Re M and L Trusts

CourtRoyal Court
JudgeDeputy Bailiff
Judgment Date07 January 2003
Neutral Citation[2003] JRC 2A
Date07 January 2003

[2003] JRC 2A


(Samedi Division)


M C St J Birt, Esq., Deputy Bailiff and Jurats Le Brocq and Bullen

In the Matter of the M Trust

Nearco Trustee Company (Jersey) Limited
(1) AM
(2) ES
(3) J
(4) S
(5) G
(6) A
(7) JS
(8) GL
(9) The LCLLPC
(10) PS
(11) RMB
(12) Mrs GS
(13) La RCHRF
(14) Advocate Ashley Hoy as representative of the unborn children, grandchildren and great-grandchildren of PS and any other contingent or unascertained interest under the M Trust

In the Matter of the L Trust

Nearco Trustee Company (Jersey) Limited
(1) AM
(2) PS
(3) J
(4) S
(5) G
(6) A
(7) JS
(8) GL
(9) RMB
(10) The LCLLPC
(11) Mrs GS
(12) La R CHRF
(13) Advocate Ashley Hoy as representative of the unborn children, grandchildren and great-grandchildren of PS and any other contingent or unascertained interest under the L Trust

Advocate N J Chapman for the representor

Advocate L Springate for the second, third and fourth respondents

Advocate D J Benest for the fifth, sixth, eighth, tenth, twelfth and thirteenth respondents

Advocate A Hoy in person

Advocate D J Benest for the second, fifth, sixth, eighth, eleventh and twelfth respondents

Advocate L Springate for the third and fourth respondents


In re Moritz deceased (1960) Ch 251.

Re Rabaotti (2000) JLR 173.

Re Lemos Trust Settlement (1992–1993) CILR 26.

Application for directions by Trustee.

Deputy Bailiff



This is an application by Nearco Trustee Company (Jersey) Limited (“the Trustee”) as trustee of two trusts, for directions on the part, if any, which it should play in proceedings instituted before the courts of the State of Illinois. We gave our decision on 17 th December 2002 and now give reasons.


The M Trust (formerly known as the P Family Trust) was established by instrument of trust declared by the Trustee on 6 th March 1995. It is a discretionary trust. The settlor of the trust was PS (“the settlor”). The class of beneficiaries (after allowing for additions to the class made since 1995 pursuant to the power in that behalf conferred by the trust instrument) comprises ES (“the mother”), the children and remoter issue (present or future) of the settlor, JS, GL, the LCLLPC, the settlor, RMB, Mrs GS and La RCHRF.


The L Trust was established by instrument of trust dated 2 nd October 1997. It is also a discretionary trust. PS was again the settlor. The beneficiaries are the same as for the M Trust save that the mother is not a beneficiary of the L Trust.


J is the daughter of the settlor and the mother. She is aged 25. S was adopted by the settlor and the mother. She is aged 17. She suffers from mental and physical disabilities which mean that she will never be in a position to look after herself. G and A are the children of the settlor by his second wife Mrs GS. They are minors.


Both trusts are expressed to be governed by the law of Jersey. They are administered in Jersey by the Trustee, which is a Jersey incorporated company carrying on the business of trustee in Jersey.


The settlor and the mother were divorced in 1996. On 18 th September 1996 the Domestic Relations Division of the Circuit Court of Cook County, Illinois County Department (“the Illinois Court”) made an order in the divorce proceedings between the settlor and the mother based upon the agreement of the parties. The order granted a decree of divorce, gave sole care, custody and education of S to the mother and ordered the settlor to pay the monthly sum of $3,500 as child support for S. In view of S's disabilities, it was acknowledged that she would require support after she attained the age of majority. The settlor was also ordered to pay the reasonable tuition, application fees, books and registration fees for S's primary and high school education and reasonable expenses for a college, university, vocational school or other learning institution thereafter.


On 5 th August 1999 the settlor filed a petition in the Illinois Court seeking a reduction in the child support and educational payments for S on the basis that his income had decreased since the date of the order and he was unable to pay the same. We were informed that he owes $60,000 arrears in respect of child support, $24,000 arrears in respect of educational expenses and $209,000 in respect of legal fees.


Had the matter rested there as a dispute between the settlor and the mother as to maintenance for S, the matter would have been relatively straightforward. However, in November 2001 the mother instituted a radical change to the nature of the proceedings. She issued a third party complaint joining the Trustee (in its capacity as trustee of the M and L Trusts) to the proceedings. This was served on the Trustee in Jersey on 12 th November 2001. The complaint alleged that both trusts were operated at the behest and control of the settlor to shield and screen the assets of the settlor from enquiry by the mother and to place his assets beyond her reach in connection with the maintenance proceedings. The complaint sought an order that the Illinois Court should find that the settlor was in de facto control of the assets and income of the two trusts, that the protector should be ordered to dismiss the Trustee as trustee of the two trusts and replace it with a trustee chosen by the Illinois Court; and that the Illinois Court should enforce the support and education provisions of its judgment of 18 th September 1996 against the trusts.


Jurisdiction over the Trustee was asserted on various grounds related to the fact that the Trustee, as trustee of the L Trust, had legal title (subject to any mortgages) to a condominium at Unit 3701, 800 North Michigan Avenue, Chicago (“the condominium”). The Trustee challenged the jurisdiction of the Illinois Court in respect of both trusts but that challenge was rejected on 29 th May 2002 and a motion for reconsideration was denied on 23 rd July 2002.


In the meantime, in completely unrelated proceedings in the District Court in the Northern District of Illinois, H Corporation had instituted proceedings against the settlor arising out of the sale of a company. In connection with those proceedings a subpoena was issued to the mother to produce various documents in her possession. On 6 th August 2002 the Illinois Court ordered that the mother and her attorney were to be relieved from liability under the confidentiality agreement and protective orders of the Illinois Court. It is the Court's understanding that this means that any documents supplied to the mother in connection with the proceedings before the Illinois Court are liable to have to be disclosed by her to the Northern District Court for the purposes of the H proceedings.


On 3 rd September 2002 the mother obtained a restraining order from the Illinois Court restraining the Trustee, as trustee of the L Trust, from removing any sale proceeds of the condominium from the State of Illinois and requiring it to deposit any such proceeds in an account at Midwest Bank. It was however directed to pay mortgage expenses etc in relation to the condominium.


On 6 th June 2002 the mother served a notice on the Trustee to produce documents. On 12 th September 2002 the Illinois Court granted an order requiring the Trustee to comply with that notice. The mother subsequently filed a motion for discovery sanctions against the Trustee for failure to disclose the documents as ordered. That application stands adjourned until 10 th January 2003 pending the outcome of this hearing. The documents ordered to be produced are as follows:-

“1. All tax returns, filings, notices, and the like, filed in Jersey, Channel Islands, the United Kingdom, the United States or for any other taxing authority for the M Trust (formerly called the P Family Trust) and the L Trust from the date of their creation to the present.

2. All correspondence, including but not limited to, notes and memoranda of conversations, memos, e-mails and the like, sent by and between Nearco Trustee Company, Jersey, Ltd. and PS or any of his attorneys and/or agents, including but not limited to Louis Levinson, Ronald Tash, Lydia Kamerlink, Howard Lanzar, the firm of Katten, Muchin,...

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