Daga v Bangur

In Daga v Bangur [2018] EWFC 91, the courts explored whether trust funds are available to meet the needs of a separating spouse by virtue of s25(2)(a) of the Matrimonial Causes Act 1973. Since these assets are not in the absolute ownership of either of the separating spouses, these assets are seen to have caused complexities in divorce proceedings.

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Background:

The parties married in 2007 and separated in 2016. They had one son with disabilities, and both parties worked full-time, earning sufficient incomes to meet their respective needs. Throughout their marriage, the parties rented their home and never owned any property. Consequently, by the final hearing, they had little capital, having spent significant funds on litigation and arrangements for their son.

The wife owned a property in India and held shares gifted by her father, who claimed these assets were security for funds he had lent her. Additionally, the wife was a beneficiary of two separate discretionary trusts, the Mount Keen Trust and the Kiwara Trust, which she set up in 2015 based on her father’s instructions. In creating the trusts, the wife had prepared letters of wishes stating that the trustees should follow her father’s advice when distributing the trust funds.

In 2016, The wife’s father had transferred significant funds into an account in her sole name, with the understanding that she would then transfer these funds into one of the two trusts. The combined value of the trusts at the final hearing was £17.6 million.

The husband initially sought a lump sum of £2.5 million, later reducing his claim to £1.5 million, to meet his needs. He argued that the wife could liquidate her assets in India or persuade the trustees to make distributions to her. Therefore, the husband requested the court to give the trustees judicious encouragement on how to apply the funds held in the two trusts.

Decision:

Mr. Justice Holman determined that the husband had not sufficiently demonstrated any objective, reasonable or justifiable need for a lump sum from the wifeHe concluded that the husband could maintain a good lifestyle by renting, which aligned with the standard of living the parties had during their marriage.

Furthermore, the court ruled that the trusts were not a resource available to the wife because:

1. The wife had never received any funds from the trusts for her benefit or even for their "very needy son."

2. The advisor to the trusts, the wife’s father, stated during oral evidence that he would not recommend the trustees distribute any funds during his or his daughter’s lifetime.

Consequently, the court found it unreasonable to expect the wife to persuade the trustees to distribute funds to her.