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The Jersey Law Review - October 2003

TRUSTS OF LAND UNDER GUERNSEY CUSTOMARY LAW

St John Robilliard

Introduction

1       Were a Jersey and Guernsey lawyer to summarise their respective laws on trusts of land the comparison might go like this-

i)    in Jersey one may have a charitable trust of land by virtue of statute[1] whilst in Guernsey such a trust may exist and may but not must be regulated by a specific Law;

ii)    in Jersey private express trusts of local land are prohibited[2] whilst in Guernsey they are possible in certain circumstances although the full ambit is yet to be fully worked out;

(iii)  in both jurisdictions implied/constructive trusts are a possibility[3] which is again a developing area.

2       The customary law of both Islands is of course rooted in the law of Normandy, which in turn has a forbear in Roman law although it is a forbear often ignored and even shunned today.[4]  It did however have an institution which some have seen as a near relative of the trust namely the “fidéicommis”.[5]  Houard[6] reports a case from 1586 where there had been a donation of immoveable property, which came under attack by the eldest son as -

“un fidéicommis tacite & concerté pour frauder l’intention de la loi, & dépouiller le demandeur d’une portion héréditaire qui étoit acquise à son droit d’ainesse”

3       However, the Court held that on the facts there was:

“…… un motif raisonnable & qui écarte le soupson d’un fidéicommis tacite”,

underlining both the recognition of this Roman law institution which split “interests” in land and the fact that its use may validly be upheld in certain circumstances.

4       The other device used formally to encumber land was the substitution whereby the succession to real property e.g. to a number of people in succession was stipulated in the conveyance.[7]  The concept was recognised by Terrien[8] although the number of substitutions was limited.[9]

5       Whilst these institutions were possibilities in certain circumstances the general principles of Norman land law and the law of inheritance greatly restricted their use, notably -

(i)   the inability to leave land by will;

(ii)   the réserve whereby following death the heirs could seek to revoke donations of land which exceeded a certain proportion of the deceased’s total land;

(iii)  the retrait whereby conveyances for value of land could be subject to the heirs’ right of preemption;

with regard to private trusts; whilst mainmort (mortmain)[10] presented problems for religious trusts.

6       It would appear that the idea of the fidéicommis, coupled of course with exposure to English law at least in terminology, led to the use of trusts of land in Guernsey in the 19th century in certain circumstances without direct collision with any of these restrictions.

Religious and other charitable trusts of land

7       On March 20th, 1860 Advocate Peter Jeremie, who had been in practice in Guernsey for many years and indeed had written on the Guernsey law of inheritance[11] gave evidence to the Royal Commissioners enquiring into Jersey’s civil law[12], the relevant passages being -

“14, 206   Still you have a great many places of religious worship, or proprietary chapels? – Yes”

14, 207    “…….These chapels are bought in the name of some persons, I suppose? – Yes”

14, 208    “And how are those chapels protected from the debts and engagements of the parties in whose names they are bought? - They are protected from such debts by being held by A. B. and C. as trustees for a certain church or religious society, the denomination of which is mentioned in the deed”

14, 217    “… -  I do not think that could be seized for the private debts of the three, if the deed stated that they held it in trust for a church”

14, 224    “Otherwise persons who dealt with A. B. and C. in future might suppose it were their own? – The presumption would be against A. B. and C. if something specific were not stated; …

14, 226    “Would the court have jurisdiction to compel the observance of it? – Yes, because it is real property in the origin”

14, 227    If A.B. and C. attempted to sell the property, … and divert it from the object, applying it to their own purposes, … would the court interpose to prevent them from so doing …?     

               Yes, …the moment the contract was registered, of the purchaser, because the right is vested in the congregation”.

14, 228    “How do you conceive the congregation could enforce this right against A.B. and C. practically? – They could name some parties on their behalf to action A.B. and C.”

