The Jersey
Law Review - October 2003
WHAT IS A TRUST JURISDICTION CLAUSE?
Paul Matthews
“
‘Will you walk into my parlour?’ said a
spider to a fly.”
Howitt, The Spider and the Fly
Introduction
1 Without
jurisdiction, a legal system is nothing. So detailed rules setting out
when and in what circumstances the court may - or must - adjudicate on a
dispute are of the first importance. But they are even more so in an
offshore financial centre like Jersey, where
Islanders manage money or other assets belonging to non-Islanders. That
management often occurs through a trust arrangement. Increasingly today
in the offshore trust world, trust instruments contain clauses purporting to
confer jurisdiction – or exclusive jurisdiction – to decide
disputes arising out of the trusts upon the courts of a particular territory
which would or might not otherwise have such jurisdiction. The precise
legal effects of such clauses are debatable, though the Jersey Royal Court has been one of the
first courts actually to have to deal with them.
This note offers a few observations on this point, but for the most part treats
of a logically anterior question, however. This is, What in fact amounts
to a (trust) jurisdiction clause? This question arose in the decision of
the Jersey Court of Appeal in Koonmen v
Bender.
2 The
facts in that case were complex, and a number of distinct legal issues
arose. Moreover, and as is usual in such cases, the case was argued and
decided on the basis of assumed facts, since no trial or other fact finding had
yet taken place. So far as concerns the scope of this note, the case can
be boiled down to this. A trust was
settled by a Cayman company, of which “the moving force” was said
to be the first defendant (formerly a US citizen and now a Grenadan, but resident in Costa Rica). The plaintiff’s case was that this
trust held the profits of a hedge fund business carried on by
himself and the first defendant.
The trust instrument was executed in January 2000, and was expressed to
be governed by the law of Anguilla. Although it was in form a discretionary
trust, but with elements of what is known by US advisers as a
‘rabbi’ trust,
the plaintiff claimed a fixed beneficial interest in it. Disputes arose between the plaintiff and
the first defendant in relation to the trust and the beneficial interests. The plaintiff brought proceedings in Jersey by Order of Justice against the first defendant
and seven others for a declaration as to the form of the trust and his rights
in relation to it, breach of trust, an account, rectification and other
relief.
4 Of
those seven others, the fifth defendant was the Cayman company which was named
in the trust instrument as settlor of the trust, and the eighth defendant was
an Anguillan company which was the trustee originally named in the trust
instrument. The third defendant was a Jersey
resident financial adviser, employed by the fourth defendant, a Jersey trust company, which was alleged to control the
second defendant, another Anguillan company which was the current trustee of
the trust. The third and fourth defendants could be, and were, served in Jersey. The plaintiff obtained leave to serve the
first, second, fifth, seventh and eighth defendants out of the jurisdiction
(the position of the sixth defendant is not made clear in the judgment).
5 The
second and the seventh defendants applied to set aside the service upon them
out of Jersey. The third and fourth
defendants applied to stay the proceedings on the grounds of forum non conveniens. The first defendant supported this
application. He had originally sought to make a similar application
himself, but because of procedural defects he withdrew it, and was thereafter
treated as having submitted to the jurisdiction, although still having the
right to seek a stay. The fifth, sixth and eighth defendants made no
applications. The Royal
Court dismissed both these applications on 27 June 2002, and the relevant
defendants appealed to the Court of Appeal.
6 In
considering the applications of the second and seventh defendants to set aside
service, the Court of Appeal first of all observed that the
Royal Court had jurisdiction under its own rules to deal with the case because
property subject to the trust was alleged to be within the Bailiwick of Jersey. But the plaintiff still had to satisfy
the court (i) that there was a serious issue to be
tried, and (ii) that Jersey was clearly the
most convenient forum for the resolution of the issues. For reasons not
material here, the Court of Appeal concentrated on the latter of those two
points. This question was one of discretion, and therefore the Court of
Appeal could only interfere on limited grounds, one of which being that the
Royal Court failed to take into account matters which it should have taken into
account.
