England has become a ‘divorce haven’, presumably because those (primarily wives) who feel they may be disadvantaged by the divorce rules in other jurisdictions regard English law as having established a fairer system for financial provision.
When allocating financial assets in divorce cases, the English courts rely on: needs; sharing; and compensation. These principles are not of universal application.
But English courts can only deal with cases where either of the parties to the marriage was domiciled in England and Wales on the date when proceedings began.
Case study
In this case the wife, Charoo Sekhri, alleged that both parties, or alternatively one of them, was domiciled in England and Wales when proceedings commenced on 20 August, 2012. Her husband, Aloke Ray, disputed this.
The couple met in December 2008, having been introduced to each other through an online dating agency. They were each, then, in their mid-thirties and were successful young professionals.
The husband was, and still is, an international lawyer with a partnership in a worldclass US law firm. The wife was a paediatric anaesthetist working at Great Ormond Street hospital in London, and was well on the way to achieving her goal of becoming a consultant at a leading London hospital. Within a short time, both were contemplating this might be an enduring relationship.
There was, however, a potential problem. They had met when the husband’s career would see him moving within his law firm to be based in either Hong Kong or Singapore.
He told her of his potential move and invited her to go with him. The wife gave serious consideration to the prospect of a move to the Far East and they moved to Singapore in 2009. They married in India later that year and their only child was born in Singapore in December 2010.
On 20 August, 2012, the wife, although living at that time in Singapore, issued a petition for divorce in London. The husband accepted that if, contrary to his belief, one or both of them were UK-domiciled, then the English court did have jurisdiction to hear the divorce petition.
The court had therefore to resolve the disputed issues as to domicile and consequently jurisdiction.
What was Charoo Sekhri’s domicile of origin?
Charoo was born, brought up, educated in and lived in India until the age of 25. Her parents were, and are, domiciled and resident in India. Her domicile of origin was clearly Indian.
Did Charoo Sekrhi acquire a UK domicile of choice? The judge said: “I am in no doubt that well before December 2008, the wife had acquired an English domicile of choice. She was living here permanently, not merely in furtherance of her career but because she preferred English attitudes and the English way of life. She had formed “a singular and distinctive relationship with this country.
“Her residence here was settled and not fixed for a limited period or particular purpose but was general and indefinite in its future contemplation. But for her later falling in love with the husband, and his career move to Singapore, none of which she could have foreseen before she met him, she had every appearance, every intention and every expectation of living lifelong in England, the country of her choice.”
Did Charoo Sekhri abandon her UK domicile of choice?
The judge concluded: “The crunch question is whether I believe and accept the wife’s strong assertion that she herself always understood the move was for a time-limited period and that she expected and intended to return to England and resume her career and residence here. I do believe and accept it. “I am, in particular, absolutely clear that the wife had long ago set herself the goal of becoming a consultant at a leading London hospital and has never wavered from that goal and intention. The move to Singapore was, for her, no more than a pause and an episode or, as she described it in one email, ‘a breather’. “I am thus not satisfied that when she first moved to Singapore, or at any time while she was there, the wife ceased to intend to reside permanently and indefinitely and long term in England. She has never abandoned her English domicile of choice.”
What was Aloke Ray’s domicile of origin?
The husband’s domicile of origin was that of his father until reaching the age of 16 in September 1987.
The husband’s parents originated from India but came to live in England soon after their marriage in 1964. The father lived in England for almost all of the remainder of his life prior to his untimely death in September 1993 at the age of 58. Evidence from the family described how he contemplated the prospect that at some time in the future he might return to live in India.
In April 1970, the father sought to make that prospect a reality by unilaterally determining that he, his wife and daughters would go to India in the hope that he would be able to find suitable permanent employment there.
His plans, however, did not come to fruition. Employment was not found, his wife was unhappy about the move, the daughters were ill and, in November 1970, the family returned to England and the house in London, which remains the family home, was purchased.
The judge concluded: “In my view, all the talk of ceasing to live in England and returning to live in India, as his home, was no more than a pipe dream after the seven month period, and he knew it.
“His intention, from immediately after the return in November 1970, was to live permanently and indefinitely in England, for it was here that his wife, together with their then two children, was determined to live.
“Practical effect was given to that intention by the purchase of [the family home] in
July 1971. I am quite satisfied that [Mr Ray senior] had acquired an English domicile of choice by, at the latest, July 1971. That was his domicile when [Aloke] was born in September 1971 and is accordingly the husband’s domicile of origin.”
The case for financial advice
The divorce aspects of this dispute are of limited interest for financial advisers. What is important is the court’s detailed analysis of the law relating to domicile, particularly in the case of those who are ‘internationally mobile’. The Sekhri case has demonstrated the existence of a large body of individuals who need advice.
Office for National Statistics (ONS) analysis, issued in September 2013, reviewed the country of birth and nationality of UK residents for 2012. The ONS findings showed that in 2012, one in eight (12.4%) of the ‘usually resident’ UK population were born abroad and one in 13 (7.8%) had non-British nationality. In 2012, one in 13 (7.8%) of the population of the UK had non-British nationality (4,852,000).
Many of these individuals may have assumed they were not UK-domiciled. However, as the Sekhri case demonstrates, such assumptions may well be incorrect.
The practical consequence is that many more individuals than was previously thought will require IHT planning advice.
There are two target populations:
• Those, like Charoo Sekhri, who have ‘originated’ from outside the UK but have acquired a UK domicile of choice and thus an IHT exposure in respect of worldwide assets. Standard IHT planning techniques, using exemptions reliefs and the nil-rate band, will apply in these cases.
• Those who can sustain a claim to domicile outside the UK. Those individuals domiciled outside the UK are subject to IHT only in respect of UK assets. The deemed domicile rules, which treat non- UK-domiciled individuals as domiciled for IHT purposes if tax resident for 17 out of 20 years, can be sidestepped through use of excluded property trusts. These arrangements can be used to provide IHT-free benefits for investors and for their families, even if those family members are UK-domiciled.
Legal principles apply to determine an individual's domicile
- A person is, in general, domiciled in the country in which he is considered by English law to have his permanent home. A person may sometimes be domiciled in a country though he does not have his permanent home in it.
- No person can be without a domicile.
- No person can at the same time have more than one domicile.
- An existing domicile is presumed to continue until it is proved that a new domicile has been acquired.
- Every person receives at birth a domicile of origin.
- Every independent person can acquire a domicile of choice by the combination of residence and an intention of permanent or indefinite residence, but not otherwise.
- Any circumstance that is evidence of a person’s residence, or of his intention to reside permanently or indefinitely in a country, must be considered in determining whether he has acquired a domicile of choice.
- In determining whether a person intends to reside permanently or indefinitely, the court may have regard to the motive for which residence was taken up, the fact that residence was not freely chosen, and the fact that residence was precarious.
- A person abandons a domicile of choice in a country by ceasing to reside there and by ceasing to intend to reside there permanently, or indefinitely, and not otherwise.
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When a domicile of choice is abandoned, a new domicile of choice may be acquired but, if it is not acquired, the domicile of origin revives.
