23 April 2008

Re The H Trust; X Trust Company Limited v. R W & Others [2006] 9 ITELR 133, Royal Court, Jersey

Facts of the Case

The H Trust was a discretionary trust whose beneficiaries include the settlor and his wife, the settlor’s children by his previous marriage and the settlor’s grandchildren.  The value of the trust fund was estimated at £2.6 million.  The wife petitioned for divorce in England and obtained a freezing injunction in the Family Division against the husband’s assets. The Royal Court also froze the trust assets.  The trust was governed by English law.  The trustee exercised its power to change the proper law of the Trust to Jersey law and to confer exclusive jurisdiction on the Jersey courts.  The wife then obtained a further order in the Family Division joining the trustee and obtaining an Order restraining the trustee from executing (if he had not already done so) a deed, changing the proper law of the trust and from taking any step to remove the wife as a beneficiary.  The trustee sought the Royal Court’s approval to the trustee not submitting to the English Court. 

The Decision

The Court granted the directions sought by the trustee and approved its refusal to submit to the jurisdiction of the English Court.  The Deputy Bailiff stated that it would not usually be in the interests of the trust to submit to the jurisdiction of the foreign court dealing with a divorce petition where one or both of the parties were beneficiaries.  It was more likely to be in the interests of the trust to preserve the freedom of action of both the trustee and the Royal Court to act appropriately, taking account of a foreign court’s decision when known.  If a trustee submitted to the decision of a foreign court, it was likely to be enforceable in Jersey without any reconsideration of the merits. 

Points of Interest

In this case the Deputy Bailiff was anxious to preserve the freedom of action of both the Jersey trustees and the Royal Court itself.  The Deputy Bailiff realised that if the trustee simply submitted to the jurisdiction of the English Family Division, then the opportunity for the Jersey Court to review the merits of the English Court’s decision from the point of view of the trust and the beneficiaries as a whole, would be lost. 

Further Developments

The H Trust has again been before the Royal Court very recently. 

The English High Court subsequently made orders against the husband requiring him to pay a lump sum to the wife out of the trust.  Certain properties in the UK owned by the H Trust were also to be transferred to the wife.  The Jersey trustee put forward a counter proposal which was less generous to the wife saying if it could not be agreed promptly, the trustee would seek directions from the Royal Court.

The wife rejected the proposal but the trustee did not apply to the Royal Court.  The trustee decided to wait for the outcome of certain enfranchisement proceedings in the UK and in the meantime not to make any significant distributions.  The wife then issued proceedings to bring the trustee before the Royal Court.  The Royal Court severely criticised the trustee for taking sides and said there would have to be a good reason for not to giving effect to the original English Court’s order.  Accordingly, the Royal Court ordered that the lump sum ordered by the Family Division be paid to the wife out of the trust and that the UK properties be transferred to her. 

Category: Article