In the matter of C Trust Company Ltd v L2 & 2D and MS, KD,
JD, MaD and MD [2009 JRC 048].
This case considered whether it was appropriate for the trustees
to take steps to safeguard assets for the benefit of certain
beneficiaries where two Jersey trusts were under attack in
ancillary relief proceedings in the English Family Division.
The judgment endorses the decision in re The H Trust  JLR
2008 that there are occasions when it is important that the English
Family Division has the fullest information concerning the
financial affairs of the trust. The couple had 3 adult children and
they separated in 1991.The husband then commenced a relationship
with a new partner MS whom he did not marry. They had two children
(who are both minors). MS instructed Withers LLP.
Some 4 years after the husband and wife had separated, the
husband settled two discretionary trusts (the 'Trusts')
governed by Jersey law, the beneficiaries of which were the
husband, his adult children, MS and his two minor children.
Ancillary relief proceedings were commenced by the wife in 2006,
some 15 years after the husband and wife had separated. The wife
claimed that the assets of the Trusts were a resource of the
The claims in the ancillary relief proceedings gave MS
considerable concern that her needs and that of her children were
in fact 'invisible' to the Family Division. In particular,
this was because their financial situation was not secure and she
had made a substantial contribution to the Trusts' funds.
MS made an application to the Jersey trustee (the
'Trustee') of the Trusts for a distribution of 50%
of the Trusts' assets to her and her children.
The Trustee considered it would be inappropriate in the context
of the English proceedings to make a distribution but proposed that
it was, without fettering its discretion, intending to create a new
trust appointing 40% of the Trusts' assets for the benefit of
MS and her children.
The Trustee subsequently made an application to the Royal Court
in Jersey in accordance with the principles in re The S
Settlement 2001/154 on the basis it was not surrendering its
discretion to the Royal Court but merely seeking its guidance and
The Royal Court concluded that the Trustee had taken
'extensive advice' and made 'appropriate soundings'
and was satisfied that its decision was a decision which a
reasonable trustee properly instructed could have arrived at.
The Royal Court referred to the commentary in
"International Trust and Divorce Litigation" by Mark
Harper, Dawn Goodman, Paul Matthews and Patrick Hamlin (all of
"the decision in Charman ... demonstrates that no
indication by the trustees as to how they might exercise their
dispositive powers may risk the court concluding that if asked,
they would be prepared to apply all or a substantial part of the
assets to the requesting spouse, particularly if the requesting
spouse were making the request under pressure of an order providing
heavy 'judicious encouragement' to the trustee.
Accordingly, careful consideration now needs to be given by
trustees as to how to address such a request in the interests of
the beneficiaries as a whole..."
This is an unusual case where, in addition to evidence of the
potentially difficult financial position she and her children were
likely to find themselves in, MS was able to put compelling
evidence before the Trustee of her contribution to the Trusts and
where, as a result of that, she was able to persuade the Trustee in
effect to 'partition' part of the Trusts' funds for the
benefit of herself and her children.
The Trustee will have to consider the appropriateness of the
proposal to create the new trust if the husband makes an
application for a distribution (in the context of the ancillary
relief proceedings). At that time the creation of a new trust will
be subject to the approval of the Royal Court and will not happen
until the conclusion of the ancillary relief proceedings.
Nonetheless, the order of the Royal Court must be persuasive
evidence that if the Family Division concludes that the Trusts'
assets are a resource of the husband, the extent of that resource
is limited to 60% of those assets as opposed to 100%.
It is an important decision for trustees because the Royal Court
has shown that it will consider the interests of beneficiaries who
may be unrepresented in foreign divorce proceedings and will, where
appropriate, take steps to protect those interests.
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.
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Family law is easily misunderstood and its realities can get in the way of a good storyline; nobody really wants to watch reasonable and calm lawyers helping parties negotiate sensible solutions in an amicable way.
"The Family Code of Ukraine of 10 January 2002 No. 2947-III" (effective since 2004) ("Family Code"), sets out the basic principles and regulations of property relations of spouses, including civil agreements, which may be entered into by and between spouses.
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