired by a trust after it is settled can also come within the definition of settlement. This is because the settlement is “the trust itself and any trust property (whenever acquired) must be part of the settlement”.

[34] We agree with the analysis of the Court of Appeal in Ward. We add that we see the requirement that the settlement be for both or either of the parties “in their capacity as spouses” as meaning only that there must be a connection or proximity between the settlement and the marriage. Where there is a family trust (whether discretionary or otherwise) set up during the currency of a marriage with either or both parties to the marriage as beneficiaries, there will almost inevitably be that connection. As Lord Penzance said in Worsley v Worsley:

The Court would have a great difficulty in saying that any deed which is a settlement of property, made after marriage, and on the parties to the marriage, is not a post-nuptial settlement.

[114]  It may also be accepted that not every trust in which discretionary beneficiaries include the parties to a marriage may amount to a nuptial settlement for the purposes of s 182. The settlement must be one it is possible to characterise as one “made on the parties” to a marriage or on either of them by reference to the marriage. Residuary or subsidiary interest may be insufficient if the focus of the settlement is not with the parties to the marriage. In cases where the husband and wife are simply within a wide class of possible beneficiaries from whom the trustees can select, it may be that the settlement is not referable to their marriage and is not properly to be treated as a nuptial settlement on them as parties to the marriage. That is not, however, the present case.

As noted by Peters J in Da Silva v Da Silva at [87] “It is apparent … that, for the purposes of s 182, there must be a connection or proximity between the settlement and the marriage. Applying that to the facts of Da Silva v Da Silva Peters J found that  no such connection or proximity existed.   Of relevance was the fact that Mrsda Silva’s mother had established the trust for the benefit of herself, Mrs da Silva and the children and that Mr da Silva was not included as a beneficiary, even though he and Mrs da Silva had been married for some 14 years when the trust was settled. The conclusion drawn from that by the court was that Mrs da Silva’s mother had “made a deliberate decision not to include Mr da Silva as a beneficiary” the fact that neither Mr or Mrs da Silva was appointed a trustee during Mrs da Silva’s mother’s lifetime was also considered significant.

The court also noted that there was a power of appointment of beneficiary that could have been utilised during Mrs da Silva’s mother’s lifetime (noting that it was not).

Usefully Peters J went on to note (after determining that the settlement was not a nuptial settlement) that:

[91] If I am wrong in this, I would exercise my discretion against granting relief to Mr da Silva. Mrs Perris intended to protect her assets for herself, her daughter and grandchildren. If instead of settling the shares in AHL on trust Mrs Perris had left them to Mrs da Silva, they would be Mrs da Silva’s separate property pursuant to s 10 PRA. Accordingly, there is no unfairness in declining relief.

Take home message:

Drafters of trust deeds beware.  When settlings trusts of which children, particularly married adult children can benefit – do not include spouses unless they are intended to benefit as the consequences might be somewhat far reaching.  Consider also, very carefully having adult children and spouses as trustees.  While not yet tested by the courts, also consider a positive statement that the trust is not a nuptial settlement.

References:

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