Jersey Unreported Judgments

Trust - reasons for decisions taken in connection with claims regarding disputes concerning Unity Trust.

[2014]JRC207

Royal Court

(Samedi)

28 October 2014

Before     :

W. J. Bailhache, Q.C., Deputy Bailiff, and Jurats Marett-Crosby and Blampied

IN THE MATTER OF THE REPRESENTATION OF B

AND IN THE MATTER OF THE REPRESENTATION OF D

AND IN THE MATTER OF ARTICLE 51 OF THE TRUSTS (JERSEY) LAW 1984

Advocate R. J. MacRae for B.

Advocate J. P. Speck for E Trustees Limited, H Investment Holdings and B Inc.

Advocate D. R. Wilson for D.

judgment

the deputy bailiff:

1.        This judgment of the Court sets out the reasons for the decisions taken and notified to the parties on 22^nd May, 2014. 

2.        The disputes concerning the Y Trust are raised in three different representations, two presented by B and one by D.  Before coming on to the detail of those claims, a short factual summary is necessary. 

3.        B is a beneficiary of the Y Trust ("the Trust"), which was established by a deed dated 3^rd April, 1979, governed by Jersey law, between T as Settlor and M Limited as the original trustee.  She was added to the "Specified Class" of beneficiaries by an Instrument of Addition of a Member of the Specified Class executed by the trustee and dated 22^nd March, 2006.  The present trustee is E Trust Company Limited ("E").  There has been one intermediate trustee between the original trustee and E, namely N Trust Company (Jersey) Limited which held office as trustee between 22^nd May, 2003, and 30^th August, 2005. 

4.        The trust deed is not in entirely standard form.  Schedule S contains a number of definitions.  "Beneficiary" is defined as meaning any of the General Beneficiaries.  "General Beneficiaries" is defined in the following way:-

"General Beneficiaries subject to clause Q4 and the proviso B contained in paragraph (e) of this definition means and includes -

(a)       The specified beneficiary or the specified beneficiaries (as the case may be);

(b)       The spouses, widows, widowers, children and grandchildren of the specified beneficiary or specified beneficiaries;

(c)       Any of the following persons or entities where so ever resident or incorporated namely -

(i)        the trustees (in their capacity as such) of any Eligible Trust;

(ii)       any Eligible Corporation;

(d)       Such other persons and corporations (if any) as may be named, described, or defined in the Annexure as additional members of the class of General Beneficiaries or nominated by the Trustees as additional members of the class of General Beneficiaries pursuant to the power so to do contained in clause Q2 hereof Provided Always where such persons or corporations are described or defined in the Annexure or in such nomination as trustees and the trusts in respect of which they are trustees are identified in the words which include such persons or corporations as additional members of the class of General Beneficiaries then insofar as such persons or corporations take any benefit under or pursuant to the trusts of this deed they do so and are intended to do so as trustee or trustee of such trusts and not in their personal capacity and any reference to such a person or corporation includes the success or successors of such personal corporation as trustee or trustees of such trusts;

   PROVIDED HOWEVER that every member of the excluded class whilst he is a member of the excluded class shall be excluded from the class of General Beneficiaries notwithstanding that he may otherwise be or be qualified to be included in the class of General Beneficiaries."

5.        By paragraph (13) of the Schedule, there is this provision:-

""The excluded class" means and includes each of the following persons namely -

(a)       The Settlor;

(b)       The Appointor and the Guardian and any person who becomes Appointor or Guardian whilst they are Appointors or Guardians and after they have ceased to be Appointors or Guardians;

(c)       The spouse of the Settlor;

(d)       Any notional Settlor;

(e)       Every person claiming under or in right of the Settlor of any notional Settlor in his capacity as a person so claiming;

(f)        The Trustees while they are Trustees and after they have ceased to be Trustees;

(g)       Persons or corporations in their capacity as Trustees of any trust or settlement in or under which any other member of the excluded class has any beneficial interest so long as such interest continues;

(h)       Every corporation in which any other member of the excluded class has a beneficial interest as shareholder or member or any other interest which would entitle him to take the benefit or part of the benefit received by such corporation under or pursuant to the trusts of this Deed were it not a member of the excluded class;

(i)        Such other person or persons if any named as additional members of the excluded class in the Annexure;

