ARTICLE
16 April 2024

What Became Of Forever? The Rule Against Perpetuities' Last Stand In Jersey

W
Walkers

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Walkers is a leading international law firm which advises on the laws of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Ireland and Jersey. From our 10 offices, we provide legal, corporate and fiduciary services to global corporations, financial institutions, capital markets participants and investment fund managers.
Despite the Trusts (Jersey) Law 1984 ("Trusts Law") expressly providing against the rule against perpetuities currently applying in Jersey...
Jersey Corporate/Commercial Law
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Despite the Trusts (Jersey) Law 1984 ("Trusts Law") expressly providing against the rule against perpetuities currently applying in Jersey, the Royal Court has found the rule to form part of the underlying fabric of Jersey trusts law. It therefore applies to trusts to which the Trusts Law does not apply, in practise meaning trusts created before it came into force.

The perpetuities question arose in Representation of Equiom Trust (CI) Limited re Estate of Constantin Mattas [2024]JRC068. This concerned a will that provided for various trusts. The final disposal of residue was to a discretionary trust. Under it, the Greek Government was to be trustee with discretion how to employ income on the trust fund to provide interest free loans to intelligent and promising young men of Greek Orthodox faith born in Greece of Greek, Greek Orthodox parents, for the purpose of them undertaking further university education in specified countries (the "Intended Trust"). The will also provided that the testator's grand-nephews and great-grand-nephews would have priority to trust funds for further university education, and not have to repay any sums advanced.

There was no trust period provided, nor terminal trust requiring the trustee to distribute the trust fund. Instead, the terms of the trust permitted the trustee to maintain the trust fund forever, deciding whether or not to make a distribution (or rather, grant a loan) at any time and never exhausting it. Even if all the income were applied to making loans at any point, not only would they be repaid (and so the trust assets contain the repayment rights as a receivable) but also there was no provision permitting the advance of any capital at all. Also, it followed that the Intended Trust permitted the trustee not to use all the income and therefore to accumulate income, potentially perpetually.

As the Trusts Law currently provides, this does not give rise to any problem. Art 15 of the Trusts Law expressly provides that a Jersey trust may continue in existence for any period, and no rule against perpetuities or excessive accumulations shall apply to a Jersey trust.

However, while Art 58 provides that the Trusts Law applies to any trust whenever it was created, that is expressly subject to Art 59 which goes on to provide that nothing in the Trusts Law shall affect the validity of any trust arising from a document taking effect before the commencement of the Law. In Mattas, the Intended Trust arose under a will taking effect when the testator died in 1979. The current Art 15 could not therefore affect the validity of the Intended Trust. Hence the question arose, but for Art 15, is there any rule against perpetuities as a matter of Jersey law?

The rule against perpetuities in English law

As it developed in English law, the rule against perpetuities has three sub-rules:

  • First, the rule against remoteness of vesting applies where there is a trust for beneficiaries or a class of beneficiaries; it requires that the trust property must vest in a person within the "perpetuity period". Historically, this perpetuity period developed as a time period equal to a life in being at the creation of the trust (or death of a testator) plus 21 years.
  • Secondly, the rule against non-alienation applies where there is a non-charitable purpose trust. It requires that the trust property must be capable of alienation from the trust within the perpetuity period.
  • Finally, the rule against excessive accumulation requires that either trust, whether for a class or beneficiaries, or for a purpose, must not permit the accumulation of income for longer than the perpetuity period.

If any of these sub-rules applies and is broken, the trust is invalid.

Jersey law approach to perpetuities

In Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2018] UKPC 7, [2019] AC 271 and again in Equity Trust (Jersey) Ltd v Halabi [2022] UKPC 36, [2023] AC 877, the Privy Council has twice recently held that the Jersey law of trusts is assumed to be the same as the English law of trusts, except to the extent that any given English trusts rule is inconsistent with the Trusts Law or any rule of customary law developed in Jersey case law.

There are no prior cases on the rule against perpetuities either way in Jersey law. The Court further accepted that what limited customary law existed suggested, if anything, that Jersey customary law also leant against perpetual restrictions on alienation: as far back as the 18th century, there was local case law striking down "substitutions" - terms in wills that tried to provide how bequests were to pass on the death of the beneficiary.

As a result, there was nothing in Jersey customary law inconsistent with the English rule against perpetuities and so, following Investec and Equity Trust, the Court accepted arguments1 that rule against perpetuities must be held to apply as part of Jersey's customary law.

However, as the Court noted in Mattas, in the vast majority of situations, Art 15 of the Trusts Law will apply and the question whether any given trust is void for infringing the rule against perpetuities is unlikely to reoccur frequently in practice. In this respect, it is notable that the issue has only arisen for the decision for the first time in Mattas.

However, the case is significant for confirming that, but for Art 15, the rule against perpetuities is part of Jersey and would apply. As a result, it is significant for confirming the importance of the Trusts (Jersey) Law 1984, and the express provision it makes for Jersey trusts to operate free from some of the historical complexities of English or other trust laws.

Footnote

1. Made by Richard Holden, James Turnbull and Craig Macleod of Walkers (Jersey) LLP.

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.

ARTICLE
16 April 2024

What Became Of Forever? The Rule Against Perpetuities' Last Stand In Jersey

Jersey Corporate/Commercial Law

Contributor

Walkers is a leading international law firm which advises on the laws of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Ireland and Jersey. From our 10 offices, we provide legal, corporate and fiduciary services to global corporations, financial institutions, capital markets participants and investment fund managers.
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