Facts
The facts of this case are straightforward. Mr and Mrs Minwalla were embroiled in a hotly contested divorce in the English High Court. The Trustees of a Jersey Trust, established for the benefit of the husband were served notice of an application by the wife in those proceedings. Given the nature of the orders the wife was seeking from the High Court, it was apparent the wife was alleging the trust was a sham. The trustees entered an appearance and informed the court that they would rest upon the court's wisdom. It was evident from the judgment that the court was unimpressed by the conduct of the wealthy husband and of the Jersey based trustee. It was held by the High Court that the trust was a sham and that effectively the assets of the trust should be transferred to the wife. The trustees then applied to the Royal Court for directions as to how they should respond to the High Court judgment.
Held
The Royal Court drew a distinction between a situation where an English matrimonial court rules that a Jersey trust is a post-nuptial settlement (as in Compass v Barnett 2002 JLR 321) and purports to vary the settlement, and a situation where, as here, the court, applying English law, seeks to declare a Jersey proper law trust a sham. The Royal Court said that as a matter of generality, it would not look favourably upon an attempt by a foreign court to declare a Jersey trust a sham. However, in this case, the trustee had had an opportunity to defend the trust in the English proceedings and had failed to do so and furthermore it was apparent that the husband had been found to have acted less than transparently and fairly in his conduct of the matrimonial proceedings. For those reasons principally, the Royal Court held, that on the principle of comity the High Court judgment should be upheld and the trustees ordered to transfer the assets of the trust to the wife.
Comment
The case is significant because the trustees submitted to the jurisdiction of the English Court. If they had not done so, the case may have been decided differently. When faced with a summons to appear in a foreign court in which an allegation of sham is being made, trustees should seek directions from the Royal Court rather than to enter an appearance and then rest on the wisdom of that foreign court.
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