Jersey: Foreign Courts’ Invasion Of Jersey Trusts Repelled

Last Updated: 11 February 2009
Article by Appleby  

On 15 August 2008, the Royal Court of Jersey delivered a landmark judgment regarding the circumstances in which it will enforce or give effect to a foreign court order varying the terms of a Jersey trust.

The decision in In the Matter of the IMK Family Trust (Mubarak v Mubarak) (2008) JRC 136, recently upheld by the Court of Appeal, is a significant development of the case law concerning the enforcement in Jersey of foreign court orders against Jersey trusts.

Mr and Mrs Mubarak established the IMK Family Trust (a discretionary trust governed by Jersey law) in September 1997. Mrs Mubarak was originally a beneficiary under the trust. Under the terms of the trust, Mr Mubarak was granted the power to add and exclude beneficiaries. In 1998, Mr Mubarak exercised this power by removing his wife as a beneficiary and declaring her to be an excluded person. Mrs Mubarak subsequently commenced divorce proceedings against her husband in the English High Court.

In 1999, the English High Court ordered Mr Mubarak to make a lump sum payment of £4.875 million to his wife. Since that date, Mr Mubarak consistently sought to avoid compliance with the order and Mrs Mubarak has been engaged in notoriously protracted litigation to have the order enforced.

In 2007, Mrs Mubarak obtained an order from the English High Court varying the terms of the trust and requiring the trustees to pay to her the sums due by her husband under the 1999 order. Mrs Mubarak then sought to enforce this order in Jersey.

Two Types Of Variation

The Royal Court helpfully differentiated between two types of variation of trust; firstly, a variation which alters the terms of the trust deed itself in a way which is outside the powers of the trustees (which the court referred to as an alteration) and, secondly, a variation in which the trust is varied in a way that the trustees themselves could have done by exercising a power in the trust deed.

The Royal Court considered the extent of its general supervisory powers and held that it had no jurisdiction to alter the terms of a trust under Article 51 of the Trusts (Jersey) Law 1984 (concerning applications for directions) or under its general supervisory jurisdiction.

The Royal Court then considered whether it could enforce the English order obtained in 2007 in Jersey. The Royal Court took into account the effect of Article 9 of the Trusts Law. Article 9(1) provides (inter alia) that all questions concerning the variation of a Jersey trust shall be determined in accordance with Jersey law. Further, Article 9(4) provides that no foreign judgment in respect of a Jersey trust shall be enforceable to the extent that it is inconsistent with Article 9(1).

The Royal Court held that by virtue of Article 9(4), it could not enforce a judgment of a foreign court varying or altering the terms of a Jersey trust even where the trustees have submitted to the jurisdiction of the foreign court.

Jurisdiction Of A Foreign Court

Where an order of a foreign court varies, but does not alter, the terms of a Jersey trust in a manner which is within the powers of the trustees, the Royal Court has power to give directions under Article 51 of the Trusts Law to the trustees to put the variation into effect if that would be in the interests of the beneficiaries. The Royal Court emphasised that the giving of directions under Article 51 did not amount to enforcement of a foreign judgment.

Order Of A Foreign Court

However, where an order of a foreign court alters the terms of a Jersey trust, there is no jurisdiction on the part of the Royal Court to give directions which authorise or direct the trustees to act in a manner which is outside the powers conferred on them by the trust deed.

Turning to the facts of the case, Mrs Mubarak was no longer a beneficiary and the trustees had no power to add her as a beneficiary. Therefore, the English order which Mrs Mubarak was seeking to enforce in Jersey amounted to an alteration to the terms of the trust. As a result, the Royal Court had no power to direct the trustees to comply with the English order.

No Power

However, all was not lost for Mrs Mubarak. As a condition of being allowed to participate further in the English proceedings, the husband had written a letter of irrevocable instruction to the trustees in 2006 confirming that he was bound by the 1999 order to make payment to his wife and that he wished the trustees to give effect to whatever orders the English Court may make. Pursuant to the rule in Saunders v Vautier (1841), all the adult beneficiaries of a trust may agree to alter the trust. In applying this rule, the Royal Court treated the 2006 letter sent to the trustees as evidence of the husband's consent to the alteration of the trust.

The Royal Court also found that the alteration was for the benefit of the minor and unborn beneficiaries and approved the alteration on their behalf pursuant to Article 47 of the Trusts Law (which confers an express power on the Royal Court to approve an alteration of a trust on behalf of minor and unborn beneficiaries in circumstances where all the adult beneficiaries agree to the alteration). As a result of the unusual circumstances of this case, the alteration ordered by the English High Court was accordingly given effect.

Important Principle

The important principle which stems from this judgment is that the Royal Court, in exercising its supervisory jurisdiction, will only put a variation of a Jersey trust ordered by a foreign court into effect if the variation ordered does not amount to an alteration to the terms of the trust and is within the powers of the trustees.

Influential

The extent to which this judgment will be influential in other offshore jurisdictions which are asked to put into effect the terms of orders from the English, and other courts remains to be seen.

This article first appeared in the winter 2008/09 issue of Appleby Jersey's Resolution newsletter.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions