Constructive Trusts And Immovable Property ' English High Court Grapples With A Vexed Question Of Jersey Law

• Published date: 15 June 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Construction & Planning, Land Law & Agriculture, Trusts
• Law Firm: Ogier
• Author: Mr Oliver Passmore, Rebecca McNulty and Liana Pallot

In the recent decision of The Serious Fraud Office & Anor v Litigation Capital Limited & ors [2021] EWHC 1272 (Comm), the English High Court has ruled that it is not possible to have a constructive trust over Jersey immovable property. Whilst the question of constructive trusts over Jersey immovable property has been previously debated before the Jersey Courts, it is not an issue that has otherwise previously been resolved here and so there is no direct Jersey authority on the point. Consequently, the decision of the English High Court makes for an interesting read.

By way of background, the English proceedings from which this judgment arises, concerned significant litigation, described as being of "labyrinthine complexity", arising out of the business dealings of Dr Gerald Smith and concerning numerous competing claims to the ownership of various assets which included four Jersey immovable properties (the Jersey Property).

In November 2016, the Royal Court declared the property of Dr Gail Cochrane (the former wife of Dr Smith) en desastre, under the Bankruptcy (Desastre) (Jersey) Law 1990, the effect of which was that all property (whether movable or immovable and wherever situated) belonging to Dr Cochrane vested in the Viscount. Before she was declared en desastre, Dr Cochrane was the sole registered owner of the Jersey Property and one of the many issues in the English proceedings to be determined (and to which the Viscount was party and represented), was whether the Jersey Property belongs to Dr Cochrane or whether she holds it on constructive trust for one or more of the Claimants in the English proceedings.

It was common ground between the parties to the English proceedings that that question was a matter of Jersey law and so the English High Court received Jersey law evidence on the issue from an expert instructed on behalf of the Viscount. No other expert evidence on the question was filed.

The Viscount's position and the opinion of the expert was that it is not possible as a matter of Jersey law to have a constructive trust of Jersey situate immovable property. Support for that analysis came principally from the decision of the Jersey Court in Re Esteem (2002) JLR 53 and Flynn v Reid (2012) (1) JLR 370 and the wording of the Trusts (Jersey) Law 1984 (the TJL), to the extent it applied, to which the English High Court was referred.

Re Esteem concerned proceedings brought by the victim of a fraud to recover substantial sums misappropriated in...