14, 231    “I have only now mentioned places of religious worship, but I will suppose a water company … - It would compel a restitution …” 

8       Jeremie thus recognised that land could be held on trust for a religious object although his waterworks example is littered with examples of particular orders for example

(a)           that dealing with the Sark Methodist Church;[13]

(b)           or “new” churches for the Church of England.[14]

9       His waterworks example is a somewhat obscure one which could perhaps be taken three ways, viz  (i)  the provision of water is for the public benefit which is clearly charitable except that he had a private company in mind; (ii) that a private company can be a beneficiary of a private trust; (iii) that one can have a purpose trust that is not necessarily charitable[15]  Again, the 19th century Orders – in - Council provide examples of trusts established for -

(a)  schools such as Elizabeth College in Guernsey[16] or the school of Alderney;[17]

(b)  lands being held on behalf of the poor inhabitants of the Parish of the Vale by arrangements originally made in 1789 and regulated in 1864.[18]

10     Not surprisingly the 20th century sees numerous examples of such trusts of land being regulated by express statute[19]

11     The position with these trusts today is that they are fully recognised and enforced.  Whilst the Trusts (Guernsey) Law 1989  (“the Guernsey Trusts Law”) in the main does not directly apply to them, that is not to say that general principles of trust law, when appropriate, are not applicable.  They have produced little difficulty in the Courts.

Trusts of land in saisie

12     Saisie is a customary law procedure, regulated in part by ordinance, for the taking of real property by creditors from a debtor, the apportionment of priorities between them and the application of the land thereto.[20]  At a particular stage the arresting creditor, who initiates the procedure, will have the land of the debtor vested in him as a trustee for all the creditors.  Interestingly the use of this type of trust of land has been in being for at least 200 years; thus in 1817[21] it was said of the “saisie héréditale” (the arresting creditor) -

“ He still continues merely a trustee and the Héritage [land] remains as it were in Abeyance, to abide the final adjudication at the close of the Saisie”.

13     What then were the duties of this trustee?  In 1823 it was stated that he must “dispose of it according to law”, that is in accordance with the priorities[22], but what must he do before that stage?  Some guidance is given by James Gallienne[23] who wrote in 1845 -

“ Il trouvera ses droits (donc ses devoirs) dans les règles que les lois imposent aux adminstrateurs des biens d’autrui”

14     This is the standard known as acting “ en bon père de famille”.[24]

15     He continued that the essential function is “de bien veiller à la conservation des propriétés qui appartiennent de la saisie” [25] and -

“Ses soins doivent se parter à faire toutes les réparations nécessaires, par autorité de justice et au dire du prévôt de sa majesité, à qui il appartient, en tout cas de saisie, de surveiller à ce que les bâtiments qui en dépendent soient maintenus en état.  Pour cet effet on prend permission de la cour”. [26]

 16    A particular question was whether the saisie héréditale should insure the property during his trusteeship.  Gallienne noted that while there was no express legal requirement to do so, he counselled that it should be done rather than -

“S’assujettir à un procès, sinon au paiement de dommages intérêts pours les pertes qui auraient pu s’ensuivre d’un accident par le feu.” [27]

17     The current law has retained the terminology of the earlier law.  Thus under section 2(3) of the Saisie Order 1952 the effect of an interim vesting order in saisie is the vesting of -

“the whole of the real property of the debtor in the creditor as trustee for claimants against the said real property”.

18     As to the duties of the saisie héréditale the Order is generally silent; one would therefore have regard to Gallienne and the standards expected of acting “en bon père de famille” which is the general standard in Guernsey law for those who have authority over or have vested in them property on behalf of others including the life tenant’s duty to the reversioner in real property and a guardian’s duty over property in guardianship.

Express private trusts of land

19     Trusts were in use in Guernsey in the 19th century with regard to personal property[28] and by the beginning of the 20th century there are examples in practice of trusts being employed for land.  In the precedent book of a turn of the century advocate, Advocate Nimmo, there is an example of both a conveyance of land to trustees in March 1902[29] and also a charge over land to secure borrowings by trustees.[30] 

20     Again in 1905 a law[31] imposed limitations on private trusts and land for certain beneficiaries.  In 1922 a trustee of real property applied to the Court for an order preventing the use of certain premises.[32]

