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Is My Trust Fund Protected If I Get Divorced? – A Jersey Perspective (Part I)

Andrew Fox, a barrister and head of family law at Sinels, provides a comprehensive review - in 2 parts - of the interplay between the English and Jersey courts when faced with trust funds on divorce. Part 1 sets out the statutory provisions and principal cases. Part 2, to be published next month, will consider how the Jersey courts and the trustees may respond.

image of andrew fox

Andrew Fox, Barrister and Head of Family Law, Sinels

Part II of this article can be found here

“…it is important to note that the roles of the two courts are very different. The Family Division is concerned to do justice between the two spouses before it. It is sitting in a matrimonial context and its objective is to achieve a fair allocation of assets between those spouses. It has no mandate to consider the interests of the other beneficiaries of any trust involved. Conversely, this court [the Royal Court of Jersey] is sitting in its supervisory role in respect of trusts, as is regularly done in the Chancery Division of the English High Court. This court’s primary consideration is to make or approve decisions in the interests of the beneficiaries. It has, therefore, a very different focus from the Family Division.” [1]

An overview
1) A high divorce rate[2], growing prosperity which is serviced by a sophisticated private wealth industry, and the principles of fainess and equality have all combined to produce an increase in ancillary relief litigation involving trusts.
2) Inevitably orders made in ancillary relief proceedings in the English Courts (‘the Family Division’) have impacted on trusts; for example where the Family Division has determined that assets held by a trust should be treated as a “financial resource.”[3]

3) This perceived attack on trusts has been of immense concern to trustees and those who have trusts in Jersey. The issue is whether or not Jersey trusts can successfully defend attacks from overseas jurisdictions and, in particular, attempts to enforce judgments of foreign courts against the assets of the Jersey trust.

A profile of Jersey
4) The Channel Islands were part of the Duchy of Normandy when William Duke of Normandy, following his conquest of England in 1066, became King William I of England. The islands have since then been subject to the English Crown as successor to the Dukes of Normandy. 

5) Jersey is a British Crown Dependency and forms part of the British Isles. However, the island is neither part of Great Britain (England, Scotland and Wales), or the United Kingdom (Great Britain and Northern Ireland). It also does not form part of the European Union.

6) Jersey largely operates as an autonomous jurisdiction with wide powers of self-government. The island has its own legislature, administrative, fiscal and legal systems (‘the Royal Court’). 

7) The legislation passed by the States of Jersey frequently draws on English legislation but has also drawn on developments in legislation from other jurisdictions (for example France and Commonwealth countries).

8) Jersey is self-supporting and neither receives subsidies from, nor pays contributions to, the United Kingdom or the European Union.

9) By virtue of the island’s autonomous status and financial structures it has become regarded as an international finance centre, with 47 of the top global banks and 183 licensed trust and company administrators. As at 31 December 2008 bank deposits stood at £206 billion and funds under administration in Jersey stood at £241.1 billion[4].

10) 53% of Jersey’s GVA (gross value added) of £4.1 billion is provided by Jersey’s financial services sector[5]. In light of these facts it is fair comment to make that financial services are the lifeblood of Jersey’s economy. Central to this is the actual, and perceived, independence and integrity of Jersey’s legislature, fiscal and legal systems; an independence that is vigorously defended!

‘Back to basics’: what is a trust and what are the benefits? 
11) There are numerous definitions of ‘a trust.’
12) In the Australian case of Re Scott[6], Mayo J provided the following definition:

“No definition of a “trust” seems to have been accepted as comprehensive and exact…Strictly it refers, I think, to the duty or aggregate accumulation of obligations that rest upon a person described as a trustee. The responsibilities are in relation to property held by him, or under his control. That property he will be compelled by a court in its equitable jurisdiction to administer in the manner lawfully prescribed by the trust instrument, or where there be no specific provision written or oral, or to the extent that such provision is invalid or lacking, in accordance with equitable principles. As a consequence the administration will be in such a manner that the consequential benefits and advantages accrue, not to the trustee, but to the persons called cestuis que trust, or beneficiaries, if there be any, if not, for some purpose which the law will recognise and enforce. A trustee may be a beneficiary, in which case advantages will accrue in his favour to the extent of his beneficial interest.”[7]

13) A statutory definition, as provided in the Recognition of Trusts Act 1987, is as follows:

"For the purposes of this Convention, the term “trust” refers to the legal relationship created—inter vivos or on death—by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose.
A trust has the following characteristics—

(a) the assets constitute a separate fund and are not a part of the trustee’s own estate;
(b) title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee;
(c) the trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon him by law.