(j)        Such other person or persons nominated as additional members of the excluded class by the Trustees pursuant to clause Q3 hereof from the date such nomination is expressed to take effect and for the time during which it is expressed to take effect or if no time is nominated then for all time thereafter;

PROVIDED HOWEVER that notwithstanding the foregoing provisions of this sub-clause (13) a person shall not be a member of the excluded class if in the Annexure he is specified by name or as the Trustee of expressly identified trusts as a specified beneficiary or as an additional member of the class of General Beneficiaries:"

6.        The Deed makes provision for Notional Settlors:-

"(22) "Notional Settlor" means any person by whom any disposition of property of any nature to or in favour of the Trustees as trustees of this Settlement shall be made at any time otherwise than for full consideration in money or money's worth;"

7.        By paragraph (35) of Schedule S:-

""The Trust Fund" means the settled sum and all moneys, investments and property paid, transferred to or accepted by the Trustees as additions to the Trust Fund held by them pursuant to this Deed or upon the Trusts in this Deed declared and such of the accumulations of income hereinafter directed or empowered to be made which pursuant to Clause M1 hereof the Trustees are entitled to treat as an accretion to the Trust Fund all accretions and additions thereto from any source and the investments, property and assets from time to time representing the said money, investments, property, accumulations, accretions and additions less any moneys paid out of the Trust Fund from time to time unless any property previously forming part of the Trust Fund and transferred out of the Trust Fund from time to time;"

8.        There is further definition of specified beneficiary in the Schedule as follows:-

"(33)    "Specified Beneficiary" and "Specified Beneficiaries" mean the person or persons named described or defined as such in the Annexure and any person added as a specified beneficiary pursuant to clause Q1 hereof after he has been so added;"

9.        The Annexure describes the Specified Beneficiaries as D, D' and D². 

10.      The Deed makes provision for a Guardian and the Annexure names the First Guardian as W.  The Guardian at the date of this hearing was A 

11.      Finally the Settlor is named in the Annexure as T.  The settled sum set out in the Annexure is the sum of £100. 

12.      There have been proceedings in the courts of the State of New York between C ("C"), who is the brother of D, and B following the breakdown of their marriage.  The relevant issues for our purposes arising out of those proceedings are set out at paragraph 22 below.  We note, however, that following a mediation between C and B, all issues as between them had been settled, subject to conditions, at the date of the hearing in May.  That does not completely remove the need for a reasoned decision but it has removed any urgency attaching to it.  

The First Representation

13.      The first representation was brought by B on 18^th April, 2013.  The thrust of her representation was that E did not have control over, and did not have comprehensive information about the assets and liabilities of, a number of companies which were owned by the Y Trust, whether directly or indirectly, nor about the transactions that had been entered into by one or more of those companies.  B asserted that her husband's accountant, a Mr L, had a good deal of information in relation to the companies which he was not providing to E.  She asserted that she was concerned about her husband's failure to provide information concerning the affairs of the companies owned by the Trust, and in the circumstances she asked for directions for disclosure of information concerning the Trust and its assets by E to her; as to what steps, if any, E should take to obtain greater information about and control over the assets of the Trust; as to costs; and for leave for her to disclose and use all relevant material concerning the Y Trust and the companies of which E as trustee was the owner in the divorce proceedings referred to above. 

14.      The Court determined that D should not be convened to the proceedings at that stage.  That decision was made on 13^th June, 2013, and the reasons for that decision were handed down on 26^th June of that year.  The Court also made orders on 13^th June that E, upon receipt of advice from its US lawyers, should take such steps as were necessary to ensure that as trustee it had sufficient corporate control to give instructions to an American bank in relation to some escrow monies to which the Trust was entitled.  The Court also ordered that E take steps as necessary to obtain a disclosure order against Mr L and also against C in respect of any information or documentation in their respective possession in order to obtain an amount of information which is detailed in the Act of Court.  The trustee was given directions to ascertain certain other information in relation to Trust assets, which included if necessary the taking of process in Mauritius.  In respect of the request for disclosure of documents, the Court noted that this matter had been withdrawn, and other beneficiaries may need to be convened if the application were to be resurrected. 