21     Of some significance is the will of Jurat Julius Bishop, which was registered with the Court on December 24th, 1932.  Here a member of the Royal Court considered that a trust for sale of real property could be set up.  The objects were both individuals and charities.  It does not therefore fit into the purely charitable class already considered.  The practice of constituting such will trusts became quite common, but they are qualified by the important Royal Court decision of re Davis in 1962.[33]  In order to understand this decision it should be noted that Guernsey passed the Law of Inheritance in 1954, which remains the foundation of this area of law.  If a deceased has legitimate descendants he is limited as to whom he may leave his property, and the only interests that may be bequeathed are absolute or for life.  In Davis the testator executed a will outside Guernsey dealing with both his real and personal property in Guernsey.  On death he left both a widow and legitimate and illegitimate descendants.  The deceased left only Guernseyreal property.  The will contained one pecuniary legacy and purported to create a trust of the income of the estate for one individual during his lifetime and thereafter for two others in equal shares absolutely.  A “consultation de barreau”[34] was held and having heard from the bar the Court decided that -

(i)   the testamentary capacity of the testator is limited by the provisions of the Law of Inheritance (1954) but not otherwise;

(ii)   the Law of Inheritance (1954) applies so as to preclude the creation of a trust;

(iii)  the will was to be construed so as to give effect to the presumed intention of the testator that the realty should devolve to N & J (the individuals entitled to the remainder) in equal shares absolutely subject to the jouissance of T (the individual entitled to the life interest);

(iv)  the pecuniary legacy of G (an individual granted a specific pecuniary legacy which would have to be taken from the property) failed.

22     The result is that when one has descendants one must follow the 1954 Law, which precludes trusts, if leaving property by will.  If one does not, a form of trust perhaps based on a variation to what was acceptable to Jurat Bishop that a devise of the testator’s real estate to the executors of his personal estate to employ the proceeds along the lines of the will of personalty, which could create a trust, is acceptable.  Can then a private trust be created during the settlor’s lifetime inter vivos?  The existence of a rule of Norman customary law followed in Guernsey[35] known as the resérve, may be crucial in certain situations here.  Under this rule, the heirs can set aside a donation of land on the ground that they have been deprived of their right to succeed at death.  The Royal Court has recently confirmed in the context of personal property that Guernsey is a forced heirship jurisdiction.[36]  If this rule survives, arguments as to its application would revolve round the 1954 Law of Inheritance and re Davis given that, if a testator has no descendants, there are no individuals, with the exception of a surviving spouse who has a limited right of life enjoyment, with rights to inherit protected by law.  The alternative is of course, to transfer one’s land to a company and to give the shares to a trust during one’s own lifetime.  If the individual is to remain in the property, care must be taken to show that the trust is genuine, but as Guernsey expressly authorises the creation of trusts[37] that could be acceptable.  The preferred method of course would be for the company initially to purchase the property.  If the testator later gifts the property, there is exactly the same problem as would apply if there was a direct gift of the property to trustees, namely the possibility that the heirs could after his death seek to set the donation aside.  The other possibility is a sale.  On the basis that it would not be at arm’s length at the true value, there may again be complications. For example, the close relatives have a right,  within a limited period, to seek to undo the conveyance and transfer the property in favour of themselves at the sale price by retrait; (a possibility expressly recognised by Re Kurz Schenkel) or alternatively by the application of the “sham” doctrine.

23     Recent statutes in the taxation area have acknowledged that there may be an express private trust of land in Guernsey.[38]  Additionally the law controlling the occupation of dwellings in Guernsey recognizes that they may be held in trust.[39]

Implied trusts:  constructive trusts and land

24     In Lloyd v Lloyd,[40]  Mr Lloyd brought an action against his daughter.  He had advanced to her a sum of money to purchase a property in her name but for his benefit.  In fact, without his knowledge, she had borrowed an additional sum to fund the purchase.  He sought an order that she “passed contract by way of deed of gift” to him.  His counsel described her as “an agent and a trustee taking solely for the benefit of her principal”.

25     The Bailiff  directed the Jurats that -

“We have no means, certainly no procedure, which I know of, which would authorize us to order the Law Officers or Court Officials to make a transfer of this property in her name….”

26     Her counsel had contended that such an order could be made in England under the equitable jurisdiction upon which the Bailiff commented -

“Now we have been forced, to a certain extent, to accept some sort of equivalent jurisdiction in regard to trusts.  We have no law on the subject (except that we have to act en bon père de famille) and we have been compelled, in a very small number of instances, to adopt principles the like of which have long been since adopted in the United Kingdom by the Courts of Equity, just because there was nothing else to be done.  There was no other way of dealing with these matters, but, in this case, I think we are primarily and principally a Common Law Court and, in a Common Law Court, the ordinary remedy for deceit or whatever the wrong may be complained of whether breach of contract or breach of trust, is damages”.