The reservation by the settlor of certain rights and powers, and the fact that the trustee may himself have rights as a beneficiary, are not necessarily inconsistent with the existence of a trust."[8]

14) A more basic definition of a trust is an arrangement under which one person (the "settlor") transfers assets to another person (the "trustee") and instructs the trustee to use those assets for the benefit of other persons (the "beneficiaries"). The settlor may be (and frequently is) a beneficiary, and usually the other beneficiaries will be members of the settlor’s family. A beneficiary can be any person nominated by the settlor. The trustee has the legal ownership and control of the assets but may not enjoy them himself; that enjoyment is for the beneficiaries alone.

15) The settlor’s instructions are contained in a written document (the "trust deed") and this ensures that the settlor, the trustee and the beneficiaries know precisely what their respective rights and duties are. It also contains "rules" which set out precisely what the trustee can do. The Royal Court will act to ensure that the trustee abides by these “rules” where necessary. The principle which underlies all of the “rules” is that the trustee must always act in the best interests of the beneficiaries.

16) Some of the benefits of establishing a trust are:

(i) it is a flexible way of managing and maintaining wealth and protecting the financial future of family members;
(ii) it can protect against the financial hardship that can arise upon the death or disability of a family member;
(iii) it will ensure that family assets are retained within the family;
(iv) it can protect trust assets against the claims of the settlor’s and beneficiaries’ creditors;
(v) it can protect the financial future of improvident family members;
(vi) it can be of assistance in planning for the legitimate minimisation of taxation;
(vii) it can protect against the devastating impact and consequences of divorce.

The discretionary trust
17) There are numerous different types of trust (bare trusts, special trusts, fixed trusts and discretionary trusts), but it is the discretionary trust that ancillary relief practitioners frequently have to grapple with. It therefore needs to be considered in more detail.
18) The normal terms of a discretionary trust vest the distribution of both capital and income in the complete and unfettered discretion of the trustees. Discretionary beneficiaries have a hope of benefit but no defined expectation. Although the settlor may be included as a beneficiary he has no legal right to direct the trustees in the exercise of their discretion. The formation of a discretionary trust, and the subsequent transfer of a settlor’s assets into that trust, can guard against future attacks against his wealth because he has severed his legal right and control over the assets.

19) In administering a discretionary trust the trustees normally require guidance from the settlor as to the distribution of capital and income.  This is usually undertaken by the use of “a letter of wishes” given by the settlor to the trustees. This letter may be amended from time to time, or totally rescinded. The letter of wishes is an informal document and does not form part of the trust deed. In normal circumstances the trustee would have full regard for its content and therefore the aspirations of the settlor, however it is only one of the factors the trustees consider.

20) The relationship between a trustee and a beneficiary under a discretionary trust has been described in the following terms:

“A trust exists where a trustee holds property for the benefit of one or more beneficiaries…. The important point is that, save to the extent permitted by the trust deed (e.g. remuneration) the trustee may not benefit from the assets; they are held entirely for the benefit of the beneficiaries. As Lord Blackburn put it in the Privy Council decision in Letterstedt v. Broers (26) (9 App. Cas. at 386): “It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.” In other words, trustees have no interest of their own in the trust property; their sole purpose is to deal with the trust assets for the benefit of the beneficiaries. All the powers of the trustees may be exercised only in the interests of the beneficiaries and in accordance with the terms of the trust deed.
What the exercise of such powers will involve will, of course, vary considerably according to the nature of the trust, the number of beneficiaries, the underlying purposes behind the establishment of the trust, the nature of the assets and many other factors...
Furthermore, it is important that the relationship between trustee and beneficiary should be harmonious. Indeed, lack of harmony may be of itself a good reason for a trustee to resign or be dismissed….This is not surprising because the trustee’s sole duty is to act for the benefit of the beneficiaries. In our judgment there is nothing untoward in beneficiaries making requests of a trustee as to the investment of the trust fund, the acquisition of properties for them to live in or for the refurbishment of properties in which they already live. In our judgment many decisions of this nature are likely to arise because of a request by a beneficiary rather than because of an independent originating action on the part of a trustee. The approach that a trustee should adopt to a request will depend upon the nature of the request, the interests of other beneficiaries and all the surrounding circumstances. Certainly, if he is to be exercising his fiduciary powers in good faith, the trustee must be willing to reject a request if he thinks that this is the right course. But when a trustee concludes that the request is reasonable having regard to all the circumstances of the case and is in the interests of the beneficiary concerned, he should certainly not refuse the request simply in order to assert or prove his independence. His duty remains at all times to act in good faith in the interests of his beneficiaries, not to act against those interests for improper reasons.
In our judgment, where the requests made of trustees are reasonable in the context of all the circumstances, it would be the exception rather than the rule for trustees to refuse such requests. Indeed, as [Counsel] accepted, one would expect to find that in the majority of trusts, there had not been a refusal by the trustees of a request by a settlor. This would no doubt be because, in the majority of cases, a settlor would be acting reasonably in the interests of himself and his family. This would particularly be so where there was a small close-knit family and where the settlor could be expected to be fully aware of what was in the interests of his family. Indeed, in almost all discretionary trusts, the settlor provides a letter of wishes which expresses informally his desires in relation to the administration of the settlement. Furthermore he may change his wishes from time to time. In our judgment it is perfectly clear that trustees are entitled …. to take account of such wishes as the settlor may from time to time express provided, of course, that the trustees are not in any way bound by them. The trustees must reach their own independent conclusion having taken account of such wishes.
On numerous occasions during the course of the hearing, [Counsel] was driven to repeat that Abacus had not rejected any request of Sheikh Fahad. A lack of any refusal may of course be indicative of the fact that trustees have abdicated their fiduciary duties and are simply following the wishes of the settlor without further consideration. But, as mentioned above, a lack of any refusal may be equally consistent with a properly-administered trust where the trustees have in good faith considered each request of the settlor, concluded that it is reasonable and concluded that it is proper to accede to such requests in the interests of one or more of the beneficiaries of the trust. But one does not start, as at times seems to have been the plaintiffs’ case, with an attitude that it is very surprising and worthy of criticism that the trustee acceded to all Sheikh Fahad’s requests. On the contrary, as the Privy Council said …., trustees exist for the benefit of beneficiaries and it is in our judgment very common that trustees will have perfectly properly acceded to all the requests of a settlor without in any way abdicating their fiduciary duties and responsibilities..” [9]

21) The inevitable uncertainty of a beneficiary’s financial expectation under a discretionary trust frequently causes difficulty for ancillary relief practitioners and the Courts alike.

22) The scenario that is frequently encountered is that one spouse, who is also a beneficiary under the discretionary trust, will argue that they have only a hope (and frequently not even that!) of benefiting from the trustees’ discretion; whereas the opposing spouse will seek to argue that the reality of the situation is that the spouse beneficiary has received and will continue to receive benefit from the exercise of the trustees’ discretion!

Is the trust fund protected if the parties get divorced?
23) In a time where fairness and equality between divorcing couples is at the top of the Family Division’s agenda, the desire to do justice between the parties in the most equitable way possible invariably means that assets held in offshore trusts become caught up in attempts to do justice between the parties.

24) In J v V (Disclosure: Offshore Corporations)[10], Coleridge J made the following forthright observations:

“…these sophisticated offshore structures are very familiar nowadays to the judiciary who have to try them. They neither impress, intimidate, nor fool any one. The courts have lived with them for years.”[11]

25) A more measured view is that of Munby J in A v A[12]:

“…In the course of his submissions on behalf of the wife, [Counsel] referred me to Coleridge J's observation in J v V (Disclosure: Offshore Corporations).....

I agree entirely with Coleridge J that the court should adopt a robust, questioning and, where appropriate, sceptical approach. As I said myself in Re W (Ex Parte Orders) [2000] 2 FLR 927 at page 938:

"the court will not allow itself to be bamboozled by husbands who put their property in the names of close relations in circumstances where, taking a realistic and fair view, it is apparent that the recipient is a bare trustee and where the answer to the real question – Whose property is it? – is that it remains the husband's property."

And I went on to refer to:

"the robustness with which the Family Division ought to deal in appropriate cases with husbands who seek to obfuscate or to hide or mask the reality behind shams, artificial devices and similar contrivances. Nor do I doubt for a moment the propriety and utility of treating as one and the same a husband and some corporate or trust structure which it is apparent is simply the alter ego or creature of the husband."