7 This
note will not review in detail the Court of Appeal’s judgment on what was
essentially an exercise of discretion. Instead it concentrates on just
one aspect of the decision, which the Court of Appeal considered critical, and
which led ultimately to the reversal of the decision of the Royal Court. That is the relevance
of three clauses in the trust instrument which were argued to amount to a
jurisdiction clause, and exclusive at that, providing that the Court of
Anguilla should have jurisdiction to determine disputes arising out of the
trust.
The clauses in question
8 The
clauses (so far as relevant) read as follows:
"1. Interpretation
(k) ‘The Proper Law’ means the law to
the exclusive jurisdiction of which the rights of all parties and the
construction and effect of each and every provision of this Settlement shall
from time to time be subject and by which such rights, construction and effect
shall be construed and regulated.
2. Proper Law
This settlement is established under the laws of Anguilla and subject and
without prejudice to any transfer of the administration of
the trusts hereof to any change in the Proper Law and to any change in the law
of interpretation of this settlement duly made according to the powers and
provisions hereinafter declared the Proper Law shall be the law of Anguilla which said Island
shall be the forum for the administration thereof.
14. Power
to change Proper Law
(1) The
trustees may at any time during the trust period by deed declare that:
(a) this settlement shall from the date of such declaration take
effect in accordance with the law of some other state or territory in any part
of the world (being a place under the law of which trusts are recognised and enforced); and
(b) The forum for the administration thereof shall thenceforth be
the courts of that state or territory.
(2) As from the date of any such declaration the law of the state
or territory named therein shall be the law applicable to this settlement and
the courts thereof shall be the forum for the administration thereof but
subject to any further exercise by the trustees of the power contained in
sub-clause (1) hereof”.
The concept of a trust jurisdiction clause
9 The
first thing to note is that the idea of a jurisdiction clause in a trust
instrument is a strange one. Jurisdiction clauses are essentially
contractual. The parties to a transaction agree that, if a dispute
arises out of their transaction, they will submit their dispute to such and
such a tribunal (which might be a court, but could be an arbitration).
The international jurisdiction rules of common law states usually accord a
special place for agreed jurisdiction in respect of
disputes arising out of contracts. Civil law countries (where the maxim
“la convention fait la loi des parties"
is often applied)
also accept jurisdiction where the parties have so agreed, at least in
international cases, though not confining this to cases of disputes arising out
of contracts.
10 But, and
contrary to the often instinctive reaction of civil lawyers, a trust is not a
contract.
It is not even a contract for the
benefit of third parties (long permitted in civil law systems).
Moreover, even to the extent that there is in the broad sense “agreement"
between settlor and trustee, any such agreement is irrelevant where the claim
is being brought against the trustee by the beneficiaries. This is because, except in rare cases, they
are not parties to the trust instrument and have not agreed anything, let alone on the question where any disputes
will be resolved. For this reason jurisdiction clauses do not have a long
history in trust law. You will not find them in English trusts until late
in the twentieth century, and even then they are rare. Their precise
juridical nature is unclear, and their legal effect even less so. There
is little case law
or academic writing
on the subject.
11 However, the
civilian mistake of seeing the trust as a contract has led to specific provisions
in the Brussels
and Lugano Conventions on Jurisdiction and Judgments,
and now the Council Regulation (EC)
on the same subject. These provisions confer exclusive
jurisdiction on the courts of a state so selected by a jurisdiction clause in a
trust “in any proceedings
brought against a settlor, trustee or beneficiary, if relations between those
persons or their rights or obligations under the trust are involved".
(The reference to proceedings against the
settlor – the supposed “contracting party” - simply
reinforces the view that civilian misunderstanding of the nature of the trust,
and of the non existent role of the settlor after the trust has been created,
led to those provisions.)
12 So it is
clear that jurisdiction clauses may be inserted into trust instruments, even if
their effect is not yet clearly worked out. The question arising in this
case was simply this: Was there a jurisdiction clause or not in this
trust instrument? The Royal
Court said that there was not. It said:
"We take it as axiomatic that clear words
are required to create an exclusive jurisdiction provision in a trust
deed. The words relied on by counsel … are far from clear.