27     The Bailiff went on to say that to permit the order would go against what had been decided in Priaulx v Le Ray[41] namely that the Guernsey Court would not order specific performance of an undertaking to convey land.  He concluded -

“It does seem to me that the remedy is for damages for misrepresentation which produced that asset (i.e. to pay the purchase price of the property). I think such a remedy would marry infinitely better with our system of law than the introduction for the first time of an equitable remedy which may, for all I know, if it is allowed any how in its implications, play havoc with our insular conveyancing institution.”

28     Priaulx v Le Ray was unlikely to have been decided any other way with regard to specific performance given what had been said by the Privy Council in Godfray v The Constables of the Island of Sark[42] in an appeal from the Royal Court of Guernsey with regard to the right of the public to use a tunnel in Sark.

29     Lord Davey,[43] no doubt commenting on submissions that he had heard, stated -

“There is no Court which can decree specific performance of a private contract, or which administers the equities familiar to English lawyers arising out of part performance, acquiescence by the vendor in expenditure of money by the purchaser on the faith of the contract or similar equities.  It is to be noted that in this unusual case the Guernsey Royal Court was sitting at first instance on a Sark matter.  There was no suggestion that Sark or Guernsey Law were different with regard to the law to be applied.

All this was admitted by Counsel for the respondents……”

30     In the 1980’s the Royal Court did recognise the concept of the constructive trust in funds of personal property.[44]  Does the reasoning in Lloyd v Lloyd still stand?  McCormack v Waterman is a major recent case dealing with the nature of joint ownership in Guernsey land.  The Deputy Bailiff gave a lengthy judgment in 2001, which was reversed by a relatively brief judgment in the Guernsey Court of Appeal in 2002.  The case at first instance canvassed a number of issues, which the Guernsey Court of Appeal did not have to consider.  It was argued that joint ownership, was capable of creating a form of trust in that one looked behind the “legal” ownership of the joint owners to the interest that they might have beneficially.  The Deputy Bailiff observed -

“…this is a wholly new concept, as far as I am aware, in Guernsey law, and however desirable (or not) it might be considered to be, it is an area of law which is wholly unsuitable for judicial law making…The proposition …is one which would require lengthy and considered deliberation of all potential issues involved starting, perhaps,  with a full examination of all the great legislative reforms regarding real property introduced in England and Wales in the early part of the 20th century; questions of public policy would also undeniably be involved.  All such matters must lie wholly within the province of the legislature …”.[45]

31     However, if there were a severance of the joint ownership there might be cases where it would -

“be inequitable to allow one person to assert full beneficial ownership over the property”.

32     Day, Deputy Bailiff thus opened the door to a constructive trust, which could be imposed at this stage. He referred to some of the authorities that have already been described here[46]  and went on to refer to s72(2) in relation to  the Guernsey Trusts Law, stating that it implicitly recognised trusts of real property.[47] Then came what might be termed the Lloyd v Lloyd question although that authority is not referred to in the judgment -

“Whether the existence of that trust, and therefore both of legal and beneficial interests, need to be expressly stated in a document of title” and he concluded[48] “ … remedies based on equitable principles must be provided for all persons for whom a property is specifically held in trust by another, or those representing the purposes for which such property is being held, and whether such relationship is created statutorily or otherwise.  The availability of such remedies would, in principle, be equally recognised.  I have no doubt, even where the terms of any such relationship or trust creating the beneficial interest are not specifically stated in a document registered on the public records…once it is recognised that both legal and beneficial interests may separately exist, then their establishment by a document on the public records is not of the essence”.

33     All of this being obiter as at this stage it was not concluded there was any constructive trust situation.[49]

34     The case went to the Guernsey Court of Appeal[50] which reversed the Deputy Bailiff’s judgment, holding that when property was conveyed to parties jointly and to the survivor of them and their ownership was severed, there was a rebuttable presumption of equality,  in that a transfer into joint ownership will result in 50/50 division unless the conveyance itself provides otherwise.  Bailhache J A[51]  stated -

“Conveyancing practice has evolved and a jurisprudence, even if limited, has developed.  While it is, of course, permissible to refer to other systems of law where inspiration has been drawn from such systems over a period of time, the assistance to be gained may be limited”.

