Jersey Royal Court Demonstrates Its Ability To Assist In The Administration Of Foreign Trusts

• Published date: 10 September 2020
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Trusts
• Law Firm: Ogier
• Author: Mr Oliver Passmore and Daniel Maine

In its recent decision in In the matter of the 1964 Settlement [2020] JRC 140B¹, the Royal Court (the Court) has - for the first time - considered whether it can exercise a foreign statutory power on the application of a trustee of a foreign trust. The Court concluded that as a matter of principle it can do so, and went on to exercise an English statutory power so as to permit the trustees of a trust governed by English law to self-deal.

Background

The 1964 E Settlement (the Trust) was made in England by the Settlor when she was resident in England. While there was no express choice of law clause, the Trust contained references to various English statutes and the first trustees were also residents of England. By the time of the application those trustees had been replaced by two Jersey private trust companies (the Trustees), and the administration of the Trust was carried out by a dedicated family office that administered the offshore wealth of two branches of the same family.

By way of subsequent instruments, a number of sub-funds were established for the benefit of the Trust's principal beneficiaries. Each principal beneficiary's sub-fund held all of the issued shares in a separate holding company, which in turn held various assets that comprised the body of the Trust. Each of the holding companies were Jersey companies.

In order to create greater independence between different sides of the family, the Trustees proposed to reorganise the corporate structure underlying the Trust. English Counsel advised that:

• the Trust was governed by English law;
• as there was no provision in the Trust permitting self-dealing by its trustees, the Trustees were subject to the English law rule against self-dealing (the core of that rule being that a trustee is not allowed to purchase trust property²), with a likelihood that any infringing transaction would be set aside;
• various historic transactions carried out by the Trustees were instances of self-dealing, namely (i) certain sales of assets between the Trust and two other family trusts³ and (ii) certain sales and re-allocations of assets between the Trust's sub-funds; and
• aspects of the proposed re-structure would also infringe the rule against self-dealing.

The Trustees (having consulted with the principal beneficiaries) decided not to unravel the historic transactions, and did not seek relief in respect of them from the Court. However, the Trustees did apply to the Court for:

• approval under Article 51 of the Trusts...