The Supreme Court has released its eagerly awaited decision in
Clayton v Clayton, a case involving disputes about
relationship property matters and the validity of trusts, following
the dissolution of a marriage.
The principal issue for the Supreme Court to consider was
whether the powers that Mr Clayton held under the trusts were
property within the definition of the Property (Relationships) Act
1976. They decided that the power to appoint and remove
beneficiaries on its own would not be property. However, the
combination of powers that Mr Clayton had (to allocate all of the
capital to any one beneficiary, to bring forward the vesting date,
to appoint and remove beneficiaries, and a broad resettlement
power), coupled with other clauses in the trust deed which meant
that his actions were not constrained by any fiduciary duty,
amounted to a power that fit the meaning of property.
These powers are therefore considered to be property, and as the
trust was established during the relationship, the property is
relationship property, to be divided between Mr and Mrs Clayton.
The Supreme Court also decided that the value of the power was
equivalent to the value of the trust.
The Supreme Court also determined that this trust was not a
sham, but did not make a determination on whether there is such a
concept as an illusory trust.
In relation to a separate trust, the Supreme Court also
considered whether the trust was a nuptial settlement which fell
within section 182 of the Family Proceedings Act 1980. The lower
courts held that the trust was created for business purposes, and
therefore was not a nuptial trust. The Supreme Court overruled
this, saying that all that is required is a connection between the
marriage and the settlement of the trust. The nature of the assets
is not determinative; a nuptial settlement can contain business
This decision will no doubt be the subject of vigorous debate
and commentary. We will provide a full analysis with a discussion
of the implications of this decision in the coming weeks.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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