But this does not mean, and I am sure that Coleridge J did not intend to suggest, that the court can simply ride roughshod over established principle, least of all where there are, or appear to be, third party interests involved….”[13]

26) The Jersey perspective is as follows:

“…there is an inherent tension between the two jurisdictions. In the case of the jurisdiction where the divorce is taking place, the court will wish to do justice between the husband and the wife and if there are substantial assets in a trust and the evidence shows that, had the marriage continued, the expectation would have been for those assets to be made available to the parties if the need arose, one can well understand the divorce court taking the view that such assets cannot be ignored. Conversely, form the perspective of the offshore court, the settlor will have established a trust governed by the law of the offshore jurisdiction. The assets therefore no longer belong to him; they belong in law to the trustee who holds them upon the trusts laid down I the trust deed. Assuming it to be a discretionary trust, it is therefore a matter entirely for the trustee as to whether the settlor or his wife should receive any distributions from the trust. The duty of the offshore court, in its capacity as a supervisory court of equity, is to ensure that the trust assets are applied only in accordance with the provisions of the trust and in the best interests of the beneficiaries.”[14]

27) There would appear to be three stages at which a trustee may have to give consideration to the effect of proceedings in the Family Division involving the beneficiary of a trust:

(i) a request for information about the trust for the use of the parties to the divorce proceedings;
(ii) the trustee may be joined as a party to the divorce proceedings by the Family Division and will need to consider whether he should enter an appearance and therefore submit to the jurisdiction of the English Court;
(iii) the trustee maybe faced with a judgment of the Family Division which affects the trust in some way and he will need to consider how to respond (for example the Court has treated the trust as a “financial resource”).

28) In any case involving a trust the ancillary relief practitioner’s starting point should always be: how will any order/s of the Family Division be enforced against the trust? This question is central to the issue of the case ultimately being successful.[15]
29) The trustee’s perspective from the outset will be: what should be done in fulfilment of the fiduciary obligations under the trust to the beneficial class as a whole?
A request for information about the trust 
30) In ancillary relief proceedings where one (or perhaps both) of the spouses is a beneficiary under a trust there is an obligation to give disclosure about the trust.[16] Once the proceedings commence a trustee is likely to be asked searching questions by a beneficiary, or the spouse of a beneficiary, about various matters, for example: 

- who contributed the funds in the first place;
- the amount in the trust;
- where are the trust assets;
- who are the beneficiaries and the nature of any beneficial interests;
- what is contained in ‘the letter of wishes’;
- what benefits have been received in the past (both income and capital);
- when have the benefits been received;
- what benefits are likely to be received in the future;
- details of trust accounts.

31) This information should be requested at an early stage in the proceedings.
32) The issue arises as to how the trustee will react to such requests and how will the Court in the jurisdiction react if the trustee decides to seek directions of that Court.
33) The leading case on this matter is the Privy Council decision of Schmidt v Rosewood Trust Ltd[17]. The Court determined that a beneficiary’s right to seek disclosure of trust documents was one aspect of the Court’s inherent jurisdiction to supervise and intervene in the administration of trusts.
34) Walker LJ stated:

“…no beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves and third parties. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it…” [18]

35) The general position under Jersey law concerning the right to obtain information had already been determined in the matter of Re Rabaiotti 1989 Settlement[19] prior to the decision in the Schmidt case. In Re Rabaiotti trustees had sought directions from the Royal Court following a direction being given in the Family Division that a beneficiary (involved in English divorce proceedings) should disclose copies of ‘accounting documents’ of various settlements, as well as all ‘letters of wishes’ relating to them. The trustees sought directions as to whether they should disclose the documents and whether they should intervene in the proceedings.

36) The Court determined that there was a strong presumption that a beneficiary was entitled to see ‘trust documents’ (i.e. documents which show how the trust assets have been dealt with such as trust deeds, accounts, bank statements, portfolio valuations). Nevertheless the Court had an overriding discretion to withhold such documents if it was satisfied that it was in the best interests of the beneficiaries as a whole. However, adopting principles established in Re Londonderry’s Settlement [20], there was a strong presumption against the disclosure of documents which might disclose ‘the reasoning behind a discretionary decision taken on the part of the trustees’ (for example  minutes of trustee decisions and correspondence between trustees). The Court determined that a letter of wishes was also a document covered by the Londonderry principle, however they did in fact order disclosure of the ‘letter of wishes.’

