Legal issues
Decision
Significance for other types of commercial trust
Clarifications in the law
Practical lessons for advisers
The case at hand(1) relates to a funded unapproved retirement benefits scheme (FURBS) – a type of Guernsey trust which holds assets of significant value for the benefit of the sole member of the FURBS, and if he or she dies, for the benefit of his or her spouse. In this case, the husband and wife were going through a divorce in England and the wife sought to join the trustee into the family proceedings for the purposes of disclosure – that is, she wanted to know what assets were vested in the trust.
This is the first time that a Guernsey trustee has sought assistance from the Royal Court for directions as to whether it should submit to the jurisdiction of a foreign court. This is because, as with other offshore jurisdictions, Guernsey trust law has a firewall which confers exclusive jurisdiction on the Royal Court over matters concerning Guernsey trusts, and so asking the Royal Court to approve the submission to a foreign jurisdiction (even for specific purposes such as those involved in this case) is a significant step to take for any Guernsey trustee.
The court directed the trustee to submit to the jurisdiction of the Family Division of the High Court of England and Wales for the purposes of taking part in the ongoing matrimonial proceedings in order to provide disclosure and assistance within those proceedings.
Significance for other types of commercial trust
By its very nature, a FURBS is, in effect, a workplace pension scheme and thus the trustee has little discretion as to when to make distributions from the trust under the scheme rules (in common with many other types of pension scheme). This is a significant difference compared to a private family discretionary trust, which confers unfettered discretion on the trustee to make distributions and take other decisions which could affect the beneficiaries. In making this statement, the deputy bailiff was narrowing the ratio of the case and limiting it to these types of trust only. In Jersey, the courts have, fairly reluctantly it has to be said, taken the line that, where appropriate, trustees of discretionary trusts should submit on a limited basis to the jurisdiction of a foreign (normally matrimonial) court. While the Guernsey court did not go that far on this occasion, it is likely to take the same course if a similar case comes before it.
The judgment is helpful because it clarifies that the court will do what it can to assist trustees of Guernsey trusts in carrying out their functions. In this case, the trustees were put in a near impossible position by the English court which had, without any reference to the Guernsey court, simply joined the trustees to the English proceedings as a party. Without any comment about whether that is right or wrong, it is appropriate for Guernsey trustees to seek direction from their home court to determine whether to submit to the foreign jurisdiction and, importantly, how far they should go in submitting. In this case, it is arguably only for the purposes of disclosure and nothing more, but the decision shows that, in the right case, the Guernsey court will look at the issues sensibly and commercially.
Practical lessons for advisers
One practical lesson for the two different types of lawyer involved in these situations is that, for matrimonial legal advisers, where a foreign trust is involved, it is paramount to seek advice from trust lawyers in that jurisdiction. Many jurisdictions have firewall legislation and matrimonial advisers will need to consider whether they need the trustee to participate in the proceedings and, if so, they must have regard to comity and allow the trustee to seek assistance from its home court first. For trusts lawyers, this case demonstrates that the courts routinely exercise their trusts jurisdiction, and are rightly protective of it. It will be interesting to see how protective the Royal Court will be when a trustee of a discretionary trust comes before it with a similar issue in the future.
For further information on this topic please contact Mathew Newman at Ogier by telephone (+44 1481 721 672) or email ([email protected]). The Ogier website can be accessed at www.ogier.com.
Endnotes