15.      All that remained over in relation to the first representation was the question of costs.  By consent the Court ordered on 22^nd May, 2014, that:-

(i)        E shall be entitled to be indemnified in relation to its reasonable costs incurred of and incidental to B's first representation out of the trust fund of the Trust. 

(ii)       That there should be no order as to the costs incurred by any other party, including B, D, B', B² and B³ of and incidental to B's first representation. 

(iii)      That in the event that no concluded settlement was reached between B and C in respect of their proceedings within 21 days of the date of the order, then each party should be at liberty to apply to the Royal Court for a variation of the orders made at paragraphs (a) and (b) above save that any such application should not affect the right to indemnification out of the trust on the part of E. 

The Second Representation

16.      The second representation of B was dated 20^th June, 2013.  In this representation, she sought orders that all of the documents that might be relevant to the financial position of the Y Trust and its underlying companies for the purposes of the divorce proceedings between her and her husband and which had been seen by the Royal Court pursuant to the first representation could and should be disclosed in the divorce proceedings in the Supreme Court of New York.  This application was heard on 3^rd July, 2013, when the Court granted B leave to disclose through her US legal advisers to the Supreme Court of the State of New York and to C through his US legal advisers for the sole purposes of the divorce proceedings the documents relevant to the financial position of the Trust and its underlying companies, together with the second representation, B's affidavit and a copy of the Act and the judgment of the Royal Court setting out its decision in relation to the second representation.  Other than tangentially, nothing further arises in relation to the second representation. 

The Third Representation

17.      This representation was presented by B on 14^th January, 2014.  The Court ordered that the following persons should be convened to a further hearing - E, B', B², B³, D, B Inc., P Limited and H Investment Holdings Limited.  The Court also ordered that B', B² and B³ should be appointed to represent the interests of their respective children and remoter issue and that D would represent the interests of her grandchildren and remoter issue.  Although the proceedings were again to be heard in private, B was authorised to disclose a copy of the representation and the Act of Court to the Supreme Court of New York and to the parties to the divorce proceedings. 

18.      Leaving aside procedural matters, B sought orders under her third representation that she have leave to disclose in the divorce proceedings all of the documentation produced for the purposes of the first and second representations, including all affidavit evidence filed by all parties and the exhibits thereto and the Acts and judgments of the Royal Court.  She also asked for an order that none of the transactions detailed in the body of the representation were dispositions of the property by B to E as trustee of the Trust.  This was important because she sought an order that none of the transactions constituted her as a notional settlor, because if she had been so treated, she would cease to be a beneficiary of the Trust.  If necessary, B sought an order that the transactions be set aside on the ground of her mistake, if they did have the effect of constituting her as a notional settlor.  She asked for directions as to the future of the Trust in the light of the divorce proceedings. 

D's Representation

19.      We mention for completeness the representation of D which was presented to the Court on 19^th December, 2013.  This representation sought the replacement of E with a new trustee of the Trust and the replacement of the Appointor/Guardian.  Affidavits in support were sworn by both D and by C.  At a procedural hearing on 7^th April, 2014, the Court ordered that all outstanding matters under the different representations should be heard at the same time and that the deponents of any affidavits should be available for cross examination at the substantive hearing in May.  D was permitted to discuss her own representation and representation no. 3 with her brother if she so wished.  Furthermore the Court then made orders in relation to disclosure of documents necessary for the purposes of hearing the representation of D. 

20.      As it turned out, neither D nor C were prepared to come to Jersey to be cross-examined on their affidavits and accordingly those affidavits have not been taken into account by the Court in reaching its decisions on the matters which are outstanding.  The Court has had to proceed on the factual basis set out in the affidavits of B and Mr Q on behalf of the trustee. 

21.      D gave notice that she did not wish to be heard in relation to her representation and no longer wished to pursue it.  That representation was therefore withdrawn by consent and the Court ordered that E and the Guardian and Appointor should be entitled to be indemnified in relation to their respective reasonable costs of and incidental to D's representation out of the trust fund of the Trust.  There was no order as to the costs incurred by any other party including B, D, B', B² and B³ of and incidental to D's representation.  There was liberty to apply for a variation of that order (i.e. no order as to costs) in the event that B and C did not reach a concluded settlement of their divorce proceedings within 21 days. 

