Man ordered to shell out millions due to bogus trust in lavish divorce dispute
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In a significant ruling for family law, the High Court has declared that a sham trust used to conceal matrimonial assets can be disregarded, and the hidden assets can be brought back into the pool of assets to be shared on divorce. The case, Mrs Stalo Michael (applicant) v Mr Mario Michael (respondent), has set a precedent that sham trusts cannot be used as a shield against matrimonial claims.
Over three years of contested litigation, seven other parties were joined, and more than 30 witnesses gave evidence. The court described the husband, a prolific property investor and developer in North London, as a "fundamentally dishonest man" who is "prepared to be wholly and deliberately dishonest."
The husband was found to have conducted the offshore trust issue in an egregiously dishonest way and retained the beneficial interest in the trust. The trust, set up as a false trail to conceal his substantial property wealth from his ex-wife during financial proceedings, was declared invalid, and Mr Michael was ordered to pay £15 million to Mrs Michael, representing her fair share of the matrimonial assets.
The ruling highlights the court’s willingness to pierce the veil of sham trusts in a family law context, particularly where trusts are set up as a false trail to conceal assets from a former spouse. It clarifies that assets held in sham trusts controlled entirely by one party are not immune from division during divorce proceedings but are treated as shared matrimonial assets.
The case underscores the court’s condemnation of deliberate dishonesty and strategies to undermine the financial rights of a former spouse. Mr Michael was found to have a "deliberate intention" to leave his wife "homeless and in a financially parlous situation." He failed to pay maintenance, a legal services payment order, and a December 2023 costs order totalling GBP 1.3 million plus interest.
The court appointed receivers over specified shareholdings and corporate interests due to the husband's sustained refusal to comply. A structure of staged lump-sum payments totalling GBP 15 million between September 2025 and September 2026, with the possibility of a reverse contingent lump sum if a tax bill materializes and is paid by the husband, was ordered.
The husband has applied for permission to appeal several rulings, with some already refused by Lord Justice Moylan, and others pending decision. The combined legal costs of the proceedings touched almost GBP 5 million.
The wife's legal team stated that the case should act as a warning to others trying to conceal matrimonial assets. The court showed it has no hesitation in exposing and invalidating such artificial arrangements, serving as a deterrent for parties tempted to use trusts as a vehicle to obfuscate asset ownership and avoid paying their fair share in divorce settlements.
This judgment advances the legal landscape by emphasizing that sham trusts cannot be used as a shield against matrimonial claims and signals strong judicial disapproval of schemes to subvert fair asset distribution in family law cases. The case is a textbook example of the family court's willingness to expose and unravel deliberately misleading asset structures.
[1] The Guardian [2] The Telegraph [3] BBC News [4] Legal Week [5] The Times
- In the light of the ruling, businesses dealing with finance in the context of high-value asset division during a divorce should exercise caution when setting up trusts, as the court may consider such trusts as sham instruments and disregard them.
- The case has significant implications for business owners involved in finance, especially those with substantial assets, highlighting the potential risk of a court invalidating a trust if it is deemed a sham and used to conceal assets from a former spouse during divorce proceedings.
