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
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.
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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