Can A Foreign Court Alter The Terms Of A Jersey Law Trust?

Case

In The Matter of The IMK Family Trust [2008] JRC136

Facts

One source of the steady flow of trust litigation coming before

the Royal Court in recent years has been a series of attempts to

enforce orders made in divorce proceedings by the Family Division

of the English High Court in relation to Jersey law trusts which

hold assets which fall to be dealt with as part of those

proceedings. This was one such case which stemmed from protracted

and acrimonious litigation between Iqbal Mubarik (the

"Husband") and his former wife Aaliya

Mubarak (the "Wife").

The Jersey law trust in question was a discretionary trust known

as The IMK Family Trust (the "Trust")

which had been established by the Husband and Wife as joint

settlors in September 1997. The initial trustee of the Trust was

and remained The Craven Trust Company Limited (the

"Trustee") and the principal asset of

the Trust was the issued share capital of a Bermudan holding

company known as Twenty First Century Holdings Limited (the

"Company"). The Company in turn held the

various operating companies which made up the Husband's

business interests, although it also had outstanding loans payable

to both the Husband (in the sum of US$34,333,522) and to the Wife

(in the sum of US$557,978). The original beneficiaries of the Trust

included the Husband, the Wife and their children. After leaving

the matrimonial home in March 1998, however, the Husband exercised

his power under the terms of the Trust to execute a deed (the

"Exclusion Deed") excluding the Wife as

a beneficiary going forwards.

The Wife commenced divorce proceedings against the Husband in

July 1998 and, in due course, obtained a decree nisi. The

Husband was, as long ago as 10 December 1999, subsequently ordered

to make a lump sum payment to the Wife in the sum of

£4,875,000 (the "Original Order").

Despite numerous further judgements having been made against him in

both the English High Court and the Court of Appeal, however, he

had succeeded in evading his obligation to make that payment.

Finally on 30 March 2007 the Wife went again to the English High

Court, this time seeking, inter alia, an order (the

"Trust Order") pursuant to the English

Matrimonial Causes Act 1973 varying the terms of the Trust so as to

require the Trustee to pay to the Wife an amount equal to the sums

due to her by the Husband pursuant to the Original Order (together

with missed interim payments, costs and interest).

As a result of the Husband's poor conduct in the divorce

proceedings up to that point, in order to be allowed to contest the

Wife's application for the Trust Order he was required first to

write a letter to the Trustee irrevocably (i) accepting that he was

bound by the terms of the Original Order; (ii) asking the Trustee

to assist him in meeting his obligations under the Original Order;

and (iii) accepting that he would be bound by the result of the

Wife's application for the Trust Order and asking the Trustee

to assist in giving effect to the Trust Order should it be granted.

The Husband elected to contest the Wife's application for the

Trust Order and, accordingly, he sent a letter to the Trustee in

these terms in August 2006 (the "Husband's

Letter").

Following a lengthy...