AC v DC & Ors (Financial Remedy: Effect of s37 Avoidance Order) (No 1) [2012] EWHC 2032 (Fam) (19 July 2012)

AC v DC & Ors (Financial Remedy: Effect of s37 Avoidance Order) (No 1) [2012] EWHC 2032 (Fam) (19 July 2012)

An order under s37 Matrimonial Causes Act 1973 operates to annul the impugned transactions ab initio for all legal (including fiscal) purposes, unless there are subsequent bona fide third party transactions, which are not present here. The effect is that the transactions are treated as never having occurred, and all legal and tax consequences are reversed accordingly.

Citation
[2012] EWHC 2032 (Fam)
Parties
Applicant: AC; 1st Respondent: DC; 2nd Respondent: D Foundation; 3rd Respondent: A Investments Ltd; 4th Respondent: B Investments Ltd; 5th Respondent: C Investments Ltd; 6th Respondent: D Investments Ltd; 7th Respondent: E Investments Ltd; 8th Respondent: F Investments Ltd; 9th Respondent: Z Trust Company Limited
Jurisdiction
England and Wales
Judgment Date
19 July 2012
Procedural Posture
Family Law – Financial Remedy (avoidance of Disposition) / Judgment After Hearing of S37 Matrimonial Causes Act 1973 Application
Outcome
Application granted. Transactions set aside ab initio.
Legal Topics
Avoidance of Disposition, Financial Remedies on Marital Breakdown, Trusts and Beneficial Ownership, Capital Gains Tax Consequences, Retrospective Effect of Court Orders
Family Law Trusts and Equity Tax Law Avoidance of Disposition Financial Remedies on Marital Breakdown Trusts and Beneficial Ownership Capital Gains Tax Consequences Retrospective Effect of Court Orders

Case Brief

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Parties

AC

Applicant

DC

1st Respondent

D Foundation

2nd Respondent

A Investments Ltd

3rd Respondent

B Investments Ltd

4th Respondent

C Investments Ltd

5th Respondent

D Investments Ltd

6th Respondent

E Investments Ltd

7th Respondent

F Investments Ltd

8th Respondent

Z Trust Company Limited

9th Respondent

Procedural Posture

Family Law – Financial Remedy (avoidance of Disposition) / Judgment After Hearing of S37 Matrimonial Causes Act 1973 Application

Legal Issues

  1. 1 Whether transactions intended to defeat financial remedy claims under s37 Matrimonial Causes Act 1973 should be set aside ab initio for all legal and fiscal purposes
  2. 2 Whether the set aside order operates retrospectively to annul the transactions as if they never occurred
  3. 3 Whether tax consequences (e.g., CGT) are reversed by the set aside

Ratio Decidendi

An order under s37 Matrimonial Causes Act 1973 operates to annul the impugned transactions ab initio for all legal (including fiscal) purposes, unless there are subsequent bona fide third party transactions, which are not present here. The effect is that the transactions are treated as never having occurred, and all legal and tax consequences are reversed accordingly.

Court Disposition

Application granted. Transactions set aside ab initio.

Orders

  • The transfer by the 1st Respondent of his 86.24% shareholding in D (Holdings) Ltd to the 9th Respondent is set aside under s37(2) MCA 1973.
  • Subsequent transmissions by the 9th Respondent to the 2nd Respondent and by the 2nd Respondent to the 3rd–8th Respondents are set aside under s37(3) MCA 1973.