Case No. FD20F00034-and-FD19P00380

calculations as to the correct figures to capitalise periodical payment entitlements. The standard underlying assumptions of such calculations are well known. They include a uniform income yield of 3% pa (1.5% pa in the first year); a uniform rate of capital growth of 3.75% pa; a uniform rate of inflation at 3% pa; and a consistent regime of taxation, with the recipient being assumed to be subject to normal rates of UK taxation. No challenge had been made to these assumptions until Mr Dyer started his closing submissions on Day 7 of the trial and indicated that Mr Brian Green QC would be addressing the court, not just on the subject of the trust documents drafted on behalf of HRH, but also as to the effect of her diplomatic status and her non-domicile status on the Duxbury calculations. Indeed, Mr Green submitted that, by reason of her diplomatic status, HRH was totally exempted from tax on non-UK source income and capital gains, whether remitted or not and that, due to her non-domicile status until 2034, there was no reason why ongoing UK income tax and CGT should arise on investments held offshore by her with “no significant likelihood that any UK tax will subsequently arise on remittances”. This led to a furious reaction from HRH’s team who immediately instructed Ms Emma Chamberlain to respond, which she did on the morning of Day 8 of the trial. Ms Chamberlain was adamant that HRH would be unable to rely on her diplomatic status as she could not satisfy the required test that she must not be permanently resident in the UK, the reason being that she was not going to return to her own country as soon as her appointment in the UK ended. Second, Ms Chamberlain submitted that, although there were some advantages to her non-UK domicile status which will apply until April 2033, when she will become deemed domiciled here, these advantages are not nearly as significant as suggested by Mr Green. She said that she would be taxed on any remittances to this country of either income or capital gains. The gain is always treated as being remitted first before the original capital and, in general, is taxed at 45%. Given that Duxbury calculations require all the capital to be realised and spent, the only advantage is the ability to defer gains and income for a time before utilising them and even this advantage will go when she becomes deemed domiciled. In response to this, Mr Green accepted most of her points and simply submitted that I should use a “broad brush” in dealing with the advantages of her current non-domicile status. 57. Given the amount of money that has been spent on this litigation, I consider that I am entitled to be critical of the way in which this issue arose at the last minute in this case without proper pleadings or even detailed consideration. I am not an expert on taxation, although I have, obviously, encountered similar issues in cases over the years. In broad terms, I accept the submissions of Ms Chamberlain. There will be some advantages for the next twelve or so years but the need to remit the income and gains, inherent in the Duxbury model, are a significant feature as is the lack of any advantage in twelve years time. There is a separate point. Mr Green made significant attack on the discretionary trust documents prepared on behalf of HRH. These criticisms included, amongst others, that HH was not the ultimate beneficiary if the money awarded was not needed for its purpose. I had made it clear from early in the trial that I did not consider it appropriate for me to impose any such trusts on HRH, let alone make a settlement of property where HH would be deemed as the settlor of such trusts. I was clear that this case was suitable either for continuing periodical payment orders or for capitalisation and, if it was the latter, it would be entirely up to HRH how she arranged her affairs. This had the added advantage of saving anticipated fees of running these trusts asserted to be some £108 million. Nevertheless, I am clear that there would still be costs associated with the investment and distribution of very large sums of money. I do appreciate that such costs are, broadly, included within Duxbury calculations via the anticipated net rates of return but I consider that the costs are likely to be significantly larger here, given the sums involved and the particular sensitivities of this case. Equally, it is possible that HRH will decide to put any money I award into trust in any event, to give it an added layer of protection and to assist with inheritance issues, given that I was told that, pursuant to Sharia law, in the absence of such a structure, Zayed would inherit two-thirds and Jalila one-third, rather than equality . These, of course, are all matters for HRH but, utilising Mr Green’s broad brush, I am of the view that these additional costs of administering the funds and/or running the trust broadly equate to the tax savings that HRH may obtain. I therefore propose to deal with Mr Green’s point, if I decide that there should be any element of capitalisation, by disallowing the costs of running the trusts, put at £108 million but making no allowance for tax savings from HRH’s non-domicile status.