Trust Law Round-Up

Last year was an extremely significant year for the trust

industry in Jersey with a number of trust cases coming before the

courts in Jersey. This has resulted in a number of important

judicial decisions which have not only clarified many of the issues

facing Jersey trustees but are of interest to the offshore world

generally. Space permits brief reference to only a couple of major

issues which arose in 2008, namely fraud on the power, and the

effect of foreign judgments on Jersey trusts.

Fraud on the Power?

In Re Bird Charitable Trust [2008] JLR 1 the

Court gave some useful guidance on the concept of "Fraud on

the Power", in the context of the anti-money laundering

legislation. In essence a fraud on the power will occur where a

trustee (or in certain circumstances a protector) exercises a power

in an apparently valid way but with the intention of achieving a

result which would have been outside its powers.

Thus, in Re Bird the Court had to consider

whether an appointment of new non Jersey trustees by a new

protector amounted to a fraud on the power in circumstances where

that appointment had been made to facilitate the removal of trust

assets from Jersey so as to avoid the restrictions of the

Proceeds of Crime (Jersey) Law 1999, given that a

Suspicious Activity Report had been filed by the previous

trustees.

Perhaps surprisingly the Court concluded that the appointment

did not amount to fraud on the power as the ultimate intention to

remove control of the trust from the Jersey trustees was found not

to be an unlawful intention. The position would have been different

had the trust assets already been determined to be the proceeds of

crime rather than the original trustees merely having suspicion

that they might be the proceeds of crime.

Enforcement of English Matrimonial Decisions

2008 also saw the Royal Court defending the integrity of Jersey

trusts in the face of foreign court orders (usually English

matrimonial decisions) which purported to vary or affect the terms

of a Jersey trust (Re IMK Family Trust [2008] JLC

136). This case (relating to the notorious English matrimonial

proceedings in Mubarak v Mubarak) has quite

rightly received considerable press comment since the Judgment in

August last year.

It is sufficient for the purposes of this article to note that

in recent years a pattern had developed of the Royal Court giving

directions to Jersey trustees so as to give effect to English

matrimonial judgments which took into account...