The only reference to exclusivity is found in the definition of the proper
law. The definition is not a model of good drafting. It is
difficult to know what is meant by ‘the exclusive jurisdiction’ of
‘the law’. We note that the expert evidence of … an
Anguillan barrister does not assert that the passages relied on by counsel
… confer exclusive jurisdiction, but only that they make ‘the Court
of Anguilla the forum of choice’.
We cannot interpret that definition, even when read with clauses 2 and 14, as
conferring exclusive jurisdiction upon the Courts of Anguilla”.
The Court of Appeal’s view
13 The Court of
Appeal disagreed. First of all, it denied the existence of any such
principle of clear words being required to create an exclusive jurisdiction
clause in a trust deed.
Next, it relied on the reference to “exclusive
jurisdiction” of the proper law in clause 1 and the reference to the
“forum for administration” of a trust in clause 2 (and also clause
14) as amounting to a provision conferring jurisdiction on Anguillan courts for
the resolution of disputes. Thirdly, the Court of Appeal held that
there was no meaningful distinction between the idea of exclusive
jurisdiction and the notion of forum of choice (an expression not
found in the trust instrument, but coming from the expert evidence referred
to). The Court of Appeal further relied on Dicey & Morris on the
Conflict of Laws, in a passage dealing with contractual jurisdiction
clauses.
14 The Court of
Appeal then said this:
"Unlike an arbitration clause, which now by
statute must in most cases be respected, the courts still retain a discretion
to override an express choice of forum in a contract or trust deed. But
prima facie, the court’s function is to interpret and apply the agreement
of the parties or the expressed intention of those creating the trust deed, and
as a general rule, the courts will give effect to a choice of forum. The
court will override an agreed choice of forum only in exceptional
circumstances. The rule is clearly stated in Dicey & Morris in rule
32(2) and in the following text and the cases thereafter cited. Although
it may be argued that the presumption in applying the express provisions of a
trust deed may not be as strong as that in favour of
holding parties to a contract to the terms of their agreement, I see no reason
why the presumption should not be just as strong as between the settlor and
those claiming to have been ‘standing behind’ the settlor as Mr Koonmen and Mr Bender were in this case and the trustees.
Further, I consider that, as an important element in the structure of the trust
in respect of which any would be beneficiary claims an interest, it should
prima facie be binding on such beneficiary”.
15 For the
avoidance of doubt, I should make clear that rule 32(2) of Dicey & Morris
(and the following text), referred to in that quotation,
refers to a contract providing for exclusive jurisdiction to be
conferred on the courts of one particular territory. Despite the terms of
the quotation, trusts do not feature in rule 32(2) at all.
Criticism of the Court of Appeal’s view
16 The Court of
Appeal’s views are, however, and with very great respect, open to
question. The decision depends on the interpretation of documents from a
field of practice of which, as it turns out, none of the three members of the
court had any significant known experience. That is, trust law, and in
particular in the drafting of trust instruments. The only reasoned
judgment, with which the other members of the court simply agreed, was written
by Kenneth Rokison QC, who was (until his retirement
in 1997 from the English bar) one of the top shipping and arbitration
barristers practising in London, and who continues to
sit as an arbitrator, as well as in the Courts of Appeal of Jersey and
Guernsey. It is therefore
unsurprising that (on this point) it draws heavily on the law and practice of
jurisdiction and arbitration clauses contained in shipping and other commercial
agreements. At no point is there any reference to authorities on, or the
practice of, trust law.
17 With great
respect, the Court of Appeal appears to be making the mistake of treating the
trust as if it were a contract, just as the Supreme Court of the Bahamas did in
the case of Roywest Trust Corp (Bahamas)
Limited v Savannah NV
in relation to a trustee exoneration clause. In that case the court simply applied
the English House of Lords’ decision of Photo Productions Limited v Securicor
Limited,
which was a case on the effect of an exoneration clause contained in a contract.
