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A brake on the English Family Courts power to vary offshore trusts?

Posted on 01 December 2016 by Peter Steen, Miles Geffin & Jessica Medus

A break on the English Family Court's power to vary offshore trusts?

In a recent High Court decision, Mr Justice Mostyn found that the English courts do not have jurisdiction either to make pension sharing orders in relation to  foreign pensions or to vary them as a nuptial settlement; a decision which may significantly limit  the English Family Court's powers to vary offshore trusts. 

Goyal v Goyal [2016] EWCA Civ 792 concerned a wife's application, in the context of financial remedy proceedings following a divorce, for a pension sharing order against her husband's Indian pension annuity.

The case came before Mr Justice Mostyn after the Court of Appeal had overturned an earlier decision and remitted the wife's application for a re-hearing.  At first instance, the court found that the husband had dissipated the family's money through an addiction to spread betting.  The trial judge held that it would therefore be unconscionable for the court not to order that what was left of the marital assets should be used for the benefit of the wife and their child, and made orders to that effect.  While the judge held that he was unable to make a pension sharing order because the Indian annuity was based outside the jurisdiction, he instead granted a mandatory injunction requiring the husband to transfer the annuity to the wife.  On the husband's appeal, the Court of Appeal set aside the order in its entirety, finding that there was no jurisdiction for the first instance Family Court to have made such an order.

At the re-hearing Mr Justice Mostyn refused the wife's application for a pension sharing order.  He found that no jurisdiction existed under English law for the court to make pension sharing orders in relation to foreign pensions (even if the country concerned would enforce it).

The judge held that the pension sharing provisions contained in the Matrimonial Causes Act 1973, whilst broadly drafted, must be presumed to exclude territories over which Parliament lacked jurisdiction.  The judge then considered whether it might be possible to treat the offshore pension as a settlement capable of variation under the variation of nuptial settlement provisions contained in section 24(1)(c) of the 1973 Act.

In considering this point, Mostyn J accepted recent variation of offshore nuptial settlement cases had failed to take into account that orders purporting to vary foreign nuptial settlements:

  1. may violate the presumption in English law against extra-territorial effect; and
  2. may impermissibly impose obligations on foreign third parties - the trustees of the overseas trust

The English court may continue to make orders altering the ownership of UK sited property even if owned by an offshore trust, or against beneficiaries of an offshore trust in their personal capacity.

The judgment may mark time on the extra jurisdictional reach of the English family court over the offshore assets held by offshore trusts.