How does Jersey’s
Royal Court react when presented with an order from an overseas court affecting a
Jersey trust? In general, these orders are made by matrimonial courts — particularly the Family Division of the High Court — and are in relation to assets that one of the spouses has put into trust, and which the other spouse claims form part of the assets to be divided between them.
First, unless there are trust assets in the jurisdiction where the matrimonial proceedings are taking place, further proceedings will be necessary before Jersey’s Royal Court to put into effect the overseas order as against the Jersey trust.
Often, even before such an order is made, if the trustee has been joined by one of the parties in the matrimonial proceedings, it may have applied to the Royal Court for directions as to whether or not it should submit to the jurisdiction of the overseas court. An example is Re the H Trust [2006]. The trustee sought the court’s approval of its decision not to submit to the jurisdiction of the English court. The Royal Court approved the decision and, in so doing, noted that if a trustee did so submit, it would have difficulty in persuading the Royal Court on any subsequent application that it should reconsider the matter on its merits. However, the court noted that if the trustee did not submit, then on any subsequent application to vary, the court “would have complete discretion as to the course it should take”. The court also drew a distinction between the role of the Family Division which was to “do justice between the two spouses before it”, and that of the Royal Court which was to “make or approve decisions in the interests of the beneficiaries”.
The court then concluded by stating it would not ignore the decision of the Family Division or other overseas courts — “the interests of comity as well as of the beneficiaries will often point strongly in favour of this court making an order which achieves the result contemplated by the Order of the Family Division.”
An English order had actually been made in CI Law Trustees and another v Minwalla and others [2005] —a Jersey trustee sought directions when it was faced with an order of the Family Division which set aside the trust as a sham and ordered it to transfer the trust assets to the wife. The court relied on comity, which it referred to as an “elastic concept”.
The Royal Court considered the Family Division’s finding of sham. This had been decided as a matter of English law but the court noted that as the proper law of the trust was Jersey, and as it was administered in Jersey by a Jersey trustee, the question of whether or not it was a sham should be determined in accordance with Jersey law. It then said: “as a matter of generality, we would regard an assumption of jurisdiction by a foreign court to declare a Jersey trust a sham to be exorbitant and we would be reluctant to enforce any judgment based upon such an assumption.”
The Royal Court looked at the trustee’s position — it was taking a neutral stance in the proceedings. However, it was noted that the trustee had submitted to the jurisdiction of the English court and had participated in those proceedings. It had been given notice of the nature of the orders sought yet had agreed to abide by any order of that court. On that basis, and notwithstanding the earlier comments in the judgment about exorbitancy, the Royal Court held “no unfairness arises from holding, as a matter of comity, that in the particular circumstances of this case, the judgment should be enforced against the trustees.”
On 27 October, 2006, various amendments were introduced to Jersey’s Trusts Law, which were designed in part to overcome the uncertainty caused by Minwalla. The new article 9(1) provides that Jersey law is to apply to the following:
- the validity or interpretation of a trust;
- the validity or effect of any transfer or other disposition of property to a trust;
- the capacity of a settlor;
- the administration of the trust (irrespective of where it is conducted); and
- the existence and extent of powers and the validity of their exercise, including powers of variation or revocation.
Article 9(2) further provides that the issues in 9(1) are to be determined without any consideration of whether:
- a foreign law prohibits or does not recognise the concept of a trust; or
- the trust defeats any rights or claims conferred by a foreign law upon any person by reason of, among other matters, a personal relationship to the settlor. A personal relationship is defined to include marriage or an arrangement in any jurisdiction giving rise to rights analogous to those arising between husband and wife.
Article 9(4) provides that no foreign judgment with respect to a trust will be enforceable to the extent that it is inconsistent with this article.
The recent case of In re the B Trust [2006] was the first to look at the provisions of the new article 9 in the context of an order made in English matrimonial proceedings. The English High Court had declared the B Trust a post-nuptial settlement (in accordance with English law) and had made various orders purporting to vary it. The Jersey trustee had submitted to the jurisdiction of the High Court, maintaining a neutral stance and subsequently it made an application to the Royal Court for directions as to giving effect to the orders made.
The judgment of the Royal Court made it very clear that the new article 9 does not operate so as to oust the doctrine of comity (as argued by counsel for the husband). In fact, the court gave substantial effect to the English judgment, despite the fact that it inclined to the view that the trust did not have the necessary “nuptial element” for it to be considered a post-nuptial settlement under Jersey law. This factor, it said, was immaterial and did not concern the court in an application by a trustee for directions. The task before the court was, “to decide whether, and if so to what extent, to give effect to the conclusions at which the English court arrived”. In so doing it would apply Jersey law.
The Royal Court went on to comment on these types of cases and to give suggestions for their future management. It said that a “more seemly and appropriate approach” in these cases would be for the English courts to “exercise judicial restraint” and, rather than invoking their statutory jurisdiction to vary such trusts, to obtain the assistance of the Royal Court in the implementation of their orders.
No doubt efforts will be made in the future to distinguish this case when different facts arise, for example where a trustee had not submitted to the English jurisdiction, or if counsel for the minor and unborn beneficiaries did contest the proposed variation. However, for the present it appears that contrary to expectations, the new amendments have done little to strengthen Jersey trusts when faced with an assault from an overseas matrimonial court.
Gillian Robinson is a partner in the litigation and insolvency group at Appleby Hunter Bailhache in
Jersey.