This error emerges most clearly from the passage just cited from the judgment
of the Court of Appeal. This is
couched in the language of an agreed choice of forum, and is buttressed
by the references to Dicey & Morris, which are references to passages
dealing exclusively with contractual jurisdiction clauses. It also
recalls the unsuccessful argument put forward in the earlier Jersey authority
dealing with trustee jurisdiction clauses, EMM Capricorn Trustees Limited v
Compass Trustees Limited, where the Royal Court said -
"[Counsel] argued that
an exclusive jurisdiction clause in a trust deed should be given the same
weight as in a contract. But that is to ignore the difference between the
two documents. If A and B agree in a contract that they will refer any
dispute to the courts of a particular country, one can well understand why they
should generally be held to their bargain. They have agreed it; why
should one of them then be allowed to go back on what has been freely
agreed? But the position is very different in relation to a trust.
The exclusive jurisdiction provision of a trust deed will have been agreed only
between the settlor and the original trustee. Actions in relation to the
trust may be brought by beneficiaries who were never parties to the trust deed;
indeed they may not even have been alive at the time of its execution.
The policy considerations which lead to a party to a contract being held to his
choice of exclusive jurisdiction cannot apply to a beneficiary who played no
part in the choice of exclusive jurisdiction made in the trust deed”.
18 But there is
more. Let us deal with the various
points made by the Court of Appeal in turn.
(1) Is there a principle that clear words are required to create an
exclusive jurisdiction provision in a trust deed?
19 At first
instance the Royal Court
treated this as “axiomatic”. But no authority was cited and I
have been unable to find any. Perhaps all that the court meant to do was
to infer a general principle of construction from all the circumstances.
Those circumstances include, first, the comparative rarity of such clauses in
trust instruments (certainly compared to contracts), secondly, the obscurity of
their legal basis and effect, and thirdly the existing imperative rules of
international jurisdiction which, with few exceptions (such as the international
conventions and council regulation of the European Union),
do not take account of such clauses in trust deeds.
The inference from these facts would be that settlors would not likely be
treated as having sought to do something unusual and possibly
nugatory anyway. It would then be no more than saying "Why construe a clause as (a) trying to do
something unusual and possibly lacking in effect, rather than as (b) trying to
do something common and effective (i.e. selecting a proper law)?”
The latter is more likely than the former to be the settlor’s
intention. So if (unusually) the settlor intends the former, let him make
clear that that is indeed his intention. This is an intuitive process,
but such processes play an important part in judicial reasoning in the common
law tradition. As Lord Hoffmann said recently (albeit in a different
context) -
"[S]ome things are
inherently more likely than others. It would need more cogent evidence to
satisfy one that the creature seen walking in Regent’s Park was more
likely than not to have been a lioness than to be satisfied to the same
standard of probability that it was an Alsatian”.
(2) The references to
“exclusive jurisdiction” in clause 1 and “forum for
administration” in clause 2
20 The Court of
Appeal thought that, if the reference to “exclusive jurisdiction”
in clause 1 did not refer “to the jurisdiction of the relevant forum or
court, it would be redundant.” With respect, this is not so.
Clauses using the wording found in clause 1 have been used by trusts draftsmen,
for many years, to indicate the law to which reference is to be made –
and exclusively to be made – to ascertain the effects of the trust
and the rights of the parties involved. The “jurisdiction”
referred to is not (as a litigation or arbitration lawyer might think) the
jurisdiction or competence of the forum, but instead (as a non contentious
trusts draftsman would have considered) the jurisdiction, meaning
“scope” or “province of application”, of the law
itself. It answers the question, Which law governs what
aspects of the trust? And the answer given here is, all aspects of this
trust, including the rights of the parties, are subject to the law identified
as the proper law. If the judges of the Court of Appeal had had any serious
acquaintance with the drafting of trust instruments, they must have known this.
