RK v RK

Factual and Procedural Background

This judgment follows the hearing of the wife's ancillary relief application after the parties separated in May 2009 and divorce proceedings were initiated shortly thereafter. The parties married in 2001, have three children, and the wife seeks financial provision following the breakdown of the marriage. The husband is employed as an estate manager and director of the family company ("Company A"), which owns a large estate and various assets. Several discretionary trusts, established by the husband's ancestors, hold significant shares in Company A and other assets, with the husband, children, and wife as discretionary beneficiaries. The trustees have made certain financial offers to the wife, which she contends are insufficient. The principal legal issue concerns the extent to which the trustees are likely to provide resources to the wife directly or to the husband to meet the wife's financial claims.

Legal Issues Presented

1. To what extent are the trustees of discretionary trusts likely to provide resources to the wife directly or to the husband to enable him to meet the wife's financial claims?
2. Whether it is reasonable for the husband to seek to persuade the trustees to release further capital or income to meet the wife's needs.
3. The appropriate level of financial provision, including capital, maintenance, and costs, to be awarded to the wife given the resources available from the trusts and the parties.
4. The enforceability and implications of a 'Sears Tooth' agreement assigning the wife's financial claims to her solicitors.

Arguments of the Parties

Appellant's (Wife's) Arguments

• The wife requires a capital fund of £425,000 for housing and related costs, a lump sum of £245,000 to cover debts including legal costs, an equal share of the husband's company pension, and maintenance of £30,000 per annum for herself and the children.
• The trustees' offers are insufficient, and additional provision should be made through the husband, who would need to secure additional funds from the trusts.
• The wife has a compelling need for capital to meet debts and maintain the children's standard of living, including private schooling.
• The wife has limited earning capacity at present and requires maintenance to meet basic needs.
• The trustees have made parsimonious offers and should be encouraged to provide further resources.

Respondent's (Husband's) Arguments

• The husband agrees to an equal division of his company pension and offers maintenance of £22,500 per annum, which is close to what he can afford.
• The trustees have made reasonable and limited offers given their liquidity and obligations to other beneficiaries.
• The husband contends he has no obligation to seek further resources from the trustees beyond what has been offered.
• The wife's litigation conduct has been unreasonable, and there is no justification for an award to cover her legal costs.
• The trustees' position should be respected as they have acted sensibly and reasonably throughout.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully assessed the financial resources of the parties, focusing on the discretionary trusts as the primary source of capital and income. It recognized the trustees' significant illiquid capital and limited liquid resources, and the trustees' reasonable reluctance to exhaust liquid funds due to obligations to other beneficiaries. The court accepted the trustees' offers as broadly reasonable but found them parsimonious and noted the trustees' willingness to reconsider in light of the judgment.

The court emphasized the husband's obligation to actively seek resources from the trustees to meet financial claims, a duty the husband failed to fulfill, which negatively impacted the resolution of the case. The wife, as a beneficiary, also had an obligation to ascertain available resources.

Legal principles from relevant case law were applied to determine whether the trustees' resources should be treated as available to the parties. The court adopted the approach that resources held in bona fide discretionary trusts are to be considered available to the extent they are likely to be made available on the balance of probabilities.

The court found the wife's financial needs, including housing, maintenance, and debts, to be reasonable and assessed that the trustees could marginally increase their offer to meet these needs without damaging the interests of other beneficiaries. However, the trustees were not likely to provide the full amount sought by the wife, particularly regarding debts and legal costs.

The court criticized both parties for unreasonable litigation conduct but held the husband primarily responsible for the trustees' position. It decided to make orders reflecting a fair balance between the wife's needs and the trustees' willingness and ability to provide resources.

Regarding the 'Sears Tooth' agreement, the court expressed concern about the assignment of periodical payments and indicated it would be unlikely to enforce such an assignment in this case.

The court declined to include indexation of maintenance payments, considering the circumstances.

Finally, the court proposed to approve a transcript of the judgment to be sent to the trustees for their response before finalizing the order.

Holding and Implications

The court granted ancillary relief to the wife, including:

• A capital fund of £425,000 to be provided by the trustees as a life interest for housing and related costs.
• A lump sum of £50,000 to cover the wife's debts, including part of her legal costs, reflecting the trustees' likely willingness to provide this amount.
• An equal division of the husband's company pension fund.
• Periodical payments of £28,000 per annum for the wife and children, reflecting the husband's capacity to pay and the wife's assessed income needs.
• Provision for the wife to receive one of the paintings purchased during the marriage as part of the division of chattels.
• The wife to vacate the former matrimonial home by 1 May 2012 to allow transition to alternative housing.

Implications: The decision balances the wife's needs and the trustees' discretion, emphasizing the importance of the husband's obligation to seek resources from the trusts. It clarifies the application of legal principles regarding discretionary trusts as financial resources in ancillary relief. The ruling does not set new precedent but applies established principles to a complex family trust context. The trustees indicated acceptance of the judgment's terms, facilitating resolution. The court also expressed skepticism about enforceability of certain legal funding arrangements (Sears Tooth agreements) concerning periodical payments.