09 November 2009
Jersey Court of Appeal confirms rights of non-trustee fiduciaries to an indemnity out of the trust fund
21 November 2013
21 February 2014
Should a trustee appeal a decision of the Royal Court in administrative proceedings? In the matter of the R and RA Trusts
30 May 2014
21 May 2014
Direct disclosure obligations resulting from joinder of adult beneficiaries to matrimonial proceedings affecting trusts
24 February 2014
The bitter and long-running Alhamrani dispute has put Jersey’s trusts law under the spotlight. Philip Sinel reports on its effect on the island’s reputation as a financial centre
Conclusion of the most expensive court case in Jersey confirms that the island remains a safe jurisdiction to establish trusts. The out-of-court settlement in the long-running Sheikh Mohamed Ali M Alhamrani and Four Others v Sheikh Abdullah Ali M Alhamrani And Four Others (2007) case brought to an end a bitter family dispute concerning two Jersey trusts, the Internine Trust and the Intertraders Trust (the Trusts), together worth in excess of $100m (£60.92m).
JP Morgan (Jersey) Trust Company Limited (JPM) was, until the latter part of 2008, trustee of the Internine Trust. Sinels Advocates acted for Trustcorp (Jersey) Limited, which was appointed trustee of the Internine Trust following JPM’s retirement.
In 2003 certain of the beneficiaries of the Trusts instituted proceedings before the Royal Court in relation to the Trusts. There followed a fierce battle in which the Royal Court was asked to adjudge numerous claims, counterclaims and interlocutory applications and to consider, among other things, the question of disclosure of information relating to the Trusts, the availability of ‘dog-leg’ claims and the matter of trustee costs and expenses including, in particular, those arising from the use of English solicitors and chancery counsel.
Provision of information to beneficiaries
In the ordinary course of events a beneficiary will be entitled to have sight of only:
• the trust deed;
• the trust accounts and, save where
there is good reason why not, details of distributions; and
• correspondence between himself and the trustee.
The Royal Court, however, went further, holding that “[a] sensible trustee will comply with any reasonable request by a beneficiary for information, even if there is no strict legal entitlement to it, as the relationship should be based on mutual trust.”
While this ruling appears to extend the general presumptions regarding provision of information to beneficiaries it does not, as the Court also made clear by its comment that no beneficiary should be allowed to “ferret through” the trustee’s files, allow the beneficiary unlimited access to trust documents or to have sight of any document capable of supporting an attack on the trust.
A ‘dog-leg’ claim is a claim based on the duty of a company director to exercise reasonable skill, care and diligence in the performance of his duties as a director and the assertion that the right to the performance of that duty is an asset of the trust. While the availability of such claims appears to have been all but ruled out by both Alhamrani and the English case of Gregson v HAE Trustees Limited (2008), Alhamrani does leave open the possibility that in “exceptional circumstances” it might be “in the interests of justice” to allow a ‘dog-leg’ claim to be brought.
The Court of Appeal in Alhamrani held that, where it has acted “properly and reasonably”, a neutral trustee is “entitled to be indemnified out of the trust fund for all its reasonable costs and expenses”, and went on to say that a beneficiary “could, of course, challenge the costs and expenses claimed by a trustee and seek a taxation… on the grounds that they were unreasonably incurred or of an unreasonable amount.”
The Court of Appeal also held that a beneficiary wishing to challenge the costs and expenses of a trustee (be they litigation or non-litigation) “could invoke the statutory and supervisory jurisdiction of the court” by alleging that those costs and expenses “had been unreasonably incurred” in breach of trust or in breach of Article 26(2) of the Trusts (Jersey) Law 1984.
The use of English solicitors and chancery counsel
Linked with the issue of the reasonableness of trustee costs and expenses was the question of those incurred as a consequence of the use of English solicitors and chancery counsel.
Allowing the trustee’s costs and expenses in that regard the Royal Court ruled that, so long as the use of such individuals was “reasonable and proportionate” both to the issue upon which advice was sought and to the extent of the trust fund, “it might be appropriate… In complex trusts litigation” to instruct English solicitors and specialist chancery counsel. This is good news for the many members of English law firms and the English bar who have developed a thriving Jersey practice. Good news too, as was noted by the Royal Court, for the development of Jersey trusts law.
There had been concern that these proceedings might inflict considerable damage on Jersey’s reputation as a leading finance centre. However the Royal Court’s pragmatic approach and its robust decisions in these proceedings demonstrate that Jersey is a sophisticated jurisdiction whose judiciary does not shy away from difficult issues, and that every effort is being and will continue to be made to ensure that Jersey remains a secure and well-regulated location in which to establish a trust.
Philip Sinel is principal at Sinels Advocates