I. Mubarik v A. Mubarak, The Craven Trust Company Ltd, S. Mubarak, N. Mubarak and Renouf

JurisdictionJersey
CourtCourt of Appeal
JudgeBeloff, McNeill and Montgomery, JJ.A.
Date19 November 2008
COURT OF APPEAL
Beloff, McNeill and Montgomery, JJ.A.

A.P. Begg for the husband;

C.G.P. Lakeman for the wife;

J.M.P. Gleeson for the former trustee;

M.P. Renouf, as guardian ad litem of the minor beneficiaries, and for the unborn and unascertained beneficiaries.

Cases cited:

(1) Att.-Gen. v. Barker, [2000] 1 FLR 759; [2000] 2 F.C.R. 1, dictum of Lord Bingham of Cornhill considered.

(2) B Trust, In re, 2006 JLR 562, referred to.

(3) Ball's Settlement Trusts, In re, [1968] 1 W.L.R. 899; [1968] 2 All E.R. 438; (1968), 112 Sol. Jo. 445, considered.

(4) Bruno Sangle-Ferriere Children's Settlement, In re, 2007 JLR N [8], referred to.

(5) Christie-Miller's Marriage Settlement, In re, [1961] 1 W.L.R. 462; [1961] 1 All E.R. 855n; (1961), 105 Sol. Jo. 256, considered.

(6) Colville, 1962 S.C. 185; 1962 S.L.T. 45, considered.

(7) Courtauld's Settlement, In re, [1965] 1 W.L.R. 1385; [1965] 2 All E.R. 544n; (1965), 109 Sol. Jo. 739, considered.

(8) Douglas, In re, 2000 JLR 73, referred to.

(9) Druce's Settlement Trusts, In re, [1962] 1 W.L.R. 363; [1962] 1 All E.R. 563; (1962), 106 Sol. Jo. 112, referred to.

(10) Fountain Trust, In re, 2005 JLR 359, referred to.

(11) Freiburg Trust, In re, 2004 JLR N [13], referred to.

(12) H Trust, In re, 2007 JLR 569, referred to.

(13) Holt's Settlement, In re, [1969] 1 Ch. 100; [1968] 1 All E.R. 470; (1967), 112 Sol. Jo. 195, considered.

(14) Inland Rev. Commrs. v. Holmden, [1968] A.C. 685; [1968] 2 W.L.R. 300; [1968] 1 All E.R. 148, considered.

(15) Law, 1962 S.C. 500; 1962 S.L.T. 377, referred to.

(16) N, In re, 1999 JLR 86, referred to.

(17) Osias Settlements, In re, 1987-88 JLR 389, applied.

(18) Phillips, 1964 S.C. 141; 1964 S.L.T. 286, referred to.

(19) Saunders v. Vautier (1841), 4 Beav. 115; 41 E.R. 482; [1835-42] All E.R. Rep. 58, applied.

(20) Schmidt v. Rosewood Trust Ltd., [2003] 2 A.C. 709; [2003] 3 All E.R. 76; 2001-03 MLR 511, dicta of Lord Walker of Gestingthorpe applied.

(21) Seale's Marriage Settlement, In re, [1961] Ch. 574; [1961] 3 All E.R. 136; (1961), 105 Sol. Jo. 257, considered.

(22) T Settlement, In re, 2002 JLR 204, referred to.

(23) T's Settlement Trusts, In re, [1964] Ch. 158; (1963), 107 Sol. Jo. 981; sub nom. Towler's Settlement Trusts, Re, [1963] 3 All E.R. 759, considered.

(24) Thoday v. Thoday, [1964] P. 181; [1964] 2 W.L.R. 371; [1964] 1 All E.R. 341, referred to.

(25) Tinkers Settlement, In re, [1960] 1 W.L.R. 1011; [1960] 3 All E.R. 85n, referred to.

(26) Whishaw v. Stephens, [1970] A.C. 508; (1968), 112 Sol. Jo. 882; sub nom. Gulbenkian Settlement Trusts, Re, [1968] 3 All E.R. 785, referred to.

Legislation construed:

Trusts (Jersey) Law 1984 (Revised Edition, ch.13.875, 2007 ed.), art. 47: The relevant terms of this article are set out at para. 40.

Texts cited:

Campbell, Changing the Terms of Trusts, ch. 2 (2002).

Harris, Comity overcomes statutory resistance: In the matter of the B Trust, 11 Jersey & Guernsey Law Review, at 184 (2007).

Harris, Jersey's new private international law rules for trusts—A retrograde step , 11 Jersey & Guernsey Law Review, at 9 (2007).

Hochberg, Jersey's new private international law rules for trusts—A response, 11 Jersey & Guernsey Law Review, at 20 (2007).

Lewin on Trusts, 18th ed., ch. 24; ch. 45; para. 45-45, at 1874; para. 45-58, at 1880 (2008).