37) From the case law it is clear that the Royal Court can be amenable to the disclosure of relevant information. In Re H Trust[21] (where the trust assets represented almost all of the matrimonial assets available to the husband and wife for their future maintenance) the Court stated as follows:

“It seems to us important, …, that the husband and the wife should have the fullest information concerning the financial affairs of the trust so that any compromise which they reach, failing which any decision of the Family Division, is based upon the true financial position.”

38) However it is not always the case that information will be disclosed[22] and each case will clearly turn on its facts.

39) It is worthwhile considering the approach of other jurisdictions, most notably the Bermudan Courts in the matter of Charman v Charman[23], before leaving this issue.

40) By way of background, in that case the husband had made a fortune in the insurance market in the City of London and by the time of the ancillary relief proceedings there were assets in excess of £100 million, of which £68 million were in a trust.
41) The trust had initially been established in Jersey, however in 2003 the husband moved to live in Bermuda and as part of his decision to move abroad the husband arranged to move the trust from Jersey to Bermuda.
42) Throughout the ancillary relief proceedings the husband asserted that the assets owned by the trust should be left entirely out of account. The wife made application to the Family Division for the issue of Letters of Request (directed ultimately to the trustees in Bermuda) to investigate the husband’s assertion that the trust was and had always been considered to be a “dynastic trust.”
43) The husband was to put up “vigorous resistance” [24] to the application, but the application was to be granted by the High Court. The husband appealed to the Court of Appeal[25] where the appeal was to be dismissed.
44) The Court’s rejection of the appeal was to be to of little consequence since the Bermudan Courts, contrary to what was anticipated, did not order the production of documents by the trustees upon their opposition to do so.
45) In the ensuing substantive hearing of the ancillary relief application Coleridge J was to describe this decision as “churlish” and “parochial”[26]. However his comments seem to have taken little regard of the fact that the Bermudan Court was simply applying the Hague Convention on Trusts[27] which was expressly intended to cover divorce and family matters. Also of note are the views of Lloyd LJ (sitting in the Court of Appeal) who made the following prescient observations: 

“…If objection is taken by the trustee, it will be for the court in Bermuda to rule on it, by reference to the particular points taken as regards the particular obligations sought to be imposed as regards the production of documents and the giving of oral evidence. Nothing that this court says can, or should be taken to, pre-empt or anticipate the decision of that court on whatever points are taken before it…It seems to me proper, therefore, to give some thought to whether such an objection would be bound to succeed ” [28]

Submitting to the jurisdiction
46) Where parties to divorce proceedings have interests under a trust it is invariably the case that the Family Division will join the trustees to the proceedings.
47) Family practitioners frequently have to consider whether it is necessary to join trustees to ancillary relief proceedings. In general, in ‘big money cases’, where it is sought to argue that the trust assets are a realistic source of capital and or income, or where it is sought to vary a settlement, then it can be highly beneficial to join the trustees to the ancillary relief proceedings: by joining the trustees they are subject to a duty of litigation disclosure which is much wider than disclosure by a non-party (although joinder solely for this reason would be considered improper and also costly) and joining the trustees should (in theory at least!) minimise enforcement difficulties.
48) The most appropriate time to consider joining the trustees is at the outset of the ancillary relief proceedings at the First Directions Appointment[29].
49) The role of the trustee is very different to that of the ancillary relief practitioner and the Family Division dealing with the ancillary relief proceedings. When joined, the trustees are faced with the difficult decision as to whether they should take any part in the divorce proceedings whatsoever, and thereby submit to the jurisdiction of the Court of the Family Division.

50) In all such cases it is incumbent upon trustees to obtain legal advice and, if necessary, directions from the Royal Court, before taking any legal action in becoming involved in divorce proceedings. At this juncture, the primary issues for the trustees will be:

- why are they being asked to participate?
- what are they being requested to do?
- where are the proceedings being conducted?
- where are the trust assets?
- what are the beneficiaries’ views?
- what is in the beneficiaries’  best interests?
- what are the risks of compliance and non compliance?

51) Article 51(1) Trusts (Jersey) Law 1984 provides:

“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.”

52) As mentioned above, a decision to submit is inextricably linked to the question of the enforceability of any subsequent judgment of the Family Division.

