Nuptial Settlements

Somewhat surprisingly, there is no statutory definition of a nuptial settlement. The guidance of Lord Nicholls in Brooks v Brooks AC 375 offers a helpful starting point: a trust that makes “some form of continuing provision for the parties…” is a broad definition that should “embrace all settlements in respect of the particular marriage, whether made before or after the marriage.” The motive and identity of the settlor are irrelevant.

If attempting to prove that a trust is a nuptial settlement, it is necessary to find evidence of the trust being connected to the parties in their capacity as husband and wife, proving the requisite degree of nuptiality; if the trust is created or varied to include a spouse or child during, or in contemplation of, the marriage, this will be sufficient. However, there are theoretically many other ways, even indirect provision made by the trust for one of the parties, such as loans to a spouse’s company.

What are the Court’s powers in relation to trusts found to be nuptial settlements?

Section 24(1)(c) of the Matrimonial Causes Act 1973 states that the court may make “an order varying for the benefit of the parties to the marriage and of the children of the family or either or any of them any ante-nuptial or post-nuptial settlement…made on the parties to the marriage.” Thus the court has the power directly to vary a trust that is found to be a nuptial settlement.

This is true even in the case of offshore trusts, irrespective of the location of the assets, the trustees or even the governing law of the trust, as confirmed by the case of Charalambous v Charalambous EWCA 1030. However, the court will consider the likely ease of enforcement before making an order varying an offshore trust.

How will the Court exercise those powers?

In Ben Hashem v Al Shayif EWHC 2380 (Fam) Munby J enunciated a set of principles summarising the approach of the courts to exercising their powers to vary a trust.

• The discretion is unfettered and unlimited;
• The starting point is always s.25 MCA 1973: in making the order the Court should have regard to all the circumstances of the case;
• The effect of the order as a whole should be one that is fair to both sides;
• Interference should only be on the basis that it is necessary in order to achieve justice;
• The court should be very reluctant to deprive innocent third parties of their rights. It should not cause substantial injury to them and if it does, should ensure that they receive some other, approximately equal, benefit.

Therefore should a trust be found to have any sort of connection to the parties in their married capacity and thus be declared a nuptial settlement, the court may vary the terms of that trust in any way it considers to be necessary to reach a fair result in the matrimonial proceedings.