The issues for us

22.      As it turned out therefore, the matters before the Court on 22^nd May were essentially these:-

(i)        The question of disclosure; and

(ii)       The status of B and her children and remoter issue as beneficiaries of the Y Trust.  

23.      Of the parties convened, Messrs Voisin had been retained by the Guardian and Appointer in relation to the representation of D, but as that representation was withdrawn, she was unrepresented.  We were informed by Advocate MacRae that Messrs Voisin had agreed the draft order on her behalf. 

24.      Advocate MacRae also explained to us that he did not represent P Limited which had been convened, but he had been in touch with the company and there was no doubt that they knew the proceedings were to be heard.  Advocate MacRae also informed us that he looked after the interests of B's children but he did not formally represent them. 

Disclosure

25.      At issue in the heart of the divorce proceedings, among other things, is the extent and value of the assets of the Trust, and (possibly) whether those assets should be regarded as available to either of C or B, so that they are taken into account in an equitable distribution of marital assets. 

26.      The New York Court is aware of the first and second representations of B and has ordered her "to make an application to the Royal Court of Jersey" inter alia for permission to produce all documents from the Royal Court of Jersey litigation, inclusive of all prior representations."  We take it as axiomatic that in order to meet her obligations to the New York Court, B is required to make an application to us in good faith and consistently with the order to which she is subject in New York; but it does not follow of course that this Court will necessarily think it is right to make an order as she requests. 

27.      We say immediately that we completely understand the view of a court exercising matrimonial jurisdiction, wherever that court be situated, that it should have access to as much relevant material as it possibly can for the purposes of achieving a just result in the proceedings before it.  When it is apparent that the assets of a Jersey trust are potentially relevant to proceedings in a foreign court, it is not at all uncommon for either trustees or the parties to the proceedings before the foreign court to apply to the Royal Court of Jersey to seek leave to make disclosure of documents or assets, or to seek such disclosure from the trustees in order that the same can be made available to the foreign matrimonial court.  Where the beneficiaries of the Jersey trust are, or are principally, the protagonists in the divorce proceedings, there is rarely much dispute as to the disclosure of essential trust information.  Where there are other possible beneficial interests in the Jersey trust, the matter needs to be reviewed more carefully, but even so, it is not uncommon for details of a trust and the extent of its assets to be made available to the foreign matrimonial court where one of the matrimonial litigants is a potential beneficiary. 

28.      We are also conscious that once information has been supplied to a matrimonial court, that court may well be encouraged to utilise its own statutory provisions to make, in relation to a Jersey trust, findings which might be effective in that jurisdiction but which this Court would not enforce.  It was a possibility which was canvassed in Re Fountain Trust [2005] JLR 359 where, in that case, an English judge had applied English law in determining whether that trust was a sham.  As the Royal Court indicated, the question of whether or not the trust was a sham trust was one to be determined in accordance with Jersey law, and indeed the Court went on as follows:-

"18     We think that there are important distinctions to be drawn between a finding that a Jersey trust is a post nuptial settlement and therefore liable to be varied, and a finding that a Jersey trust is a sham.  The right to seek a variation is one which derives from the matrimonial regime of the jurisdiction which dissolves the marriage.  There is a general statutory power, for example, under the English Matrimonial Causes Act 1973 to vary ante or post nuptial settlements.  There is, so far as we are aware, no such statutory power to declare a foreign trust to be a sham.  Furthermore, a decision to seek a variation of a trust in order to give effect to an order under matrimonial jurisdiction is qualitatively different from a decision to declare a trust to be a sham.  Under the law of Jersey, a sham trust requires that the settlor and trustee have not only a subjective intention that the deed is not to create the legal rights and obligations which it purports to create, but also a common intention to mislead.  It is a serious matter to find that a professional trustee in Jersey has been party to a sham.  It is a finding, moreover, which might well have adverse consequences under the statutory regime which regulates the activities of professional trustees in Jersey and which, incidentally, is absent in England and Wales.  It is a finding which requires, so far as Jersey is concerned, a careful analysis under the rules applicable in this jurisdiction.  As a matter of generality, we would regard an assumption of jurisdiction by a foreign court to declare a Jersey trust a sham to be exorbitant and we would be reluctant to enforce any judgment based upon such an assumption."