21 Secondly,
the Court of Appeal thought that the reference to the forum for the administration
of the trust in clause 2 (even though headed “Proper Law”, which must
surely have been seen as a clue) confirmed the interpretation of clause 1 as an
exclusive jurisdiction clause. Again, this cannot be right. The
“forum for administration” of a trust is a quite different concept
from an exclusive jurisdiction for the resolution of disputes (whether arising
from trusts or otherwise). The administration referred to here is
not intended to include contentious breach of trust litigation. On the
contrary, it is concerned with aspects of the administration of the trust which,
for one reason or another, require the assistance of the court. These might
well include trustees seeking to clarify the true construction of the trust
terms (for example whether they might invest in such and such an investment),
or trustees seeking a direction as to whether they might safely distribute
assets when there are contingent claims from third parties still in the air,
whether they should disclose trust documents or information to beneficiaries,
or whether they should take or defend legal action against third parties (so
called “Beddoe"
applications). Indeed, it might even involve an application to remove a
trustee from office and appoint another. This is the “domestic
jurisdiction” of the Chancery Court, which under the old Rules of the
Supreme Court 1965 in England
was represented by the provisions of Order 85. The predecessor
of that Order itself was introduced in order to avoid the need in every case to
have a full action to administer the trust – a so-called
“administration action”. This jurisdiction – usually, but
not invariably,
invoked by the trustees – continues today in England. A similar
jurisdiction exists in Jersey
and, for that matter, in Guernsey.
22 Hence, the
phrase “forum for administration” referred directly back to the
nineteenth century (and earlier) idea of the court which would take on the
administration of the trust if need be. The most usual forum
for that, of course, was the forum of the proper law. So strictly there was no need to state
the forum for administration. And
it is doubtful that selecting a different forum from that of the proper law
could require the trustees to seek directions only from the nominated
court. But such an administration
action was in effect procedural rather than substantive. It was a means of dealing with
matters of administration and construction. It was not – could not be –
used to deal with breach of trust issues,
characteristic of the kind of hostile trust litigation for which an exclusive
jurisdiction clause might be needed. So there could not be any suggestion that
this “forum for administration” was automatically intended also to
be the exclusive jurisdiction for the resolution of contentious disputes
involving beneficiaries. As the leading cases in England show,
that was an entirely different question, resolved – in the days before
the adoption of forum non conveniens
as a part of English law – by a straightforward application of the
ordinary rules of national jurisdiction. In England and other common law countries
this depended initially on where the defendants were to be physically found,
and a similar rule was originally applied in Jersey. Thus it mattered who the defendants
were. They might or might not have been the trustees, but the important
point to notice is that it is the plaintiffs who would have had to make
that decision, and they would probably not have been the trustees.
Accordingly, the use of the phrase “forum for administration” could
not, with respect, support the interpretation placed on clause 1 by the Court
of Appeal.
(3) No meaningful distinction
between “exclusive jurisdiction” and “forum of choice”.
23 One problem
with the third point is that the terminology suddenly changes. Where the
phrase previously was “forum for administration”, it has become
“forum of choice”. This is the result of the evidence of the
expert on Anguillan law, who used the latter phrase, probably without intending
it to mean anything different. But the Court of Appeal then says that there is
no meaningful distinction between “exclusive jurisdiction” and
“forum of choice”. If “forum of choice” means
“forum of administration”, then I respectfully disagree, for the
reasons already given. But if “forum of choice” means (as the
Court of Appeal appear to think it means) a place which is to have jurisdiction
to hear disputes, then of course the Court of Appeal is right to say there is
no real distinction. But in my view that is not what the expert meant in
the context.
Other matters
24 One point
which the Court of Appeal did not consider – on their view of the
matter, could not have considered – is whether the claims being
made in the litigation were the kinds of claim that could have been made in an
administration action in any case. If they were, then (perhaps
paradoxically) the Court of Appeal would have been right to
rely on the “forum for administration” clause. If this had
simply been a question about the true construction of the words used, in
advance of action taken by the trustees, it would probably have been a matter
of administration, and could have been the subject of an action for
administration (or, in England, an application under what used to be RSC Order
85 and is now CPR Part 64). But in fact this was a highly contentious
dispute between persons claiming to be beneficiaries as to their respective
rights, and in any event other claims were also made, including claims for
breach of trust and fiduciary duty, which could not have been the subject of
such an action.
