Companies, Trusts, And Forensic Accountancy
When dealing with high-net-worth divorce, you need a solicitor who not only understands family law but is also commercially astute and has a pragmatic knowledge of how business works. Shabana Sultana, who heads up our family law team, not only has 20 years’ experience in family law, she has founded a successful business herself and understands the commercial realities facing her clients.
Whether you are looking to protect your wealth or suspicious that your spouse has not told the truth about their financial status, Shabana and her team have the contacts, expertise, and acumen to work through the issues and provide practical advice.
We work with trusted experts including barristers, psychiatrists, forensic accountants, actuaries, doctors, and private investigators, all of whom assist us with providing first in class support to our clients. In addition, our team are discreet and follow a strict confidentiality policy and will robustly manage any media interest in your divorce.
What is a sham trust?
Lord Justice Diplock gave a classic legal definition of what constitutes a sham trust in Snook v London and West Riding Investments Ltd  2 QB 786:
"if it has any meaning in law, it means acts done or documents executed by the parties to the "sham" which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual rights and obligations (if any) which the parties intend to create."
Sham trusts are created when a Settlor wants the benefits of a valid trust (such as protection from marital claims) but still wants to retain the benefits of full ownership of the assets.
To prove a sham trust exists, the claimant must show:
- There was an intention to mislead third parties,
- This intention was common between both the Settlor and Trustees (although if the trust is declared unilaterally, the court will only examine the intentions of the Settlor),
- Generally, the trust must have been set up as a sham from the beginning of its creation.
In cases where the trust has been bilaterally created by the Settlor and Trustees, recklessness on behalf of the Trustee as to whether the trust is genuine or not is enough to demonstrate intention.
Proving a trust is a sham is highly complex as the burden of proof lies with the person who alleges the trust was not created for a genuine purpose. Justice Neuberger stated in National Westminster Bank plc v James  BPIR 1092:
"there is a very strong presumption indeed that parties intend to be bound by the provisions of agreements into which they enter, and, even more, intend the agreements they enter into to take effect."
By working with forensic accountants and examining the legal framework of a trust you suspect is a sham, set up to prevent you from receiving a fair financial settlement, our team can build a strong case on your behalf. Likewise, if your ex-spouse is contesting the validity of a trust containing property which should not become part of the divorce settlement, we will fight tenaciously to ensure the genuineness of the trust is proven in court.
Can I protect my company from becoming part of a divorce financial settlement?
Understandably, people who have built up a business long before they married are deeply concerned they may have to give their spouse a portion of the company as part of a financial settlement. There is no yes or no answer to this question; the Court will examine all the factors under section 25 of the Matrimonial Cause Act 1973 and base its order on the needs, financial resources, and responsibilities of the parties.
The courts are very reluctant to break up a successful business by forcing a sale, especially if it employs people and has a range of suppliers whose livelihoods would be adversely affected by such a decision. More commonly, the business-owning party will off-set the value of the business by providing them with a larger proportion of other assets such as the family home or private pension.
Our team will proactively look for solutions to preserve your business and provide sharp advice on negotiating a win-win settlement. If litigation proves inevitable, we will work with financial experts to create a persuasive case designed to ensure your business and its future interests are protected.
How is forensic accountancy used in divorce?
One of the cornerstones of family law is that both parties must provide a full and frank disclosure of their financial position. If you are presented with documents showing the value of the family business at a significantly lower amount than you anticipated, or have a gut feeling that details of certain assets are missing, a forensic accountant can investigate the matter and uncover the truth.
Forensic accountants can unpick complex offshore corporate structures, delve into trust accounts, and provide accurate valuations of shares and assets. We work with highly experienced teams of forensic accountants who will ruthlessly uncover any anomalies in your spouse’s financial disclosure documents.
To find out how we can assist you please call our office on 0203 741 9583 to make an appointment with Shabana or one of her team.