29.      In Re the H Trust [2006] JLR 280, the Court was considering whether or not to approve the decision of the trustee not to submit to the jurisdiction of the English Court which was dealing with matrimonial proceedings between two of the beneficiaries of the Jersey trust in question.  The Court noted that the roles of the two courts were very different.  The family division was concerned to do justice between the two spouses before it, and was sitting in a matrimonial context where the objective was to achieve a fair allocation of assets between the divorcing spouses.  The interests of the other beneficiaries of any trust involved were not the concern of the matrimonial court.  Conversely, the Royal Court was sitting in its supervisory role in respect of trusts as is regularly the obligation of the courts in the Chancery Division of the English High Court.  The Royal Court's primary consideration was therefore to make or approve decisions in the interests of the beneficiaries, which might be a very different focus from that of the family division.  This would often drive a conclusion that the trustees should not submit to the jurisdiction of the foreign court, so as not to compromise the jurisdiction of the Royal Court in relation to Jersey trusts to provide supervision of the administration of the those trusts and to be fair to all the beneficiaries in so doing. 

30.      In Re the H Trust, the Court also added this:-

"17     We should add that a decision that the trustee should not submit to the jurisdiction is separate from the question of provision of information.  It seems to us important, in this case, that the husband and the 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.  It is our understanding that the wife has received the necessary information but if this understanding is incorrect and further information is requested, the trustee should make the fullest information available to both parties and, through them, to the Family Division should this become necessary".

31.      Of course in that case, both husband and wife were beneficiaries of the Trust. 

32.      In Deary v Continental Trust Company Limited and Watts [2010] JRC 001, the Court was concerned with letters of request issued by the Family Division of the English High Court seeking the assistance of the Royal Court in respect of matrimonial proceedings between the applicant and her husband.  The letters of request sought the production of affidavits sworn by the trustee on an application to the Royal Court for directions under Article 51 of the Trusts (Jersey) Law 1984.  The Court noted that the trustee had made full and frank disclosure to the Royal Court in accordance with its duty, and the Court went on at paragraph 6 to say this:-

"Fourthly, it is clear from material we have seen that it is absolutely necessary that a trustee should be able to come to court under Article 51 to make a candid appraisal of its 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."

33.      Accordingly, the Court in that case decided it was not proper to give effect to the letters of request. 

34.      This decision was applied in the case of In the matter of the M and Other Trusts [2012] (2) JLR 51, again a case where a trustee applied for directions under Article 51 of the Trusts (Jersey) Law 1984.  The Court said this:-

"14     Such applications are an important part of the supervisory jurisdiction of this Court in relation to trusts.  They are invariably held in private.  This is because the applications will often concern legally or commercially sensitive matters and they are of course administrative rather than adversarial proceedings.  They do not usually determine civil rights for the purposes of Art. 6 of the European Convention on Human Rights. 

15       It is of vital importance that, if such applications are to serve the purposes for which they are intended, information and documents received by those who are convened as parties to such proceedings should be held in confidence.  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."

35.      The Court then went on to endorse the decision in Deary v Continental Trust Company Limited cited above and noted that the observations in that case were consistent with the approach to similar applications in England.  In Midland Bank Trust Co Limited v Green [1980] Ch 590, at page 606, Templeman J was quoted as saying:-

"[Of] 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."

36.      In this case, D contended in written argument that she had no objection to disclosure being made in accordance with the New York order.  B clearly had no option but to contend that disclosure ought to be made in accordance with the New York court order, because if she failed to make that contention, she herself would be in breach of the terms of the order.  Advocate Speck, on behalf of E submitted that whilst ordinarily the trustee would have had reservations, in this case the trustee was willing to cooperate in circumstances where B risked prejudice if the New York court took the view that she was being obstructive, and as B was in the trustee's view a beneficiary, it would appear to be in the interests of the beneficiaries overall that disclosure should be made. 

37.      We recognise the force of the argument put forward by E that although B should logically suffer no prejudice because she has done everything that could be required of her, there was a risk that the New York court would hold a decision of the Royal Court against her.  However, we think that such an approach reveals too wary a view of a friendly foreign court exercising its jurisdiction in a matrimonial case in circumstances where the order made to B so far does, on the face of it, rightly respect the right of the Royal Court to take its own decision as to whether the information and documents should or should not be disclosed.  For ourselves, we have no doubt that a New York court would accept and respect the decision of this Court which is based firmly on the policy grounds that trustees must be able to come to this Court and make full and frank disclosure when making, or being a defendant to, an Article 51 application involving the Court's supervisory jurisdiction.  It would be unfair to B or to any litigant in a similar position if any foreign court were to hold against her this established judicial policy of the Royal Court of Jersey, established for very good reason because it enables this Court to do its job properly. 

