Trusts,
Divorce Courts and enforcement—an offshore update
Michael Birt
The
author examines the sometimes difficult relationships between family courts
dealing with matrimonial disputes between husband and wife and chancery courts
(usually offshore) dealing with the interests of the beneficiaries of a trust.
1 The situation in the field of trusts and
divorce is sometimes portrayed as a contest between the Family Division of the
High Court of England and Wales (“the Family Division”) and the
Chancery courts, whether onshore or offshore. Of course there is scope for
differences of view between these courts and I shall deal with some of the
areas of potential tension. But it is certainly wrong to see the offshore
courts as simply placing obstacles in the way of the Family Division achieving
justice between the spouses. The Royal Court of Jersey is a court of general
jurisdiction which hears divorce cases as well. The court fully appreciates the
importance of ascertaining what assets would really have been available to the
parties had the marriage continued and how those assets should be divided.
Indeed, the test now applied by the Family Division in connection with trusts
in deciding whether the trust should be treated as a resource available to the
parties—namely, if the husband were to request the trustees to advance
capital from the trust fund, whether the trustees would be likely to do so—is
a test that has also been applied in Jersey.[2]
2 In a previous article in this Review on the topic of trusts and
divorce from the perspective of an offshore court (“the 2009 article”)[3] I
considered the subject under three headings.
1. The
provision of information about the trust directly or indirectly to the Family
Division;
2. Whether
the trustee should participate in the divorce proceedings and therefore submit
to the jurisdiction of the Family Division; and
3. Issues
concerning enforcement of any order made by the Family Division.
3 This remains a convenient way of
considering the issues which are likely to arise in the context of divorce and
trusts and I shall take each of these in turn and see how matters have
developed in recent times.
4 However, before doing so, there is one
particular area where potential difficulties are emerging which is worthy of
discussion.
Applications
in private to the Royal Court
5 When beneficiaries of a Jersey trust
become involved in divorce proceedings, the trustees may have some important
decisions to take. For example, as just mentioned, should they supply
information to one or other of the divorcing spouses and, if so, what
information should they provide? Secondly, should they submit to the
jurisdiction of the divorce court? These are of course decisions which the
trustees may well decide to take on their own without reference to the court.
There is certainly no requirement for them to obtain the court’s approval
of whatever they decide. However, because it might be regarded as a “momentous”
decision, the trustees may well feel that they want to obtain the court’s
blessing to their decision.[4]
6 The ability of the Royal Court to give
assistance to trustees is an important part of its supervisory jurisdiction.
Whilst there are cases where the court will refuse to give approval on the
basis that the matter is not significant enough and the trustees should decide
the matter on their own, the Royal Court by and large adopts a reasonably
generous approach in allowing trustees to apply for the comfort of court
approval. This is generally regarded by those in the trust industry as being a
beneficial jurisdiction, which not only helps trustees but also allows
beneficiaries to have their say in a non-adversarial manner so as to ensure
that all points of view are considered before the relevant course of action is
taken.
7 However, for this jurisdiction to work
properly, the trustees and any beneficiaries convened to the hearing must be
able to lay their cards on the table and speak openly and frankly. It must
always be borne in mind that the effect of the court’s approval is to
prevent a claim for breach of trust being brought against the trustee for the
action which is approved. It is therefore vital that the court has the fullest
possible picture. As the Royal Court said in Re M Trust[5] at
para 15—
“The trustee is under a duty and must feel able
to make full and frank disclosure in relation to the application. It must be
able to summarise the arguments for and against the proposed course of action,
including any weaknesses or possible risks in relation to what is
proposed.”
8 As a result, such applications are
invariably held in private. They will often concern legally or commercially
sensitive matters and of course they are administrative rather than adversarial
proceedings; they do not determine civil rights for the purposes of art 6 of
the European Convention on Human Rights. As William Bailhache DB explained in Deery v Continental Trust Co Ltd[6] at
para 6—
“6(d) . . . it is absolutely necessary
that a trustee should be able to come to court under Article 51 to make a
candid appraisal of his position and the problems which are to be addressed. If
trustees thought that such affidavits and applications might be provided to
those with hostile eyes upon the trust or the trust fund, they would be less
likely to be candid and the whole purpose underlying the Article 51 procedure
would be liable to be frustrated.”
9 Consistently with that view, the Royal
Court in that case refused to give assistance to a letter of request from the Family
Division which had sought disclosure of material produced to the Royal Court in
the private trust application. The court held that the public interest in
preserving the confidentiality attaching to such proceedings outweighed the
demands of comity.
10 The approach of the Royal Court is
consistent with what certainly used to be the approach to similar applications
in England. Thus in Midland Bank Trust Co
Ltd v Green,[7]
Templeman J said this—
“[O]f course, it is necessary for defendants (i.e. the applicants for Beddoe relief) to open their hearts to
the judge and tell him exactly what the action looks like. The judge is acting
in some respects as though he were the adviser and trustee giving guidance. The
application is invariably heard in chambers, and nothing is published because
of the jurisdiction of the judge to look after the estate, and because any
information made public would be available to the plaintiff in the action, and
might well be prejudicial to the defence and the estate which the judge is
there to protect. Over the whole of such an application there is an aura of
confidentiality, which is preserved by hearing everything in chambers.”
11 That observation was made in the context
of a Beddoe application strictly so
called; i.e. where a trustee seeks
directions as to whether to institute or defend legal proceedings. But it seems
to me that the principle is equally applicable to other decisions which the
court is asked to approve. The need for the court to be alerted to all the arguments
for and against what the trustees are suggesting means that there must be
protection of confidentiality for what is said at the hearing and for the
material produced for it. I am conscious from the interesting talk given by
Robert Ham QC at the annual Wilberforce Chambers Conference on 2 February 2015
that the position may be changing in England.[8]
Nevertheless, for the reasons I have given, I think the arguments in favour of
maintaining the present Jersey position are very powerful.
12 That is why in Re M Trust, the Royal Court held that it would be a contempt of
court to disclose the content of private trust proceedings or material which a
party had only received as a result of such proceedings.
13 And it is in the case of Re M Trust that the problem in question
first reared its head. It involved a number of trusts where the beneficiaries
were the children of the husband. The husband and wife had become involved in
divorce proceedings. Although they were not beneficiaries of the trusts with
which the Royal Court was concerned, the husband and the wife could have been
added with the consent of the protector. The trustee sought approval of its
decision to disclose information about the assets of the trusts to the
husband’s father (who was a
beneficiary) in the knowledge that he was likely to pass it on to the husband,
from which the information would of course become available to the Family
Division; and also to its decision not to participate in the divorce
proceedings and thereby submit to the jurisdiction of the Family Division. The court
approved both decisions.
14 Subsequently, the adult beneficiaries (i.e. the children of the husband) sought
leave to intervene in the divorce proceedings in the Family Division. As a
condition of being granted leave, they had to undertake to produce the
documents supplied to them in the earlier Jersey private trust proceedings, if
called upon to do so by the divorce court. As can readily be seen, they were
therefore on the horns of a dilemma. If they produced the documents, they would
be in contempt of the Royal Court and liable to punishment; conversely, if they
refused to produce the documents when called upon to do so by the Family
Division, they would be in contempt of that court, being the jurisdiction where
they were resident. Not surprisingly, they therefore applied to the Royal Court
for permission to disclose the documents and information they had received in
the private trust proceedings.
15 In its judgment, the court confirmed, as
I have already said, that it would be a contempt of court for the beneficiaries
to disclose such material without consent. It went on to emphasise the
importance of the supervisory jurisdiction and the need for trustees and others
to be able to make full and frank disclosure in relation to the application.
The court reminded itself that the only issues raised in the trust proceedings
had been whether the trustee should provide information to the grandfather and
whether it should submit to the jurisdiction of the Family Division. The
information had subsequently been provided. The court accepted that it was not
viewing the matter from the perspective of the Family Division but said that it
seemed highly unlikely that the material disclosed in the July proceedings
would add to the relevant knowledge about the trusts on the part of the Family
Division or be relevant to the issue which the Family Division had to resolve.
The court said this at paras 23 and 24—
“23. We accept that we cannot view the matter
from the perspective of the Family Division but it does seem to us highly
unlikely that the material disclosed for the July proceedings will add to the
relevant knowledge about the Trusts on the part of the Family Division or will
be relevant to the issue which the Family Division has to resolve. The only
issues raised in the July proceedings were whether the trustee should provide
information to the grandfather and whether it should submit to the jurisdiction
of the Family Division. Following the court’s ruling, the information has
been provided to the grandfather (and onwards) and the trustee has not
submitted to the jurisdiction. The reasons
for the trustee and the court reaching that view do not, with respect, seem
relevant to the issue of how much, if anything, the husband should be ordered
to pay the wife or whether there should be a variation order in relation to any
of the Trusts. The internal thinking of the trustee as to what it considers to
be in the best interests of the beneficiaries and the decision of the court in
relation to that matter seems very different from the issue of what order
should be made by the Family Division in relation to the financial position of
the husband and the wife.
24. We would therefore respectfully invite the Family
Division to consider very carefully whether it needs to make any order that the
adult beneficiaries disclose material relating to the July proceedings. If this
court were to find that the Family Division began routinely to make orders
requiring disclosure of applications by trustees brought in private, the court
would have to consider amending its procedures either so as to heavily redact
any material served on English resident beneficiaries or to preclude material
from being sent out of the jurisdiction and allowing only inspection within the
jurisdiction. This would seem to be in no one’s interests. If, despite
this, the Family Division considers that some disclosure should be made, we
hope that it will have regard to the remarks of this court in relation to the
different categories and material referred to in the remainder of this
judgment.”
16 The court then went on to divide the
material produced in the private trust proceedings into three categories,
namely legally privileged material, what it called “sensitive material”
and other material. All parties agreed that there was no problem with
disclosure of the other material and the court refused consent to disclosure of
privileged material. In relation to what it called sensitive material, the court
considered the circumstances to be very unusual and gave consent but subject to
a caveat. It said this at para 33—
“In the very unusual circumstances of this case
and taking into account the nature of the material in question (which we do not
think is particularly sensitive), we consider that, if required to do so by the
Family Division even after it has heard arguments to the contrary, the adult
beneficiaries should be given leave to disclose the sensitive material . . .
However, we hope very much that the Family Division will respect the nature of
the July proceedings and not order disclosure of the sensitive material.”
17 The matter duly came back before Moylan
J in the Family Division.[9] It
is clear that he did not simply brush aside the views of the Royal Court. He
engaged with those views and considered carefully whether it was necessary to
order production of the material. He accepted without question that the legally
privileged material should not be produced. Nevertheless, even though he had
not seen the material and was aware of the view expressed by the Royal Court
that it seemed highly unlikely that the material would add to the relevant
knowledge of the Family Division, he concluded that he should order the adult
beneficiaries to disclose the sensitive material as well as the other material.
18 Moylan J referred at para 35 of his
judgment to the last sentence of para 23 of the Royal Court’s judgment
(quoted above) with its reference to the “internal thinking of the
trustee”, and said at para 36 of his judgment—
“The English court’s decision in this
case, at the trial of the financial remedy application, would have depended
very significantly on the court’s determination of the two issues
referred to above including the extent to which, if at all, the resources held
within the Trust are resources likely to be available to the husband and as
such part of his resources for the purposes of Section 25 of the MCA 1973 . . .
What the trustee considers to be in the best interests of the beneficiaries,
and why, are, I would suggest, essential elements of this, factual,
determination because it is the trustee who controls the availability of this
wealth through the exercise of its discretion. The trustee’s reasons for
coming to its conclusion—its thinking—are highly relevant to this
determination. . . .”
19 He went on to say this at paras 43 and
44:
“43.
The significance of [the likelihood of the husband benefitting from the trust]
is enhanced in this case because it appears that the bulk of the wealth
accumulated as a result of the husband’s endeavours during the course of
the marriage is held in the Trusts. The outcome of the case at trial would have
hinged to a considerable extent on whether the Trusts were nuptial settlements
and/or whether the Trusts’ resources were likely to be available to the
husband.
44.
Given the pivotal importance of these issues and given the importance of
seeking to understand how and why the trustee was likely to exercise its
powers, I ordered disclosure of the material because I concluded that its
potential relevance and importance, including in particular the sensitive
material, was such that I must order its disclosure notwithstanding the strong
judgment of the Royal Court and the demands of comity. I should also add that
I, of course, recognise the specific concerns which flow from trustees being
able to apply confidentially to the Court for directions.
45.
However, in my judgment, any light on the ‘internal thinking’ of
the trustee would be significantly preferable to none . . .”
20 As it happens, the divorce proceedings
settled and therefore we shall never know whether the material would in fact
have been of assistance, as Moylan J thought it might, or would not have
assisted, as the Royal Court thought.
21 It is clear that Moylan J engaged with
the Royal Court’s concerns but nonetheless his decision has troubling
implications. In essence, his reasoning was that the Family Division needed to
ascertain the likelihood of the husband benefitting from the trusts and that,
although he could have no direct knowledge of it because he had not seen the
material, it was likely that, in the course of an application for directions, a
trustee would provide information to the Royal Court which might assist the
Family Division in its task. It is hard to see therefore why his reasoning
should not apply in almost every case where a trustee has sought directions
from the Royal Court about divorce proceedings involving one or more
beneficiaries.
22 As the court said in Re M in the passage quoted above, if it
were to become the case that the Family Division routinely ordered disclosure
of material produced in private proceedings before the Royal Court, the Jersey
court would have to decide how to respond. Both the Royal Court and Moylan J
made reference to the interests of comity and this is an important
consideration. The situation now has very much improved from that which it was,
say, 10 years ago and there is a greater mutual understanding and appreciation
of the respective roles of the Family Division and the offshore trust court. In
my view, the Royal Court has been supportive of the need for the Family
Division to be provided with information about the trusts and in return, I
would hope that the Family Division would show an appreciation and
understanding of the need for the Royal Court to hear trust applications in
private. The benefits of that procedure should not be undermined by routine
disclosure orders in the UK. I am already aware of one subsequent case where,
as a consequence of Moylan J’s decision, the trustees asked that a UK
resident beneficiary only be allowed to inspect the evidence in Jersey and the court
agreed to this.
23 It remains to be seen how this
situation develops, but it is greatly to be hoped that a modus operandi can be achieved which is satisfactory to both
jurisdictions.
24 With that introduction, I turn to
consider the three headings mentioned above.
1. Disclosure of information
25 In the 2009 article, I concluded that
the basic approach of the Royal Court was that, if a beneficiary would normally
be given access to trust documents and information, the fact that he needs them
for the purposes of his divorce proceedings is not a reason to refuse
disclosure. Thus in 2006 in Re H Trust the court said, at para
17—
“It seems to us important, in this case, that
the husband and wife should have the fullest information concerning the
financial affairs of the trust so that any compromise which they reach, failing
which any decision of the Family Division, is based upon the true financial
position.”
26 There are some exceptions. So, in Re L & M Trusts,[11] the court
ruled that it would not be in the interests of the beneficiaries as a whole for
information to be provided to a wife in order for her to attack the validity of
the trust in certain American proceedings. Similarly, in Re Avalon Trust,[12] the
English divorce court had ordered disclosure of various categories of trust
documents. The Royal Court held that there should be disclosure of documents so
as to give a picture of the financial position of the trusts but the court
refused to order disclosure of correspondence between the trustee and any
beneficiaries other than the husband in that case.
27 There has been no material change since
2009. It is still the general approach of the Royal Court that it is
appropriate for a trustee to provide information to a beneficiary about that
beneficiary’s interest under the trust and the trust assets generally so
that the Family Division can properly fulfil its role of making a fair
allocation of assets, and make a decision which is based upon the facts rather
than upon conjecture and, possibly, suspicion.
28 An example is Re M Trust itself, where neither the husband nor the wife were
beneficiaries of any of the relevant trusts—although they could have been
added—and therefore the trustee felt unable to supply information to the
husband. The court nevertheless approved of the trustee’s decision to
disclose all relevant financial information to the grandfather (who was a beneficiary) in the knowledge that
he would pass this on to his son.
(ii) Submission to the jurisdiction
29 The next issue for offshore trustees is
likely to be whether, if they are made parties to the divorce proceedings, they
should participate and so submit to the jurisdiction of the divorce court. I
think this is an area where thinking is still developing and where it may
sometimes be finely balanced as to whether the interests of the beneficiaries
as a whole are best served by submitting or not.
30 The original approach of the Royal Court
was summarised in Re H Trust[13] where the court pointed out (at para
14) that, whereas the Family Division was concerned to do justice between the
two spouses before it, the primary consideration of the offshore court was to
make or approve decisions in the interest of the beneficiaries. It therefore
had a very different focus from the Family Division and the view was that,
because submission to the jurisdiction of the divorce court would make
subsequent enforcement in Jersey easier, whereas a judgment where the trustees
had not submitted could not be enforced in Jersey on ordinary private
international law grounds, it was more likely to be in the interest of a Jersey
trust that the trustees should not submit.
31 However, that was before the
introduction of the so called firewall legislation in art 9 of the Trusts (Jersey)
Law 1984. The Royal Court held in Re IMK
Settlement (Mubarak)[14] at
para 76(1)—
“By reason of art. 9(4) of the 1984 Law, this
court cannot enforce a judgment of the Family Division varying or altering a
Jersey trust under the 1973 Act, even where the trustees have submitted to the
jurisdiction of the Family Division . . .”
32 It might be thought therefore that the
position had changed and that there would now be no disadvantage to trustees
joining in divorce proceedings.
33 The advantage of such a course is that
they can do their best to ensure that the divorce court is reminded of and
takes full account of the interests of the other beneficiaries. They can also
ensure that the correct position in relation to the trust and the trust assets
is fairly and squarely before the divorce court. In particular they can do
their best to reduce the risk of the court wrongly drawing adverse inferences
simply because of the failure of the trustees to appear. As Mostyn J put it in BJ v MJ (Financial Remedy Overseas Trusts),[15] at
para 18—
“If the trustees have refused to participate
meaningfully or helpfully in the enquiry then neither they nor their
beneficiary can complain if the Court draws robust conclusions as to the
likelihood of future benefits.”
34 As against that, once trustees have
submitted to the jurisdiction of the divorce court, they may find themselves
being ordered to do something by that court which is inconsistent with their
obligations under the proper law of the trust. They may end up in the
unenviable position of either disobeying the order of a court to which they
have submitted (with the risk of suffering penalties for the contempt of court)
or dealing with trust monies otherwise than in accordance with the trust deed (with
the risk of being sued for breach of trust under the proper law of that trust).
35 Even if the variation ordered by the
divorce court is within the terms of the deed, e.g. that a capital distribution be paid to the wife who is a
beneficiary—the trustees may be strongly of the view that such a payment
is not in the interests of the beneficiaries as a whole. Take the example of a
trust where the sole asset is a business which is illiquid. Any capital
distribution from the trust ordered by the divorce court may only be capable of
being paid by gearing up the trust assets to a level which the trustees
consider imprudent and therefore not in the interests of the trust estate as a
whole. If they have submitted to the jurisdiction, they may feel they have to comply.