53) In the case of Re H Trust[30] the trustees had applied to the Royal Court for directions concerning ancillary relief proceedings in England. The Court was to approve the decision of the trustees not to submit to the jurisdiction of the Family Division, but emphasised the importance of the trustees providing the parties to the matrimonial proceedings with the fullest financial information concerning the trust (as they had done) to ensure any order made would be based on the true financial position[31]. Birt, DB, stated as follows:

“11.… the Trustee seeks approval of its decision not to submit to the jurisdiction of the English Court. That is a continuing and significant matter such that it is reasonable to seek the approval of the Court.

12. Significant consequences may flow from a decision by a trustee of a Jersey Trust to submit to the jurisdiction of the Family Division of the High Court or indeed any other Court considering the matrimonial affairs of beneficiates of a trust.  Any order subsequently made by the Family Division would be made in proceedings to which the trustee had voluntarily submitted and in which therefore it had full opportunity to put forward submissions on the order which the court should make.  It follows that the trustee would be in some difficulty in arguing subsequently before this court against the proposition that any order of the Family Division relating to the trust should be enforced without reconsideration of the merits of such order.

13. Conversely, if the trustee has not submitted to the jurisdiction of the Family Division, any order of that court will not be enforceable in Jersey under the rules of private international law.  On any subsequent application to this court to vary the trust so as to achieve the affect of any variation or other order made by the Family Division, this court would have complete discretion as to the course it should take.
15. It follows that, in most circumstances, it is unlikely to be in the interest of the Jersey trust for the trustee to submit to the jurisdiction of an overseas court which is hearing divorce proceedings between a husband and wife, one or both of whom may be beneficiaries under the trust.  To do so would be to confirm an enforceable power upon the overseas court to act to the detriment to the beneficiaries of a trust when the primary focus of that court is the interest of the two spouses before it.  It is more likely to be in the interests of a Jersey trust and the beneficiaries thereunder to preserve the freedom of action of both the trustee and this court to act as appropriate following and taking full account of the decision of the overseas court.  We have said that this is likely to be the case in most circumstances.  In some cases, e.g. where all the trust assets are in England, it may well be in the interests of a trustee to appear before the English court in order to put forward its point of view because, by reason of the location of the assets, that court will be able to enforce its order without regard to the trustee or this court.

16. The observations which we have made do not lead to the conclusion that this court will ignore a decision of the Family Division or other overseas Court.  Far from it.  That court will have investigated the matter very fully and will have made a decision intended to achieve a fair allocation as between the spouses.  In such cases, the interests of comity as well as the interests of the beneficiaries will often point strongly in favour of this court making an order which achieves the result contemplated by the order of the Family Division.  Indeed, this court has made such orders in the past and will no doubt do so again in the future.  But the significant factor, from the point of view of whether the trustee should submit to the jurisdiction of the overseas court, is that it will remain a matter of discretion for this court as to the course it should take in light of the overseas order if the trustee has not submitted, whereas if the trustee has submitted, the overseas order is likely to be enforced without reconsideration of the merits.  For these reasons, we approve of the trustees decision not to submit to the jurisdiction of the Family Division in this case.” [32]

54) It is of note that in Re IMK Family Trust Birt, DB, qualified these comments by saying:

“…it is worth noting that they were entirely obiter in that no order had been made in the English matrimonial proceedings at the date of the Judgment…” [33]  

55) A decision on the part of the trustees, and the Court (if requested to give directions), as to whether a trustee should submit to a foreign jurisdiction must be taken on where the best interests of the beneficiaries lie. Each case is fact specific, for example in Re Turino Consolidated Limited Retirement Trust[34] the respondents (the husband and wife) were the beneficiaries of a Jersey trust, the sole asset of which was their matrimonial home in the Netherlands. In divorce proceedings (to which the trustee did not submit), a Dutch court ruled that, on the basis of a letter of wishes, the respondents had equal interests in the trust and accepted the wife’s valuation of the matrimonial home and ordered that it should be offered for sale to her at that price and thereafter to be sold on the open market. The trustee applied for directions in the light of the letter of wishes and the order of the Dutch court. The Royal Court authorised the trustee to appear before the Dutch court in order to advance various arguments concerning the practicalities of the orders made by the court.
56) The case of A and A and St George Trustees Limited and others[35] illustrates the potential benefits of trustees submitting to the jurisdiction (this was a decision of Munby J handed down in January 2007 at a time when the Charman case was still very much in proceedings). Here the trustees intervened and gave evidence in the ancillary relief proceedings. In this case although the trustees were based in Jersey (and therefore were personally responsible to the Jersey regulatory authorities) the trusts were governed by English law and not by Jersey law.
57) In submissions to the Court, Counsel for the trustees made the following observations:

