Dispute in Jurisdiction over Foreign Law Trust

Two hearings in which Mark Renouf acted for the Trustees. The Representor was the trustee of two family trusts, the H Trust and the J Trust. Both trusts were governed by Bermudian law. The J Trust, through BVI companies, owed a substantial country house in Europe. Whilst being a very valuable asset, the running costs of the country house far exceeded the rent received and settlor (to whom it was let) had significant indebtedness to the trusts and bank. Following numerous efforts to find alternative solutions and re-financing the trustee made the decision that the house had to be sold to settle the debts. The settlor and one beneficiary opposed that decision.

The Trustee sought the court’s approval of its decision to market the property for sale on the basis that it would return later for approval to sell. The court was satisfied that the decision had been formed in good faith and was a reasonable one which had not been vitiated by any actual or potential conflict of interest. However, the settlor argued that the Royal Court had no inherent jurisdiction over any trusts other than those governed by jersey law. It has jurisdiction over foreign trusts only by virtue of the Trusts Law, and only to the extent that such jurisdiction is conferred by the Trusts Law. Importantly, Article 51 is qualified by Article 50.

If Article 50 is to have any effect, it must be read as limiting the circumstances in which the powers given in Article 51 can or should apply to the foreign trust. Otherwise, he said, Article 50 would be otiose. However, the Royal Court held that there was nothing in the context of Article 51 which limits the Court’s powers to Jersey trusts and that the Court has jurisdiction over Jersey resident trustees of a foreign trust under Article 5 of the Trusts Law. I held that “It is a jurisdiction that is given over the Jersey resident specifically in its capacity as trustee of that foreign trust. It would be self-defeating if the Trusts Law were on the one hand to give the Court jurisdiction over a Jersey resident trustee in that capacity and on other hand to then curtail the Court’s ability to do anything to enforce that foreign trust by limiting the Court’s powers under Article 51 to Jersey Trusts”.

The court also considered the settlor’s application on grounds of forum non conveniens. The court referred to the established test, as set out in Spiliada Maritime Corp v Consulex Limited [1986] 3 All ER 843 (and followed in Jersey law Heinrich-v-Pantrust and Others) In the matter of the Brazilian Trust [2016] JRC 106A, In the matter of the Manor House Trust [2015] JRC 208 and Crociani v Crociani [2014] UKPC 40 and concluded that the trustees had satisfied the court that Jersey was the most appropriate forum.

In its later judgment (reported under [2017]JRC189) the court set out its reasons for blessing the decision that the country house be sold. Interestingly, the trustee’s decision to be blessed was to bind itself to a floor price for sale, rather than a confirmed sale to an identified specific purchaser. The court held however that the trustee was not fettering the way it could exercise its powers in the future and accordingly gave it’s blessing.

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