P v Q, R and S (Claim against Assets of Extended Family)
[2024] EWFC 164 (B)
DR v ES & Ors
9 July 2024
[2024] EWFC 176
Family Court
A wife is divorcing her husband. His parents claimed he owed them a lot of money, saying it was a secret agreement. The judge didn't believe them; they were trying to hide money from the wife. The judge said the husband owns all the money, not his parents.
Key Facts
- •Financial remedy proceedings between DR (wife) and ES (husband) following separation.
- •Husband's parents, JS and KS (J and K), joined as Second Respondents, claiming husband owes them £1,853,334 for shares in X Ltd, Y Ltd, and the former matrimonial home (FMH).
- •Wife alleges claims are a sham to defeat her financial remedy claims (approximately £27 million).
- •Husband and wife have two children, L and M.
- •Wife was diagnosed with multiple sclerosis.
- •Previous Children Act proceedings found psychological manipulation and alienation of children by husband and J and K's involvement.
- •Preliminary issue hearing focused on ownership of Y Ltd, X Group, and FMH, and the alleged £1,853,334 debt.
Legal Principles
Express trust requires actual intention to hold property on trust for another; can be evidenced by words or conduct.
Lewin on Trusts, Snell's Equity
Constructive trust arises from unconscionable conduct of legal owner denying beneficial interest of another.
Carl Zeiss Stiftung v Herbert Smith & Co. (No.2)
Institutional constructive trust arises where a person assumes a trustee role by lawful transactions preceding any breach of duty.
Lewin on Trusts
Common intention constructive trusts principles apply to non-real assets, including businesses, but not purely commercial relationships.
Stack v Dowden, Jones v Kernott, Webster v Webster, Crossco No. 4 Unlimited, Agarwala v Agarwala
In assessing evidence, prioritize contemporaneous documents over later recollections; consider witnesses' motivations.
Gestmin v Credit Suisse
Outcomes
Dismissed J and K's claims.
J and K failed to discharge the burden of proof; contemporaneous documentary evidence overwhelmingly contradicted their assertions of beneficial ownership; court found their actions consistent with previous attempts to undermine the wife's claims and harm their grandchildren.
Husband is the sole beneficial owner of Y Ltd.
Lack of contemporaneous evidence supporting a trust; conflicting accounts; husband's name on all documents; court found J and K's testimony unreliable.
Husband is entitled to all Y Ltd dividends since 2004.
Based on the finding that the husband is the sole beneficial owner of Y Ltd.
Claims regarding debt for shares in X Group and FMH are dismissed.
Lack of evidence supporting the alleged debt; timing of the claims coinciding with wife's financial remedy application suggests a motive to mislead.
Likely application to set aside the share transfer in Y Ltd.
Given the court's finding that the husband is the sole beneficial owner, the wife's legal team has indicated they would likely make this application.