SW v X Trust Company Ltd

JurisdictionJersey
CourtRoyal Court
JudgeJ. A. Clyde-Smith,Jurats Clapham,Le Cornu
Judgment Date02 October 2007
Neutral Citation[2007] JRC 187
Date02 October 2007

[2007] JRC 187

ROYAL COURT

(Samedi Division)

Before:

J. A. Clyde-Smith, Esq., Commissioner and Jurats Clapham and Le Cornu.

In the matter of the H Trust

Between
SW
Representor
and
(1) X Trust Company Limited
(2) R W
(3) R C W
(4) AP
Respondent

Advocate R. J. MacRae for the Representor.

Advocate D. M. Cadin for the First Respondent.

Authorities

In the matter of the H Trust [2006] JRC 057.

Leasehold Reform Act 1967.

Lewin on Trust 17 th Edition.

Marley v Mutual Security Merchant Bank [1991] 3 All ER 21.

S Settlement [2001] JLR N 37.

B Trust [2006] JRC 185.

S and L and E v Bedell Cristin Trustees [2005] JRC 109.

THE COMMISSIONER:
1

This is an application by SW, a beneficiary of the H Trust, for X Trust Company Limited (the "Trustee") as trustee of the H Trust to be directed to give effect to the Order of Coleridge J in the English High Court of Justice, Family Division, dated 27 th September, 2006, ("the English Order"), in divorce proceedings between SW and her husband RW, the settlor of the assets of the H Trust.

2

This application was brought before the Royal Court on 20 th June, 2007, when the Court convened the Trustee, RW, who has not appeared but who has submitted an affidavit, and RW's two children who all represent the interest of the spouses and minor children and any future issue they may have. They did not appear but submitted letters to the Court. The matter was heard on the 20 th August 2007.

Previous directions
3

Directions were given to the Trustee by the Royal Court on 12 th April 2006 ( In the matter of the H Trust [2006] JRC 057) when the Royal Court:-

  • (i) Directed the Trustee not to submit to the jurisdiction of the Family Division. The Court made it clear (paragraph 18) that the decision not to submit was quite separate from the question of the provision of information. The Court stressed the importance of the parties having the fullest information concerning the financial affairs of the H Trust, so that any decision of the Family Division would be based on the true financial position. It is clear that the Family Division was indeed given the fullest information in relation to the affairs of the H Trust.

  • (ii) Declined to make any order in relation to the decision of the Trustee to change the proper law of the H Trust from English Law to Jersey Law.

  • (iii) Declined to give open ended approval to the stance of the Trustee in relation to the request from the husband and wife.

4

The Court on that occasion added a postscript which is worth setting out in full:

The Court would like to take this opportunity of emphasising some of the remarks which it made during the course of the hearing. On the evidence before the Court, the trust fund appears to comprise almost the entirety of the assets available to provide in future for the husband and the wife. The marriage has been a long one and the assets were contributed to the Trust by the husband during the course of the marriage. The Trustee has used the trust fund to maintain the husband and the wife at a high standard of living in recent years as a result of which the capital appears to have been somewhat depleted. No payments have been made to or for the benefit of any of the other beneficiaries .

The marriage has now come to an end and clearly the wife has to be provided for as well as the husband, albeit that it would seem that both will have to live at a reduced standard as compared with the somewhat unrealistic level which has been provided in the past. The wife remains a beneficiary at present by reason of her status as a spouse and, even following decree absolute, it would be open to the Trustee to appoint her as an additional beneficiary. In the circumstances it would seem, on the face of it, entirely appropriate that the Trustee should agree to assist in giving effect to any reasonable arrangement reached by the parties in relation to their financial affairs. The funds in this case are limited and it cannot be in the interests of the husband or the wife (as beneficiaries) or the trust fund (and the other beneficiaries) for these limited funds to be spent on litigating this matter (whether before the Family Division or this Court). We hope very much that the Trustee, the husband and the wife will all give due consideration to this aspect of the matter .

5

As can be seen from what follows, very substantial sums indeed have since been spent on litigation, sums representing some 18% of the assets held within the H Trust at the date of the English Order and sums the benefit of which neither party can afford to lose.

