Quan v Bray

Quan v Bray, which became known as the ‘Chinese tigers’ case, provides interesting insight into how trusts are dealt with by the courts when considering a financial settlement in divorce proceedings.

Li Quan and Stuart Bray met in 1990, and married in 2001. Both were united by their passion for saving the Chinese tiger and invested vast amounts of time and money into a venture to save the endangered animals.

The husband was “extraordinarily successful in the world of structured finance transactions” and the wife was the global head of licensing for Gucci before becoming a conservationist.

During the course of their marriage, the husband transferred almost all his wealth to a charitable trust registered in Mauritius. Litigation began in 2012 following the couple’s separation and the wife’s removal as a director of the charity.

Though the trust was ostensibly to support their tiger project, the wife, represented by Vardags, has argued that it was set up in such a way that the husband could extract wealth from it, and that it was used to fund their lifestyle during the marriage. She sought to argue that the money was settled as part of a “nuptial settlement”, a special kind of trust which the court can vary in matrimonial proceedings.

A nuptial settlement was defined by Lord Nicholls in Brooks v Brooks, as “some form of continuing provision for both or either of the parties to a marriage, with or without provision for their children”. Under s.24(1)(c) of the Matrimonial Causes Act, the court has the power to issue an order varying a nuptial settlement “for the benefit of the parties to the marriage and of the children of the family or either or any of them”.

The case was heard in the High Court, where Sir Paul Coleridge found that the trust was not a nuptial settlement. The wife appealed to the Court of Appeal, where Lady Justice King gave the leading judgement and concluded:

• The “critical issue for determination” was “the motives behind and the precise purpose” of the trust’s structure. The court’s starting point was the formal written documentation setting out the purpose of the trust, which it identified as being for the benefit of the Chinese Tiger Project.
• As the wife’s claim rested on the idea that the documents did not reveal the true nature of the husband’s motives in setting up the trust, Lady Justice King found that Sir Paul Coleridge’s assessment of the parties’ credibility was “the single most critical finding”. She held that Sir Paul Coleridge had been entitled to conclude that the husband had been truthful in his claims that the sole purpose of the trust was for the benefit of the Chinese Tiger Project, and that the wife’s claims otherwise were “a late invention”.

The Court of Appeal found against the wife in a hearing held from 31 January to 2 February 2017, upholding the High Court’s ruling that the trust was not a nuptial settlement.

More recently, Vardags represented the wife in 2018 and 2019 in her “Titanic struggle” for financial settlement. Following the Court of Appeal’s judgement, no direct provision could be made from the assets of the trust, which had been ‘ring-fenced’. However, Mostyn J awarded the wife spousal maintenance of £64,000 per year and issued a joint lives award. A joint lives maintenance order requires payments to be made on an indefinite basis, to continue for the parties’ ‘joint lives’. This obligation will come to an end when either party dies, the receiving party remarries or enters into a subsequent civil partnership, or if the court issues a further order. Such awards are not issued often, as the courts’ general approach is to determine non-extendable limited terms for spousal maintenance to encourage financial independence and achieve a clean break. However, Mostyn J held that a joint lives award was appropriate here due to the wife’s limited earning capacity and lack of a capital base. He rejected the husband’s claims of inability to pay his former wife and suggested that he was colluding with the trust to “hide something highly material in the finances of the trust which, if revealed, would be significantly to his disadvantage.” Mostyn J considered that the husband had agreed with the trust to defer payment for his services to it until the divorce proceedings had concluded.

This suspicion of collusion perhaps reflects Mostyn J’s assessment of the husband’s behavior before the court. Interestingly, there was a stark contrast between Sir Paul Coleridge’s impression of the husband and that of Mostyn J’s. In the former’s assessment that the husband had been truthful in his claims regarding the purpose of the trust, he found the husband to be honest and accurate. Mostyn J came to a rather different conclusion as to the husband’s character. Following remarks from the husband that he “might be able to earn some money as a drug dealer” and comparing himself to Walter White, the science teacher turned drug kingpin from Breaking Bad, Mostyn J described him as “grossly disrespectful”. Mostyn J concluded that the husband had been “dishonest, manipulative, arrogant, menacing and contemptuous of the court’s authority. I do not accept any of his evidence unless it is either agreed or is corroborated by clear contemporaneous documents”.

Alongside his award of spousal maintenance, Mostyn J also adjourned the wife’s capital claims on the basis that it was foreseeable that the husband would have sufficient funds for a clean break settlement in the future.

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