“Whilst the court is of course free to give judicious encouragement to the Trustees if it concludes it is appropriate to do so on the facts of this case, the Trustees must (and do) jealousy guard their independence in this respect. The court should not assume that the Trustees will automatically or inevitably exercise their discretion in any particular way simply because they are encouraged to do so by the court. By making this submission the Trustees are not indicating an intention to set their face against whatever the court may consider is the right solution as between [the husband and the wife]: they simply make it clear that they have a number of beneficiaries to consider and they will do what they think is right for the class of beneficiaries as a whole. If that requires them to disregard any judicious encouragement, then – respectfully but firmly – disregard it they will…” [36]

58) The Court described this approach as “…an impeccable attitude for the trustees to be adopting…”[37] and was to determine that:

“I do not think it likely that the trustees will be prepared to make capital distributions from the trusts for the benefit of the husband or in order to enable him to meet his obligations under any order I may make. It is, of course, possible that the trustees will be prepared to assist the husband in this way, but there is nothing in the history of the trusts thus far to suggest that they will…”[38]

[1] Per Birt, Deputy Bailiff, Re H Trust [2006] JLR 280, paragraph 14
[2] 32,900 petitions filed for divorce in the first quarter of 2009 in UK; Provisional Court Statistics, MoJ
[3]Section  25(2)(a) Matrimonial causes Act 1973
[4] Fact sheet (March 2009);
[5] Economic data (2007);
[6] [1948] S.A.S.R. 193
[7] [1948] S.A.S.R. 193 at 196
[8] Article 2 of the Schedule to the Recognition of Trusts Act 1987
[9]Per Birt, Deputy Bailiff, in Re The Esteem Settlement (Abacus (C.I.) Limited as Trustee) 2003 JLR 188, paragraph 163ff [10] [2004] 1 FLR 1042
[11] Ibid, paragraph 130
[12] [2007] EWHC 99 (Fam)
[13] A and A [2007] EWHC 99 (Fam), paragraph 18ff
[14] Per Birt, DB, “Trusts and Divorce Courts – An Offshore Perspective”, The Jersey and Guernsey Law Review 2009, Vol 13, Issue 1, p6; see also headnote
[15] See Mubarak at paragraph 90ff below
[16] Form E; paragraph 2.14:”trust interests (including interests under a discretionary trust), stating your estimate of the value of the interest and when it is likely to become realisable. If you say it will never be realisable, or has no value, give your reasons”
[17] [2003] 3 All ER 76
[18] [2003] 3 All ER 76, paragraph 67
[19] [2000] JLR 173
[20] [1964] 3 All ER 855
[21][2006] JLR 280, paragraph 17
[22] See for e.g. Re L & M Trusts [2003] JLR note 6
[23] [2005] EWCA Civ 1606 (1st decision of CA); [2006] EWHC 1879 (Fam) (substantive AR decision of Coleridge J); [2006] EWCA Civ 1791 (2nd decision of CA); [2007] EWCA Civ 503 (3rd decision of CA)
[24] Per Coleridge J, [2006] EWHC 1879 (Fam), paragraph 54
[25] [2005] EWCA Civ 1606
[26][2006] EWHC 1879 (Fam), paragraph 54
[27] The Hague Convention obligations were given effect in English law by the Recognition of Trusts Act 1987
[28][2005] EWCA Civ 1606, paragraph 63
[29]R1.3 of the Family Proceedings Rules 1991, as contained in RSC Ord 15, r.6(2)(b)(i) and (ii)
[30] [2006] JLR 280
[31] See paragraph 37 above
[32] Per Birt, Deputy Bailiff, Re H Trust [2006] JLR 280, paragraph 11ff
[33][2008] JRC 136, paragraph 45
[34] [2008] JLR N27
[35] [2007] EWHC 99 (Fam)
[36] A and A [2007] EWHC 99 (Fam), paragraph 97
[37] Ibid, paragraph 98
[38] Ibid, paragraphs 100-101