In The Matter Of The A v A v St George Trustees Limited And Others, [2007] EWHC 99 (Fam) (Unreported) 29 January 2007

Background

Trusts practitioners will be aware of the history of Family

Division judges in England having been willing, in effect, to

disregard foreign trust structures in a manner which their

counterparts in the Chancery Division would approach with far more

caution. As a notable exception to this, the decision of Munby J in

A v A v St George Trustees Limited and others

comes as welcome news to Jersey's trust industry.

The case involved trusts, with Jersey trustees, governed by

English law. The wife alleged that the trusts were shams, with the

consequence that, as she would have it, certain shares held by the

trusts should be treated as belonging to the husband.

Munby J rejected this argument, noting that although the court

should adopt a "robust, questioning and where appropriate,

sceptical approach" to offshore structures, it did not

mean that the court could "simply ride roughshod over

established principle, least of all where there are, or appear to

be, third party interests involved".

The High Court went on to consider the law on sham trusts, and

pointed out that the relevant legal principles which have to be

applied "are precisely the same in [the Family Division]

as in the other two Divisions. There is not one law of

'sham' in the Chancery Division and another law of

'sham' in the Family Division."

In considering the law of sham, Munby J agreed with the analysis

of the Royal Court of Jersey in In the Matter of the Esteem

Settlement (Abacus (CI) Limited as trustee), Grupo Torras SA and

Culmer v Al Sabah and four others [2003] JRC 092, that the

requirement of there being a common intention applies equally in

the case of a settlement of property or the creation of a trust, as

between the trustees and the settlor, who must intend that

"the arrangement is otherwise than as set out in the trust

deed".

A comforting reminder was also given by Munby J that

"the mere fact that a trustee complies with a request from

the settlor (or, for that matter, a request from a beneficiary) to

exercise his discretion in a particular way provides no basis at

all for the suggestion that the trust is a sham".

The High Court also considered whether a trust which commenced

as a sham, could subsequently lose that character, and vice versa,

and concluded that a trust which is not initially a sham cannot

later become a sham - if a trustee subsequently acts other than in

accordance with the trust deed, this would constitute "a

breach of trust; nothing less and...