If on the other hand, they have not submitted, they retain a free hand—assuming
the assets are outside the jurisdiction of the divorce court.
36 Another consideration may be the
likelihood of the trustees’ submissions to the divorce court having any
effect. In Re Otto Poon Trust,[16] the
Royal Court agreed to the trustee submitting to the jurisdiction of the Hong
Kong court hearing the divorce between the settlor and his wife, on the grounds
that many of the assets were in Hong Kong but also on the basis that the
trustee wished to make submissions about the trust to the divorce court. The
situation there was that the beneficiaries comprised the husband, the wife and
their adult child. In the divorce
proceedings in Hong Kong, the court at first instance and the Court of Appeal
accepted the submission of the trustee that, although the trust was
discretionary, one third should be notionally allocated to the adult daughter,
thereby leaving two thirds to be treated as a resource of the husband and/or
wife. However, this was overturned by the Court of Final Appeal[17]
which disagreed and held that the whole of the trust fund should be treated as
a resource of the husband. It ordered him to pay a lump sum to the wife which
was half the total assets of the parties including the trust which made up the
major part of those assets. The trustee’s intervention did not therefore
achieve anything in the end.
37 Otto
Poon was an example of where it was felt that the trustee should submit; Re M Trust was a case where the opposite
view was taken by the trustees and approved by the court. The situation there
was that there were four trusts governed by BVI law but administered in Jersey.
Although the assets of the M Trust itself were situated in the UK, the assets of
the other trusts were situated elsewhere, and overall the vast majority of the
assets were outside the UK. The wife was seeking an order that the trusts
should be varied so as to provide for her. In those circumstances, the court
agreed with the trustees’ decision that it would be preferable not to
submit to the jurisdiction.
38 Of course an alternative to submitting
to the jurisdiction is for the trustee simply to provide evidence, including
oral evidence as necessary. As Mostyn J said in the BJ case at para 21—
“I can therefore see why overseas trustees may
not want to submit to the jurisdiction of the English Court. They may prefer to
keep their powder dry and wait to see what judgment emerges before deciding
whether or not to resist enforcement proceedings in their local court. I have
to say, however, that I find it hard to see why participation by the trustees
in a helpful or meaningful way in this Court’s enquiry qua witness could be construed as a
submission to the jurisdiction.” [Emphasis in original.]
39 It may be that this is a course of
action which trustees may be more inclined to adopt in the future. Certainly
trustees (and offshore courts) have to accept that if a trustee does not submit
and does not provide any evidence, there is a substantial risk that the divorce
court will draw adverse inferences against the trust and its relationship to
the husband wherever this is possible. Whether this matters may depend upon the
location of the trust assets. If they are in England and Wales, this may be
very important; if on the other hand they are elsewhere, it may not be such a
significant consideration.
(iii) Enforcement
40 Again, there has been little change in
approach here since the 2009 article. The three most likely orders of a divorce
court in this context are first, a finding that the trust is a sham, secondly
an order that the trust be varied, or thirdly an order that the husband pay the
wife a lump sum. As to sham, this is now likely to be a comparatively rare
finding given that the trustee has to be a party to the sham for the trust to
be invalid.[18] If
the divorce court has ruled that a Jersey trust is a sham, that decision will
not be capable of enforcement in Jersey if the Family Division has applied
English law.[19] If
it has applied Jersey law, the decision will not be enforceable if the trustees
have not submitted to the jurisdiction and the wife would have to start all
over again in Jersey. If the trustees have submitted, then this being a form of
declaratory judgment, it would be a matter of discretion for the Royal Court as
to whether to enforce such a judgment in Jersey.
