Taxman fails in bid to force tycoon to hand over files used in highest divorce settlement in UK history

 

The taxman has failed in a legal move to force a tycoon to hand over documents used in a divorce battle which ended in him having to pay the highest award in British legal history.

In 2006 a High Court judge ordered insurance magnate John Charman to pay former wife Beverley a total of £48 million in property and cash.

Mr Charman, who described the award as "grotesque and unfair", lost an appeal the following year.

The divorce payout is still thought to be the highest made after a contested hearing.

At the High Court today, the same judge who made the award gave a ruling dismissing an application by HM Revenue and Customs (HMRC) for production of documents relating to the hearing in 2006, which it wished to use in an appeal by Mr Charman over a disputed £11.5 million in tax.

Mr Justice Coleridge, sitting in London, said one of the issues "which impacted on my determination of the wife's claim was the extent of the husband's potential tax liabilities" - in particular "the extent of his income and capital tax liabilities in relation to his interests in Axis Speciality Limited".

He added: "That in itself depended significantly upon the date when the husband gave up residence in the UK and took up residence in Bermuda."

The judge said: "That potential tax liability has now become more of a reality because the applicants to this application (HMRC) have issued assessments for about £11.5 million of unpaid tax for the years 2001 - 2008."

Mr Charman, 59, "disputes the liability and to that end has appealed the assessments". The appeal process was "very much under way".

There was "no suggestion that the husband is guilty of tax evasion or criminal conduct in relation to his tax affairs" - "this is a routine tax assessment", said the judge.

Explaining the HMRC's application, Mr Justice Coleridge said: "For the purposes of the tax appeal and that hearing HMRC would like sight of and to be able to use transcripts of the divorce/financial proceedings and many other documents which were filed in or brought into being for the application/hearing in front of me.

"They have asked the husband and the wife to produce them. The wife is not objecting but the husband has refused to do so and so HMRC have issued this application for their production."

Giving his conclusion the judge said that as a general rule documents and other evidence produced in financial remedy proceedings are not disclosable to third parties outside the proceedings "save that exceptionally and rarely and for very good reason they can be disclosed with the leave of the court".

The fact that the evidence may be relevant or useful "is not by itself a good enough reason to undermine the rule".

He added: "No-one would seriously argue with the proposition that it is in the public interest for the right amount of tax to be paid by taxpayers.

"Further there is no doubt that the documents sought in this case would be relevant to the proceedings before the First Tier Tribunal Tax Chamber and, for obvious reasons, might well be of assistance to them. But that is not the test I apply."

Mr Justice Coleridge added: "Having considered and balanced the competing public interests here, I have no hesitation in finding that there is nothing rare or exceptional about this case which takes it outside the general rule.

"The husband is entitled to say, with indignation, that he complied fully with the rules of disclosure and the confidentiality/privilege attached to the documents and other evidence produced thereby should not be breached."

Referring to the 2006 proceedings, he said: "It was in a very real sense a 'big money case', as these cases are sometimes rather unattractively described, the assets exceeding £100 million.

"The hearing eventually resulted in my making an award to the wife worth in excess of £40 million made up of real property and cash.

"I think that award still stands as the highest award made in a post divorce contested hearing."

Mr Charman and his wife married in 1976, when neither had significant resources.

During their marriage Mr Charman had a hugely successful career and built up considerable wealth in the insurance market in the City of London.

They separated in November 2003 and divorced in April 2005. The former matrimonial home was in Sevenoaks, Kent.