It will often be the case for a trustee of a family trust that it is not only the husband and wife that are forced to make hard decisions when a marriage breaks down. One of the spouses will often wish to involve the trustee in negotiations or even proceedings in respect of the divorce, particularly where there is a suggestion that the other spouse is hiding assets in a trust, that the trust is a sham, or even if that is not the case, if the majority of the matrimonial assets are held in the trust.
Such latter circumstances formed the background to the Court’s judgment in Re the H Trust  JRC 057. The trust in question was a Jersey law discretionary trust with husband and wife as beneficiaries as well as the two adult children of the husband from his previous marriage and their issue. The husband and wife were married in 1983 and the majority of the matrimonial assets were held in the trust. Divorce proceedings were issued by the wife in the Family Division of the English High Court, which granted the wife’s application to join the trustee to those proceedings.
The Jersey trustee took advantage of the power under Article 51 of the Trust (Jersey) Law 1984 (as amended) – formerly Article 47 – to seek the directions of the Royal Court in Jersey regarding whether it should submit to the jurisdiction of the English High Court.
If a trustee voluntarily submits to the jurisdiction of the Family Court - or, indeed, any Court - it has had, in theory, a full opportunity to participate in the proceedings and would have difficulty in opposing any subsequent enforcement of an order made by the foreign Court, even in a later hearing before the Jersey Court.
No Submission to the Jurisdiction
However, if a trustee has not submitted to the jurisdiction of the Family Division, the spouse must ordinarily bring proceedings in Jersey to enforce an English judgment against Jersey-based assets. At this point, the trustee would usually apply under Article 51 for directions to the Royal Court, which "would have complete discretion as to the course it should take".
In Re the H Trust, one of the key considerations for the Royal Court was the very different role that it and any Court considering matrimonial proceedings would undertake. Whilst a matrimonial Court will consider the interests of the spouses with the objective of achieving a fair allocation of assets between those spouses based on family law principles, the Royal Court sits in its supervisory role in respect of trusts with its primary consideration being to make or approve decisions in the interests of the beneficiaries.
In its decision, the Court pointed out that "in most circumstances, it is unlikely to be in the interests of a 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 confer an enforceable power upon the overseas Court to act to the detriment of the beneficiaries of a trust when the primary focus of that Court is the interests of the two spouses before it. It is more likely to be in the interests of a Jersey trust and the beneficiaries there under 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".
The Royal Court confirmed that the trustee should not submit to the jurisdiction of the English Court. However, the Court did sound a warning note by indicating that it would pay attention to a decision of an English Court. The principles of comity as well as the interests of the beneficiaries would often point strongly in favour of the Jersey Court making an order in line with that of the Family Division. Furthermore, in some cases, for example where all the trust assets are in England, the parties will be able to enforce an English order without regard to the trustee or the Jersey Court, and therefore, it may well be in the interests of a trustee to appear before the English Court.
The Royal Court did emphasise that even if not taking part in the proceedings, a trustee, in these circumstances at least, should ordinarily co-operate in providing information relating to the financial affairs of the trust so that any compromise or decision of the Family Division is based upon the true financial position. Thus, even if a trustee is not involved as a party in the decision-making process for the division of assets, it cannot remove itself from the process entirely and it must decide its stance dependent upon the facts of the case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.