25 There is a
final matter to mention. The Court of Appeal, after relying on the contractually
based authorities that they cite, specifically refer to the fact that, in any
event, they consider this case to be “contractual” in nature.
This is because they regard the plaintiff and the first defendant as having
been “standing behind” the settlor, and the settlor (after all) did
enter into the transaction with the original trustee.
So whether in strict law a trust is a contract or not, they think it is right
to decide this case according to the contractual
principle, because in substance the dispute arises out of an agreement.
26 There are
three points to make here. The
first is a simple point of fact.
The plaintiff’s case was that he did not ‘stand
behind’ the settlor, although the first defendant may have done so. So the court’s whole point here
rests on an unproven and unadmitted assertion. The court had no basis (e.g.
an admission) on which to assume that assertion to be a fact for the purposes
of this application.
27 Secondly, it
is odd to rely on a contract between the plaintiff and the first defendant to
justify setting aside service or declaring that Jersey was a forum non conveniens on the applications of the second and
seventh defendants (in the one case) and the third and fourth defendants (in
the other) when none of these was a party to the trust instrument
concerned. No doubt the first
defendant and the eighth defendant (original trustee) could take advantage of
any relevant contract in the trust instrument, but neither of these was making the application, and it is hard to see why the other
defendants should be entitled to do so.
28 The third
point is that the wording used in the clauses in this case is very common in
offshore trust instruments, in Jersey and
elsewhere. If the Court of Appeal were
intending to rely for their decision on the fact that in this particular
case the parties involved in the litigation were in some way bound by an
agreement between themselves, and they were not therefore relying generally on
there being some kind of exclusive jurisdiction clause in the trust instrument
itself which automatically bound
beneficiaries, then they should have made this clear. Instead, they did
the opposite. The judge giving the leading judgment said:
"I consider that, as an important element in
the structure of the trust in respect of which any would be beneficiary claims
any interest, it should prima facie be binding on such beneficiary”.
29 The judge
did not however explain how such a clause could possibly be binding. After all, in the normal case, as
explained by the Royal Court
in EMM Capricorn Trustees Limited,
the beneficiary does not agree to any such thing. In the contractual context, a
jurisdiction clause is binding on the parties only to the extent of an agreement
by them that it should be so, and this is as much French law
as it is English. If a trust jurisdiction clause were
binding without agreement, then the contractual principle would be redundant.
30 Professor
David Hayton suggests that the settlor in entering a
trust “agreement” with the trustee as to jurisdiction could expressly
contract also “on behalf of” the beneficiaries. To the extent that they are in existence
and ascertained persons, and are competent to bind themselves, this is
perfectly possible, though since settlors of trusts do not normally purport to
act as agents it would – as Professor Hayton says
– need clear language to achieve this. There is no such clear language in the
trust instrument in the present case.
But the real problem is that a person cannot – in English law, at
least – contract as agent for a person not yet ascertained or in existence,
or for a minor
or a mentally disordered person. And in the case of most non-commercial
trusts, especially discretionary trusts, this will exclude nearly all of the
beneficiaries. So it is not much
use in practice.
31 Cohen and
Staff
build on the agency idea by suggesting that under English arbitration law a
trust beneficiary will be bound by an arbitration clause in a trust
instrument, because the beneficiary is within the statutory definition of a
party to an arbitration agreement, as a person “claiming under or through
a party to the agreement”. As it happens, Jersey
has recent legislation based on the English statute, and (on this point) to the
same effect. So if the conclusion were correct in
English law, it would also be correct in Jersey
law. But it would only extend to arbitration
clauses, and not to court jurisdiction clauses. And in any event, the conclusion is not
correct. The phrase “under or
through” may perhaps include cases of pure agency,
in which case it suffers from the problems already mentioned, but it is surely mainly
intended to refer to the case of transmission – whether voluntary or
involuntary – of pre-existing rights. However, a trust beneficiary does not
claim in any relevant sense as the assignee from the settlor of any
pre-existing rights. The
beneficiary is not the assignee of the settlor’s right to sue for breach
of trust or otherwise to compel due administration of the trust, because the
settlor never had any such rights that he could transmit to the beneficiary by
assignment. Instead the beneficiary acquires his own
original rights to do so as from the date of his becoming a beneficiary.
