UK: Many Farms Are Held Within Trust Structures But Do Such Arrangements Protect Against A Divorce In The Family?

Last Updated: 15 August 2012
Article by John Darnton

The reality is that every case will be decided on its individual facts but a recently reported case sheds light on how the courts view these things.

In RK v RK there was a family company ("FC") which owned a large estate.  When the parties met the husband was working in FC as an assistant estate manager but he rose to become a director of FC.  He did not however own any shares in FC.  The principal activity of FC was farming but it also owned a number of other assets, principally properties.  The estate had been founded by the husband's great grandfather about 100 years previously and had been passed down the generations.

At the time of the hearing, the shares in FC were owned as to 29% by the husband's father, 42% by his uncle, about 13% by an aunt and just over 15% by 8 family trusts.  The first of these trusts had been set up by the husband's grandfather in 1965.  The remaining trusts had been constituted in the intervening period by the husband's grandfather and parents.  The beneficiaries were children and remoter issue of the settlers and, in most cases, their spouses.  An indication of the value involved is that the shares held by the trusts had a combined gross value of about £12.8m.

The parties married in 2001 and separated in 2009.  They had three children.  At the time of the divorce the wife was 40 and the husband 39.  The problem was that they had no assets to speak of but horrendous debts - the husband had net liabilities of just over £300,000 and the wife had debts totalling £245,000. 

Against this background the wife sought a capital fund of £425,000, £400,000 being for the cost of a house and £25,000 being to fund the costs of purchase of the house and a car.  She accepted that the £400,000 could be provided in such a way that she had a life interest in that sum, i.e. she was not looking to receive the money outright.  She also wanted £245,000 to cover her debts, including her legal fees, an equal share of the husband's pension fund and maintenance for herself and the children at the rate of £30,000 per year.  Finally, she also made a claim in respect of the family dogs.  The judge who heard the case did not consider it appropriate to make an order on that issue because he found that, on the evidence, they had principally been looked after by the husband!

The judge described the key issue as being:-

"the extent to which the trustees.....are likely to provide resources to or for the wife direct and/or to the husband to enable him to meet the wife's financial claim".

The trustees had been prepared to offer assistance up to a figure of £400,000 in total; £375,000 for a house, £15,000 for furniture and white goods and £10,000 for a car.  According, ignoring for the moment that the wife would be left with a huge costs bill, the parties were not a great distance apart.

In the end the judge decided that it was reasonable for the wife to spend £400,000 on a house, excluding associated costs.  Indeed, he determined that, because the house would remain within the trust structure, the trustees could increase the capital fund to provide from £400,000 to £425,000.  He also concluded that the trustees could provide a further sum of £50,000 to the wife directly or to the husband for the wife to reduce her debts.  This would still leave the wife with horrendous debts and it is unclear how the judge thought they would be dealt with.

Having carried out his assessment the judge decided not to make an order but instead directed that a transcript of his judgment be sent to the trustees for their views in the expectation that they would agree to make the financial provision he had suggested.  This is an example of the court using "judicious encouragement" to a third party to act in a particular way.

The judge examined the development of this concept since 1995, particularly in the area of trusts and the importance of "encouragement" not developing into "improper pressure".  This will be a question of balance to be struck in every case but the judge was satisfied that the court will expect trustees to respond positively if the court concludes that the interests of the trust and of the other beneficiaries will not be appreciably damaged if the trustees were to provide the husband with the resources required to enable him to make proper provision for his wife and children.  The trustees will be expected to respond positively because the court will have concluded that the trustees would, in the exercise of their duties, respond in a reasonable manner to a reasonable request from the husband.

As had been said by The Royal Court of Jersey in 2004:-

"In our judgment, where the requests made of trustees are reasonable in the context of all the circumstances, it would be the exception rather than the rule for trustees to refuse such requests".

The trustees may not be bound to comply with a request from a husband to come to his aid but it is plainly proper for trustees to take account of such a request.

This is not a 'groundbreaking' decision but it provides a useful reminder of how the court approaches family trusts within the context of a divorce. In answer to the question posed at the outset the structure created by the husband's family may well have limited the damage done by the wife's claim - the largest component of her claim, being a suitable home, was to be provided in such a way that the money did not pass outright to the wife.  It is also perhaps noteworthy that the judge was somewhat critical of the husband for not approaching the trustees and seeking to persuade them to make appropriate provision to enable the compromise of the wife's claims.  The suggestion is that, when trustees become aware of a divorce involving one of their beneficiaries, they should perhaps become more engaged in trying to assist the beneficiary to achieve a resolution.  In this case, the wife put her costs of the financial proceedings at £195,000 and the husband's costs were £130,000.  The trustees themselves had incurred legal costs in excess of £46,000.  These figures demonstrate how a large proportion of a family's wealth can disappear into the pockets of lawyers when financial claims remain unresolved and proceed to a court trial.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

John Darnton
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions