Royal Court Case Tracker

1. Representation of Craigmonie Hotel Limited [2024] JRC009 

The Representor bought an application to set aside a trust that it had established on grounds of mistake.

The trust was established by the now deceased owners of the Representor following advice received by Baxendale Walker (a firm of lawyers in the United Kingdom) whose advise has led to a number of similar cases being determined by the Royal Court.

The advice the beneficial owners (who were husband and wife) of the Representor obtained from Baxendale Walker is that they should transfer three properties that they owned at the time to the trustees of the trust and the trustees would then agree to provide a deferred annuity income to them and that their children may also benefit.

However, the trust instrument that was executed stated, in the Excluded Persons section that not only was the Representor an excluded person, but also ‘any person connected with the Representor’.  This also extended to ‘the Enforcer’ (who was expressed to be the beneficial owners of the Representor) and any person connected with the Enforcer’.  The Trust Instrument stated that the words ‘connected with’ were to have the meanings ascribed to them in the Income and Corporation Taxes Act 1988.  That Act makes clear that a ‘person is connected’ with the Representor if they have control of the same.  In the case of individuals, the Act makes clear that a ‘person is connected’ with an individual if they are a relative of the individual.

Accordingly, not only were the beneficial owners of the Representor were duly excluded from benefit, but also their children (given that they were relatives of the beneficial owners). This resulted in none of the family members being able to access any of the assets subject to the trust, on the basis that to allow them to do so would constitute a breach (the power of amendment did not extend to amending the Schedules where the Excluded Persons section was included).

The Court applied the settled test that it must apply when considering whether to declare a Jersey law governed trust invalid on the grounds of mistake namely:

• Was there a mistake on the part of the Representor – The Court held that the Representor, through its beneficial owners believe the advice that they and their children could benefit.
• Would the Representor not have entered into the transaction but for the mistake
• Was the mistake so serious a character as to render it unjust on the part of the trustee to retain the assets in question

The Court answered all of these questions in the affirmative which resulted in the trust being declared void, with the resulting trust fund being declared to be held by the trustee for the Representor.

2. Representation of Viberts Executors Limited [2024] JRC055 

The Representor brought an application for a blessing by the personal representatives of the Jersey estates of two deceased individuals (A and B) to enter into a memorandum of understanding committing them tot pay a contribution to the Executors of A’s United States estate in relation to the worldwide taxes payable on the entirety of A’s estate as a matter of US law.  This liability arose because A, throughout her life, was a US citizen, although she may have acquired a domicile of choice in Jersey.  B was a UK citizen and also contended that he had acquired a domicile of choice in Jersey.  A and B were married and at the time of their death had lived in Jersey for a number of years with Jersey being their home.

At the heart of this matter is whether this decision to enter in a memorandum of understanding represented an indirect attempt to enforce a foreign revenue claim.  The basic principle is that the Royal Court will not enforce a foreign revenue claim.

The Court ultimately blessed the decision of the Executors on the basis that the proposed settlement was in the interests of the beneficiaries of the respective estates.  However the Court made it very clear that it granted this blessing on the basis that some of the assets of the estates were in the same country where a claim to enforce the foreign tax could have been made.  It made clear that if all of the assets of the estates had been in Jersey, it would have refused to approve the Representor entering into the compromise unless some form of peril to either the personal representatives or the beneficiaries could be established.

3. Representation of Equiom Trust (CI) Limited [2024] JRC068 

This case concerned a will of a person who died in 1979 (which thus pre-dated the enactment of the Trusts (Jersey) Law 1984) that purported to create various trusts which included an accumulation period of 20 years and then life interests of income to the testator’s two nephews. On the death of those nephews, the final disposal of residue was to a discretionary trust with the Greek Government as trustee (the “Intended Trust”).

The Intended Trust had two further components. Under one, the Greek Government had discretion as trustee how to employ income on the trust fund to provide interest free loans to intelligent and promising young men of Greek Orthodox faith born in Greece of Greek, Greek Orthodox parents, for the purpose of them undertaking further university education in specified countries (the “Criteria“). Under the other, the testator’s grand-nephews and great-grand-nephews would have priority to trust funds for further university education, again in the trustee’s discretion, but not have to repay any sums advanced (the “Nephew Exemption“). 

The issues the Court had to address

The Court identified the following issues that need to be addressed:

• Did the Intended Trust create a trust?
• If the Intended Trust created a trust, was it invalid due to: (i) a lack of certainty of beneficiaries; or (ii) its indefinite duration?
• If it was otherwise invalid, is it nevertheless a valid charitable trust?
• If it was not a valid charitable trust, can the charitable aspects be saved or severed? 

Did the Intended Trust create a trust?

The Court concluded that when read in the context of the will, the Intended Trust was intended to create a trust.  This was because of the following:

• The wording of the Intended Trust was very different to other parts of the will where absolute gifts were provided.
• The Intended Trust was given a name.
• The Court also rejected an argument from the Greek Government that the Intended Trust was simply a gift subject to a condition subsequent. The Court was satisfied that the Intended Trust showed an intention to impose a trust obligation on the Greek Government.

Was the Intended Trust invalid?

The Court held that the Criteria established the class of beneficiaries for the Intended Trust.  However the Court noted that it was necessary for an individual to satisfy the entirety of the Criteria in order to be regarded as a beneficiary of the Intended Trust.  As a result, the Court held that this created a lack of certain of the class of beneficiaries.

As to the intended duration of the Intended Trust, it contained no provision for the vesting of the capital to any person who satisfied the Criteria.  Given that it predated the enactment of the Trusts (Jersey) Law 1984, it was necessary to determine what the position in Jersey was prior to the enactment of this piece of legislation.   The Court held that the rule against perpetual or indefinite trusts (which exists as a matter of English law) also forms a part of Jersey law (given that Jersey case law, most recently Rawlinson & Hunter Trustees SA v Chiddicks [2019 (1) JLR 87] confirmed that: “it is apparent that in seeking to identify and to apply the trust law of Jersey, one should look to what is the trust law of England and to the English case law on trusts save where these may need to give way to customary law and Jersey legislation.”)  Upon analysing the customary law of Jersey, the Court noted that it was clear that Jersey, in common with other civil law jurisdictions (such as France) had created structures to prohibit property from being inalienable.  As such the Court regarded it highly unlikely that the customary law of Jersey would have permitted an indefinite trust of movables to be created by a will.

Is the Intended Trust a valid charitable trust or could the charitable aspects be saved or severed?

A charitable trust, unlike a normal trust does not require certainty of objects.  In addition, a valid charitable trust can last indefinitely.

In order for a charitable trust to exist, it must be: (i) exclusively for charitable purposes; and (ii) for the public benefit (i.e. it benefits the community or a section of the community).  It was accepted that at least on the face of it, the Intended Trust did seek to further a charitable purpose.  The difficulty arose by the inclusion of the Nephew Exemption (this is because the class of beneficiaries of a charitable trust must not be dependent upon their relationship to a particular individual).  As such the Court declared that the Intended Trust was not a valid charitable trust.

The Court concluded it was possible to sever the Nephew Exemption from the Intended Trust upon the death of the last surviving nephew.

Last updated: 14 May 2024