Re B Trust

• Jurisdiction: Jersey
• Court: Royal Court
• Judge: Bailhache, Bailiff and Jurats Le Breton and Allo
• Judgment Date: 08 December 2006
• Date: 08 December 2006

ROYAL COURT

Bailhache, Bailiff and Jurats Le Breton and Allo

M.H. Temple for the trustee;

D.J. Petit for the wife;

J.P. Michel for the minor and unborn beneficiaries;

S.A. Franckel for the husband and other beneficiaries.

Cases cited:

(1) Abidin Daver, The, [1984] A.C. 398; [1984] 1 All E.R. 470; [1984] 1 Lloyd's Rep. 339; (1984), 128 Sol. Jo. 99, dictum of Lord Diplock considered.

(2) Brooks v. Brooks, [1996] A.C. 375; [1995] 3 All E.R. 257; [1995] 2 FLR 13, considered.

(3) Fountain Trust, In re, 2005 JLR 359, applied.

(4) H Trust, In re, 2006 JLR 280, applied.

(5) J v. M, 2002 JLR 330, referred to.

(6) Lane v. Lane (ne Coverdale), 1985-86 JLR 48, referred to.

(7) Rabaiotti 1989 Settlement, In re, 2000 JLR 173, applied.

Legislation construed:

Matrimonial Causes (Jersey) Law 1949 (Revised Edition, ch.12.650, 2006 ed.), art. 27(1): "Where a decree of divorce . . . has been made, the court may . . . vary . . . any . . . post-nuptial settlement . . ."

Trusts (Jersey) Law 1984 (Revised Edition, ch.13.875), art. 9, as substituted by the Trusts (Amendment No. 4) (Jersey) Law 2006, art. 2: The relevant terms of this article are set out at para. 5.

art. 51: "(1) A trustee may apply to the court for direction concerning the manner in which the trustee may or should act in connection with any matter concerning the trust and the court may make such order, if any, as it thinks fit.

(2) The court may, if it thinks fit

(a) make an order concerning

(i) the execution or the administration of any trust . . ."

Matrimonial Causes Act 1973 (c.18), s.24(1)(c): The relevant terms of this paragraph are set out at para. 7.

Trustsvariationenforcement of foreign financial provisioncomity and interests of beneficiaries may require Jersey court to give effect to variation of trust ordered in foreign matrimonial proceedingsunder Trusts (Jersey) Law 1984, art. 51, court to act in best interests of all beneficiaries

Trustsvariationenforcement of foreign financial provisionEnglish order varying Jersey trust not inconsistent with Jersey law and unenforceable under Trusts (Jersey) Law 1984, art. 9(4), as amended, if trust is post-nuptial settlement under English law but not under Jersey lawJersey court giving directions under art. 51 as to enforcement of order applies Jersey trusts law not Matrimonial Causes (Jersey) Law 1949

The trustee of a Jersey trust applied for directions as to how to respond to a judgment of the English High Court varying the trust.

In matrimonial proceedings in England, the High Court sought to make financial provision for the wife by varying a Jersey trust of which the husband and his family were beneficiaries. Applying principles of English law, the court found the trust to be a post-nuptial settlement and purported to vary it under the Matrimonial Causes Act 1973, s.24. The court ordered that 1.5m. of the 5.3m. trust fund should be transferred to a sub-trust in which the wife would have a life interest.

The trustee brought the present proceedings under the Trusts (Jersey) Law 1984, art. 51, seeking directions as to how it should respond to the English order. As it had submitted to the jurisdiction of the High Court, enforcement of the order would probably have been uncontroversial prior to the coming into force of the Trusts (Amendment No. 4) (Jersey) Law 2006. The husband claimed, however, that in light of the amendment Law the order could not be enforced. Article 9(4) of the Trusts (Jersey) Law 1984, as amended, provided that "no foreign judgement with respect to a trust shall be enforceable to the extent that it is inconsistent with this Article irrespective of any applicable law relating to conflicts of law" and para. (1) provided inter alia that questions concerning the administration and variation of a Jersey trust should be determined in accordance with Jersey law.