Trusts—variation—scope—under Trusts (Jersey) Law 1984, art. 47, court may approve arrangement unless complete resettlement—"arrangement" under art. 47 construed widely and may revoke or vary trust, provided to some extent beneficial to those protected by court—if arrangement not to end trust, assets to remain dedicated to trust purpose—court may approve arrangement for payment of matrimonial provision to reinstated beneficiary, with remaining assets held for existing trust purposes, as not resettlement

Trusts—variation—variation by beneficiaries—unascertained beneficiaries—court may approve arrangement under Trusts (Jersey) Law 1984, art. 47 even if potential unascertained beneficiary in existence and of full age and capacity—unascertained beneficiaries' interests considered as whole—unreleased power to add anyone in world to class of potential beneficiaries not fiduciary and not bar to approval

The first respondent brought proceedings in the Royal Court seeking an order enforcing or giving effect to an order of an English court varying a Jersey trust.

In matrimonial proceedings in England in 1999, the Family Division of the High Court ordered the appellant (the husband) to pay £4.875m. to the first respondent (the wife), with periodical payments until the lump sum was paid. In 1997, the parties had established a Jersey trust which held the shares in a group of companies involved in the international jewellery business. As a result of a company reorganization prior to the establishment of the trust, however, the husband had retained the majority of the group's value. The beneficiaries were originally the parties, their children and any remoter issue but, in 1998, the husband had revocably excluded the wife as a beneficiary of the trust, so that the trustee had no power to make payments to her. The husband refused to comply with the 1999 order and the wife, with whom the children lived in dire financial circumstances, commenced various proceedings seeking payment of the amount awarded to her.

In 2005, she applied to the English court seeking, inter alia, an order under s.24(1)(c) of the Matrimonial Causes Act 1973 varying the trust so as to require the trustee to pay the sum owed to her by the husband and, as there was no liquidity in the trust, to enable steps to be taken to obtain the funds from the underlying companies. She also sought to bar the husband from any further participation in the proceedings under the Hadkinson principle, as he was in contempt of the court's orders. As a precondition to his continued participation, the husband wrote a letter to the trustee in 2006, in which he accepted that he was bound by the English court's orders and wished the trustee to give effect to them. He was then permitted to appear and opposed the wife's application. The English court made an order in 2007 varying the trust as requested by the wife.

The husband refused to comply with the 2007 order and informed the trustee that, contrary to his 2006 letter, he opposed the wife's application. She therefore brought proceedings in the Royal Court seeking an order enforcing or giving effect to that order, which was supported by the parties' adult children. On the morning of the day on which the hearing was due to commence, the husband's advocate informed the court and the other advocates by email that the husband had withdrawn instructions from him and he would therefore not appear at the hearing. The emails suggested that the husband's reason for doing so was his perception that the court would be reluctant to entertain some of his arguments. It was indicated that the husband was still a party to the proceedings and the court was requested to take account, inter alia, of his skeleton argument. That document, filed only on the day of the hearing, presented fundamentally different arguments, which could have been presented earlier.

The Royal Court (Birt, Deputy Bailiff and Jurats Le Brocq and Liddiard) held that, pursuant to art. 9 of the Trusts (Jersey) Law 1984, the English order could not be enforced as it purported to vary the trust (i.e. it required the trustees to reinstate the wife as a beneficiary, which they did not have power to do under the trust), nor could the court give the trustee directions under art. 51 to comply with it. The court held, however, that all the adult beneficiaries should be treated as having consented to the variation and that it should give consent on behalf of the minor and unborn beneficiaries pursuant to art. 47 of the Trusts (Jersey) Law 1984 (in proceedings reported at 2008 JLR 250). The variation was in the best interests of the minor and unborn beneficiaries, as it offered the best prospect of obtaining funds from the underlying trust assets. Article 47 provided that the court could approve on behalf of "any person?.?.?. who may become entitled?.?.?. to an interest under the trust?.?.?. any arrangement?.?.?. varying or revoking all or any of the terms of the trust?.?.?. [provided that it] appears to be for the benefit of that person." The first paragraph of the order of the Royal Court referred only to the court having been satisfied as to the benefit to the "unborn and minor beneficiaries" of the trust, but the court had previously ordered that service on the unascertained beneficiaries was to be effected by service to Advocate Renouf, who understood that he had been instructed to represent the minor, unborn and unascertained beneficiaries.

The husband appealed, submitting inter alia that (a) the arrangement, under which the whole fund would be paid to an excluded person, was a wholesale resettlement, rather than a revocation or variation, and the Royal Court therefore had no power to approve it under art. 47; and (b) the courts should be cautious when approving an arrangement under which an excluded person was reinstated to benefit under a trust as there could be serious adverse tax consequences.

On the evening before the appeal was due to be heard, the husband raised a further point of appeal, namely that the Royal Court had not considered the interests of unascertained beneficiaries under cll. 8 and 9 of the trust and that the arrangement was not for their benefit. Under cl. 8, a beneficiary could choose to benefit any charity, but such a payment was to be deemed to be for the benefit of the beneficiary and the definition of "beneficiaries" in the trust did not include charities under cl. 8. The husband had a wide power under cl. 9 to add anyone to the class of beneficiaries (except an excluded person), from which class the trustees had an...

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