41 Alternatively, the Family Division might
make an order varying the trust under the Matrimonial Causes Act 1973. As
already mentioned, in Mubarak the court
held that such a judgment is not capable of enforcement in Jersey. As a matter
of Jersey law, the trust would therefore remain in its original form. If the
purported variation by the Family Division is within the powers of the trustees
under the trust deed, the trustees could
choose to make a decision which gives effect to the variation and the Royal
Court could approve that decision if
it thought that this was in the best interests of the beneficiaries as a whole.
If, on the other hand, the order of the English court amounted to an alteration
of the trust (in the sense that it required something to be done outside the
terms of the trust deed) then neither the trustees nor the Jersey court could
give effect to it.
42 The third type of order is simply an
order that the husband pays a lump sum to the wife which takes into account the
court’s finding that the
trust assets are a resource available to him. There can be no objection to the
principle of such an order as it is an in
personam order against a party who is before the divorce court. But of
course it may well be a sum which the husband cannot pay without recourse to
the trust assets. The question then for the trustees is whether they should
make a distribution out of the trust assets to the husband to enable him to pay
the lump sum to the wife. This will turn on the facts.
43 A recent example of this situation was
in the Otto Poon case itself. The
award of the Court of Final Appeal was in the region of HK$770 million. The
husband then requested the trustee to make a capital distribution of this sum
so as to enable him to pay that sum to the wife. Fortunately in that case there
was not a liquidity issue. Although the payment amounted to half the trust
assets, the trustee wished to make such a distribution but it also wished
thereafter to exclude the wife as a beneficiary.
44 The matter came back before the Royal
Court recently.[20] The
court had little difficulty in agreeing that the trustee should make the
distribution. It was in the interests of all beneficiaries that the
long-running litigation between the spouses should be ended and that everyone
should be able to get on with their lives. But the wife objected to the
suggestion that she should be excluded as a beneficiary. On this aspect, the court
also agreed with the trustee. It accepted that a power to exclude a person as a
beneficiary was an unusual power which should be carefully exercised but the
court found that the circumstances of the case were perhaps a classic example
of an instance where it would be right to exclude a beneficiary. It concluded
by stating—
“The wife has, in effect, received half the
trust fund. She is aged 75 and will now have HK$770.5m plus certain other
assets giving her a total of HK$832.5m in her own right. She therefore has
ample financial resources to last her for the rest of her life and there is no
need for her to remain as a beneficiary of the trust on financial grounds.
Furthermore, the money has been paid to her as part of a divorce order intended
to achieve a clean break. It is entirely reasonable in those circumstances that
the trustees should conclude that the remaining assets of the trust should be
held exclusively for the remaining beneficiaries of the trust.”
Summary
45 In summary, issues about offshore trusts
and divorce courts continue to arise. Such issues should not be regarded as a
contest between divorce courts and the offshore chancery courts. Ultimately,
all courts of justice should seek to achieve a just outcome. Nevertheless, it
cannot be denied that the roles of the two courts are different. The divorce
court is concerned to achieve fairness between the husband and the wife. That
may lead it to take a particular view of trust assets and their availability to
one or other of the parties. The offshore chancery court and the trustees, on
the other hand, have a duty to act in the best interests of the beneficiaries
as a whole. Whilst a material consideration for trustees and offshore courts,
when deciding how to respond to the order of a divorce court, may be the
desirability of bringing an end to hostile litigation between spouses which may
well be affecting the family as a whole, the trustees cannot escape from their
fiduciary duty to the beneficiaries as a whole, and the offshore court cannot
escape from its duty to supervise the activities of the trustees in fulfilling
that duty.
Sir Michael
Birt held the office of Bailiff of Jersey between 2009 and 2015, having
previously been Attorney General of Jersey (1995–2000) and Deputy Bailiff
(2000–2009) He is a Commissioner of the Royal Court and remains a judge
of the Jersey Court of Appeal.