32 Professor
Hayton, however, has a further argument. He goes on to suggest that a beneficiary
not otherwise bound becomes a party to an express jurisdiction
“agreement” in a trust instrument, and will become bound by it,
if he takes a benefit under that trust instrument. Now it is true that in English law there
is a doctrine of so-called “benefit and burden”, whereby a person
who takes a benefit under a deed is sometimes said to be obliged to take the
burden of obligations purportedly imposed by it. I have found no trace of a similar
general doctrine in Jersey law, although there
do exist apparently exceptional rules of Jersey
succession law
and company law
which in their particular contexts produce a similar effect. But even in England it seems that this doctrine
at most gives the person concerned a choice whether to perform: if the
obligation is not performed, the benefit may be withdrawn. It is a “stick and carrot”
arrangement. It does not
make that person personally liable for the obligation in question. And it is clear law in England that
(except in the special case of a “simple” trust)
a beneficiary under a trust is not personally liable (say) to the trustee to
reimburse his proper expenditure or pay his stipulated remuneration, where the
trust assets are otherwise insufficient for the purpose. I have found nothing to suggest that Jersey trust law is different on this point.
Conclusion
33 There are
perhaps two lessons to be learned from this case. The first is that
trusts draftsmen the world over
must revisit their precedents and decide, in the light of this case, whether to
make any amendments. In particular, they may decide to suppress the use
of the words “exclusive jurisdiction” if they appear in what is otherwise a definition of the proper law. Secondly, they
may wish either to omit reference to the “forum for
administration”, or at least make clear exactly what it is
intended to refer to. Thirdly, they should consider whether they wish to
insert an exclusive jurisdiction clause for the resolution of disputes.
Obviously these points matter most to anyone using a Jersey
law trust, because (until overruled) the decision of the Court of Appeal is
binding on the Royal Court. However, since you can never tell how
much influence a case like this will have on the courts of other offshore
jurisdictions, common sense suggests that all offshore trust precedents
should be reconsidered.
34 The second
lesson is this. Years ago the Jersey Court of Appeal boasted such
Chancery luminaries as Mr Nicolas Browne-Wilkinson
QC, Mr Leonard Hoffmann QC and Mr
John Chadwick QC amongst its members. Ironically, in those days very little
trust litigation reached the Court of Appeal. Not so today. And, of
late, the number of Chancery members of the court seems to have fallen. I
think there is now only one ordinary member (out of eleven) that English
Chancery lawyers would recognise as having
significant Chancery expertise, and perhaps one other who has at least
some. Neither of them sat on this appeal. Given the importance to Jersey of its trust business, and the importance to any
business of having an effective legal system to vindicate the rights conferred
by that business, it is surely desirable that the Court of Appeal should be in
a position to muster judges with the appropriate background and
experience. No doubt there are formidable logistical and other
difficulties in listing trust law appeals before Chancery specialists,
especially since most of the appeals to the Court of Appeal relate to criminal
law matters. And it is true that
this is neither a new nor a purely insular complaint. The same point has
been made (several times) in the past in relation to the English Court of
Appeal.
In that jurisdiction, some improvement has been noted. But, in the
overall economic scale of things, trust law business matters more to Jersey than it does to England. Accordingly, I would
like to think that this note will not fall upon deaf ears.
Paul Matthews is a
solicitor of the Supreme Court of England and Wales and a consultant with the
firm of Withers LLP, 16 Old Bailey, London, EC4M 7EG.