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(Court of Appeal, Lloyd, Patten, Black LJJ, 1 May 2013)
The Russian husband and wife were married for 19 years during which time they purchased a property in London for £6m with a further £1.5m being spent on improvement works. It was intended to be the family home where the wife and children lived. The property was purchased in the name of an investment company as a nominee for the wife. Thereafter the wife caused the company to hold the property on trust for the trustee of a discretionary trust established in the Cayman Islands for the benefit of the family.
When the marriage broke down the parties disputed who was beneficially entitled to the property. The husband's claim that a half share of the property was held on trust for him absolutely was rejected. Financial proceedings were ongoing in Russia and the husband was challenging the decision of the trust exercise the discretionary powers to exclude the husband from the trust as a beneficiary. He now sought to establish his asserted right to a half share of the property under English law.
The husband submitted that he should own half the property by virtue of a resulting trust asserting that under Russian matrimonial property law, the purchase money was jointly provided and therefore the husband and wife held the property in equal shares. He also asserted that he had insufficient knowledge of the transaction and did not provide consent to it.
The trial judge's finding that the husband had been aware of the critical factor of the use of the trust and the fact that he may not have known of the power to exclude him from the trust, was a point of degree, not kind, was endorsed by the Court of Appeal.
The husband's resulting trust argument was wrong as being based on English domestic law on a point which was to be determined, under English choice of law rules, by Russian law as the law of the matrimonial domicile. He either consented to the transaction or his claim was time-barred by reference to the Russian civil and family codes.
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