35     The Court of Appeal noted that the decision of the Deputy Bailiff was contrary to cases in 1982[52] and 1996[53] and went on to state -

“Those two decisions of the Royal Court are important, particularly in a small jurisdiction where precedents are few, because legal practioners will no doubt have advised their clients accordingly and the public will have relied on the decisions”. [54]

36     The Court was of the view that there was much to be said for certainty and concluded with regard to jointly owned property -

“…..in the event of a severance of joint ownership, the parties are entitled to the property, or to the proceeds of sale of the property in equal shares.  The proviso is that there seems to be no reason in principle why the parties to a conveyance into joint ownership should not, if they so wish, make different provision for the sharing of the property or the proceeds of sale in the event of severance.  Such provision could obviously be included in the habendum.  We leave open the question whether a private arrangement outside the conveyance could validly be made to the same effect.” [55]

37     Clearly a decision in the tradition of Lloyd v Lloyd.  However some nine months later a differently constituted Court of Appeal in Roger v Roger[56], a case which sprang out of an eviction, stated this:

“ In the end…… case was put fairly and squarely on the application of the doctrine of proprietary estoppel.  So far as the law is concerned, the learned Bailiff in his summing up said that this was, so far as this jurisdiction is concerned, a “novel form of action” but, rightly in our view, did not direct the Jurats to the effect that proprietary estoppel was not known to Guernsey law.  Guernsey law has, as we understand it, generally followed and applied English equitable principles in appropriate cases, and we see no reason to exclude the possibility of proprietary estoppel being invoked in an appropriate case”. [57]

38     It might be noted that this makes no reference to the chain of authorities from Godfray through Priaulx v Le Ray to Lloyd v Lloyd which shows resistance to such principles.  Godfray can of course be taken as merely descriptive of the position 100 years ago and, of course, the law does move on.  Lloyd v Lloyd however, did not in all circumstances, rule out the possibility of the application of “equitable” principles with regard to land[58] but counselled caution and appeared to apply a test of necessity which it had thought was not applicable on the facts of the case in that there was an adequate financial remedy.  It remains to be seen which of the two approaches will ultimately gain the upper hand.  With great respect to the Court of Appeal in Roger v Roger it does not appear that the general application of English equitable principles to questions relating to Guernsey land has been  common practice over the past 100 years or at all.

39     The Court of Appeal’s decision in McCormack v Waterman has recently been reaffirmed by that Court in Pirito v Curth (April 10th, 2003).  This decision related to jointly owned land in Alderney.  There had been an attempt to distinguish Waterman v McCormack on the ground that the case had failed to distinguish between legal and equitable interests in land and had proceeded on the basis that equity formed no part of Guernsey Law -

40     Southwell JA commented -

“The land laws of Alderney and Guernsey have developed through the centuries on the basis of ancient Norman customary law.  To seek to engraft on to Alderney or Guernseycustomary law relating to immovable property different concepts of English common law or equity is an exercise to be undertaken with the greatest care.  This is clear from a number of decisions of the Privy Council of the 19^th and 20^th century, and by analogy can be seen in the excellent guide to the Origin and Development of Jersey Law written by Miss Stephanie Nicolle QC, HM Solicitor-General for Jersey.”[59]

41     In addition the English law on this topic was itself in the Court of Appeal’s view inadequate.

42     There is certainly a space for trusts of land.  However, because of the decisions that have been described here it is clearly a smaller space  than that occupied in England and Wales.  Lloyd v Lloyd did not preclude the possibility of constructive trusts in certain circumstances and indeed the Conveyancing (Guernsey) Law 1996, which was primarily passed to provide that an agreement for the sale or other disposition of real property must be in writing, thus reversing accepted practice before the law,[60]  provides at section 5 - 

“Nothing in this section affects the creation or operation of resulting implied or constructive trusts”

This would seem to leave the door open to some development.[61] 

Conclusion

43     Where the trust concept has been of use and has not conflicted with the essentials of  the Guernsey law of realty and succession it has been adopted and recognised with little problem.  To date however a wholesale importation of general equitable principles has  been resisted as illustrated recently by Pirito v Curth.  As for the constructive trust the door is neither wide open nor shut fast; it is to be given the most gentle of pushes when justice demands.

St John A Robilliard is an advocate of the Royal Court of Guernsey and a partner of Ozannes, Guernsey.

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