The husband submitted that (a) as the trust was not a post-nuptial settlement under Jersey law, the English order could not be enforced under art. 9 of the Trusts (Jersey) Law 1984, as amended, because it was inconsistent with Jersey law; and (b) in addition, the power to give effect to the English order as a matter of judicial comity had been removed by art. 9.

Held, ruling as follows:

(1) The English order would be recognized and given substantial effect (subject to certain qualifications), so as to vary the trust by creating a sub-trust for the benefit of the wife, because it would be fair to do so as a matter of comity. The order sought to do justice between the husband and wife on divorce, the trustee had submitted to the jurisdiction of the English High Court and the other parties had been heard. Whereas the English court would have been concerned solely with making a fair division of assets between the husband and wife, the Royal Court's primary consideration, when exercising its supervisory jurisdiction under the Trusts (Jersey) Law 1984, art. 51, was to act in the best interests of all the beneficiaries ( para. 19; para. 25).

(2) The English order was not inconsistent with Jersey law and therefore unenforceable under the amended art. 9(4) of the Trusts (Jersey) Law 1984. The order was based on the correct assumption that, for the purposes of English law, the trust was a post-nuptial settlement that could be varied under the Matrimonial Causes Act 1973, s.24. It was irrelevant that the trust was not a post-nuptial settlement under Jersey law and thus could not have been varied under the Matrimonial Causes (Jersey) Law 1949, art. 27. The present court was not exercising its power under the 1949 Law to vary the trust. It was instead exercising its supervisory jurisdiction under art. 51 of the Trusts Law to give a direction concerning the administration of the trust, in particular whether, and if so to what extent, to give effect to the English order. The amended art. 9 of the Trusts Law did not operate so as to protect trust assets to the extent that a manipulative spouse could evade the enforcement of a judgment in matrimonial proceedings intended to do justice between him and his wife ( para. 13; para. 15).

(3) Furthermore, the court's power to give effect to the English order as a matter of judicial comity had not been removed by the amended art. 9 of the Trusts Law. Comity was a fundamental principle that enabled the courts of one country to show respect to the courts of another and avoided conflicting judgments being given in different jurisdictions. Article 9 did not contain the very clear and express words that would have been required to persuade the court that the legislature had intended to deprive it of the flexibility to do justice on the basis of comity ( paras. 16-18).

(4) Although, in the present case, substantial effect would be given to the English order as a matter of comity, it would be desirable if English courts felt able in future to exercise judicial restraint before purporting to vary Jersey trusts. Time and expense could be saved if, having calculated an award on the basis of the totality of the parties' matrimonial assets, an English court were to refrain from invoking its power under the Matrimonial Causes Act 1973, s.24 to vary a Jersey trust. It should instead request the Royal Court to be auxiliary to it, as for example in insolvency cases. The trustee or a party to the English proceedings should be directed to apply to the Royal Court for assistance in implementing the English order. This would be a more seemly and appropriate approach, and more likely to avoid the delivery of inconsistent judgments ( paras. 30-32).

1 BAILHACHE, BAILIFF: This is an application by Mourant & Co. Trustees Ltd. for directions in relation to the administration of the B Trust following an order of the Family Division of the High Court in England dated February 6th, 2006 ("the English order") in matrimonial proceedings between J ("the wife") and S ("the husband"). The trustee had submitted to the jurisdiction of the English court and this application might have been straightforward but for the coming into force of the Trusts (Amendment No. 4) (Jersey) Law 2006 ("the Trusts Law amendment"). The Trusts Law amendment was registered in this court on October 20th, 2006 and came into force at midnight on October 26th. Entirely fortuitously, this application came on for hearing on October 27th. Mr. Franckel appeared for the husband and for certain other family members, namely, all the adult beneficiaries of the trust other than the wife. We refer to him for convenience as "counsel for the husband."

2 The B Trust was established by a deed of settlement dated December 8th, 1988 and was made between E, the settlor, a cousin of the husband, and Granby Trustees Ltd. At that time, the settlor was domiciled in Jersey but he put no significant...