English Order
6

Following two unsuccessful attempts at financial dispute resolution hearings in which apparently RW did not really take part, the financial aspects of the marriage came before the Family Division in September, 2006. At that time there were assets within the H Trust of about £2.5 million and precious little else. Judgment was given by Coleridge J on the 18 th September in which he observed:

"There is barely enough to go round, barely enough to support a reasonable way of life for both spouses following the divorce for the rest of their life. That situation is in stark contrast to the recent past when the lifestyle of the parties can be described as "stylish" if not "lavish". It certainly would have given the impression of very significant wealth and indeed, until a few years ago, there was a lot more money to play with."

The Judgment continued:

"5. So this case is bedevilled by the fact that both parties have had to come to terms with the unpalatable reality that, following their separation, they are both going to have to take a very significant drop in their living standard. When such an adjustment coincides with divorce, a wife invariably - and often justifiably - believes there is financial manoeuvring going on to defeat or reduce her claim. When that is combined with the fact that the assets are held offshore, apparently by hostile trustees, suspicion deepens. The wife in this case believes that the trustees are in the husband's pocket to do her down. Having now heard the case over five days, heard the parties give evidence at some length, read numerous statements and examined numerous documents in eleven lever arch files, I am satisfied that neither the husband nor the trustees are embarked on a campaign to deliberately do her down; however some of their actions and statements have been at times both ill-judged and intemperate. The husband has, furthermore, been unco-operative in his disclosure and erratic with interim provision. That does not help .

6. Furthermore, the trustees have also entered the arena of the debate between the husband and wife, and expressed views about the outcome of these proceedings which was not their department. Particularly I am referring to a letter of 20th January 2006 which is to be found at bundle 2, p. 198. In so doing, they have become partisan and in the husband's camp, and so, predictably, the wife wants no solution to this case which contemplates them controlling assets of which she has the use .

7. However, the trustees' position has not been and is not easy, as they have had to try and stem the outward flow of funds from the trust at a rate which is, quite frankly, unsustainable in anything but the short term. They have had to try and inject some reality into the parties' spending habits."

7

Coleridge J found the evidence of SW to be transparent and honest but there were aspects of RW's evidence that he found unsatisfactory, in particular his failure to disclose an interest he had in land owned by his brother (an asset which was not taken into account in the orders that were made) and a bank account in which the sum of US$ 96,000 was deposited.

8

The parties had married in 1983 when SW was 31 and RW 53 and had no children. Today RW is 78 and SW 56. RW's two children RCW and AP were from his previous marriage. The H Trust had been created in 1992. The assets settled by RW into the H Trust related to an investment made by him in the early part of 1983 which came good in 1997 when some 7.6 million dollars was received by the H Trust. However, Coleridge J found that SW had thrown "in her lot fully with the husband" at the outset of the marriage by selling her own property in New York and paying the profit of some US$97,000 to RW thus making a significant capital contribution at the beginning of the marriage. RW is named under the Trust Deed as the principal beneficiary but under the letter of wishes it was made clear that on his death SW was to step into his shoes and the trust assets and income devoted to her during her lifetime. That was changed in 2004 and was one of the triggers for the issuing of the divorce petition.

9

In 1989 SW and RW had acquired the lease of a manor in England in which they subsequently lived with staff relying on loans from the H Trust. By 31 st December, 2004, those loans had totalled some 4.5 million dollars which were written off by way of a capital distribution to RW. In 2005 and 2006 there have been further capital distributions of $714,000 and $508,000 respectfully, leaving the Trust with the £2.5 million worth of assets it held in September 2006. Those assets are in essence as follows:

  • (i) Properties in Scarborough (the "UK Properties") valued at £400,000 in one of which SW's mother resides.

  • (ii) Land in British Columbia (the "Canadian land") valued at £367,000.

  • (iii) An investment portfolio valued at £1,498,570 (as at September 2006).

  • (iv) A Portuguese property (the "Portuguese property") held in the names of RW and SW, but in which the H Trust has an interest, valued at £251,358.

10

Coleridge J acknowledged the fact that all the material assets available to the parties were held within the H Trust as follows:

"40. I turn, then, to look at the financial resources of the parties. Now, the preliminary point, of course,...

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