The High Court decision in Kroupeeva v Kroupeev is a striking example of how the court approaches complex wealth structures and nuptial settlements, in the context of a divorce.

Background

The parties, Mr and Mrs Kroupeeva, married in Russia in 1988 and later moved to London, where they enjoyed a very high standard of living funded by the husband’s entrepreneurial success. The husband was an international businessman involved in oil, gas, energy and related investments through various corporate and trust structures. The wife was the homemaker and primary carer for the children.

The marriage broke down after the wife discovered that the husband had maintained a long-standing second family abroad. Financial remedy proceedings followed in 2024, complicated by the husband’s persistent failure to comply with court directions, his failure to provide full and frank financial disclosure and his attempts to place assets beyond the wife’s reach.

A central issue in this case was the extent of the husband’s wealth and whether assets held within trust structures formed a nuptial settlement.

What is a nuptial settlement?

A nuptial settlement is a settlement for the benefit of the husband and/or wife or their children, created in contemplation of or during the marriage. For the settlement to be considered nuptial, it requires a connection with the marriage.

The status of a trust as a nuptial settlement is important because the court can vary a nuptial settlement upon divorce. This means that if a trust is found to be a nuptial settlement, the court can make various orders, including (but not limited to) an order that one or more of the assets within it be transferred to a spouse, orders regarding the removal of trustees and orders for the provision of income for a spouse of the family from the trust.

The Court’s Approach to the Trust

The trust in question was an offshore discretionary trust called the Rossini Trust, which held the entire share capital of a company, Waterford Finance Limited. Waterford had holdings in several international companies. The husband and children were discretionary beneficiaries of the trust. The wife had previously been a beneficiary but was removed when the divorce proceedings commenced.

The wife’s case was that, after a long marriage of 35 years to which she had made a full contribution, she had a full sharing claim to the parties’ wealth, which was entirely matrimonial. This included a share of the Rossini Trust on the basis that the trust was a nuptial settlement, could be varied by the court, and specific assets held within the trust could be transferred to her as part of the divorce settlement.

The Husband’s case was that the assets held within the Rossini Trust, including Waterford, were not his assets; he relied on the fact that the trust was settled by a third party and that the trustees could remove him as a beneficiary if they chose to do so.

The court found the husband’s evidence to be profoundly unsatisfactory and lacking in credibility. The husband refused to agree to a single joint expert appointment to value various elements of the trust, failed to provide up-to-date valuations in respect of the trust and its associated assets and failed to provide documentary evidence in support of the various submissions he made as to why the trust was not a matrimonial resource. This made it difficult for the court to accurately value the trust assets, and the court was forced to draw adverse inferences as a result of the husband’s conduct.

The court found that the entire trust structure, including all its directly owned and underlying assets, including subsidiary companies and investments, comprised a nuptial settlement and formed an arrangement that had made continuing provision to the husband, wife and the children. It was therefore capable of variation by the court and could be used to meet the wife’s claims.

Despite the evidential uncertainty, the court attributed significant value to the trust assets (over £240 million) and found the total assets of the husband to be in the region of £304m.

Decision and Outcome

The wife was awarded the sum of £100.6m, which represented around one-third of the identified asset base. Rather than immediately varying the nuptial settlement, the court opted to transfer assets that were outside the trust into the wife’s name, as well as making a substantial lump sum award of £60m in favour of the wife.

This decision reflected a combination of factors, including liquidity considerations, the structure of the assets, and the interests of the parties’ children within the trust.

The court left open the possibility of a future application to vary the nuptial settlement if the husband failed to comply with the order made.

The court also made clear that any uncertainty as to the true extent of wealth lay squarely at the husband’s door due to his failure to engage properly with disclosure obligations.

Why This Case Matters

This decision is significant for three primary reasons:

1. A broad interpretation of nuptial settlements: The court was prepared to treat a complex offshore trust as a nuptial settlement where it functioned as a vehicle for family provision, reinforcing the wide ambit of section 24(1)(c) of the Matrimonial Causes Act.
2. Adverse inferences and non-disclosure: The judgment evidences that attempts to obscure wealth, particularly via opaque structures, will likely backfire. The court will not hesitate to “fill in the gaps” against a non-compliant party.
3. Pragmatic remedy over immediate variation: The court demonstrated flexibility by awarding a substantial lump sum rather than immediately varying the settlement, while retaining jurisdiction to revisit the structure if enforcement becomes an issue.

In short, Kroupeeva is a clear warning – sophisticated asset structures will not shield parties from the court’s redistributive powers where they are, in substance, nuptial in character. It is more important than ever that those dealing with trust assets take advice from family law specialists who can ensure that structures are robust and can mitigate the financial risk of divorce.