38.      We have already authorised disclosure of a large number of documents into the New York proceedings.  We do not however think it is appropriate to order disclosure of the affidavits sworn by or on behalf of E, nor of the documents which are exhibited to those affidavits, save to the extent that the documents have already been separately provided which in many instances is the case.  There would have to be some very cogent reasons why this established policy of this Court, which establishes a framework for trustees to feel comfortable in making full disclosure on an Article 51 application, should be overridden and none have been advanced here. 

39.      For these reasons the Court has made no further order in relation to the disclosure of documents.  We authorise B to produce this judgment to the New York court should that ever become necessary. 

B's status as a beneficiary of the Y Trust

40.      Once again it is appropriate to note that there has been no real argument before us.  Neither B nor E contended that B was not a beneficiary of the Y Trust, but it was said that there were doubts that had been raised and it was in the interests of both B and the trustee that the Court should consider the extent of those doubts so that the trustee could be sure as to B's status. 

41.      The problem has arisen because B has apparently transferred certain property to companies owned by the Trust although she has not made any dispositions of property to E or its predecessor trustees as trustees of the Trust.  Approximately $1.5 million of cash has been transferred by B to an underlying company of the trust known as B Inc., incorporated in Delaware, USA, the first such transfer having been made in or about November 2001.  B asserts that C and his father became bankrupt in the late 1990s, and that upon his discharge from bankruptcy, C wanted to start a new business in India.  He asked B and indeed others to lend money to him or to B Inc. for this purpose, to which B agreed.  She asserts that she was not at the time aware, and indeed remained unaware until very recently, that B Inc was part of the Y Trust structure.  She regarded the transfer as a loan made by her to her husband and/or to B Inc to permit her husband to establish his new Indian business, and she did not regard the transfer as a gift or settlement made by her into trust. 

42.      The second set of transfers concerns a transfer of artworks previously belonging to B into the company called P Limited.  A single share had been issued in P, and was held by HIHL.  B understood the share to be held by the company as nominee for her.  This understanding may not be correct. 

43.      The third relevant transfer relates to 100,000 shares in a Mauritian company known as R Limited ("R") sold or transferred by B to HIHL, ostensibly at an undervalue, in August 2011.  B's evidence is that she only became aware of the transfer of the shares after the event, following the commencement of the divorce proceedings in 2012.  She declared that she had not previously been aware that she was a shareholder in R, but she simply signed papers that were presented to her by her husband.  Of the 100,000 shares so transferred, 99,999 were apparently allotted to her in February 1994, but without her knowledge or agreement, and the other share was transferred to her on the same day by one S, again without her knowledge.  Since she was unaware of her holding of shares in R, she contends the shares could not have belonged to her beneficially and indeed she had no intention of transferring them into HIHL in 2011, and into the Trust, because she was unaware that she had done so until a year later. 

The argument against B's entitlement as a beneficiary is that all notional settlors are part of the excluded class, and a notional settlor as defined means a person by whom any disposition of property has been made at any time otherwise than for full consideration to or in favour of the trustees as trustees of the Y Trust. 

44.      It seems to us that B is not to be treated as a notional settlor for the following reasons:-

(i)        The definition of the trust fund (see paragraph 7 above) requires that the money, investments or property received by the trustee has to be paid or transferred to the trustee, or accepted by the trustee as an addition to the trust fund.  There is no evidence before us to suggest that any of the relevant transfers of property were made to the trustees as additions to the trust fund, nor accepted by them in that capacity.  This conclusion on the facts is itself conclusive of the argument. 

(ii)       The definition of notional settlor means that the person by whom the disposition of property was made had to make it "to or in favour of the trustees as trustees of this settlement".  The language of "in favour of" is wider than simply "to".  It would clearly seem to include a transfer to a company wholly owned by the trustees in circumstances where the trustees had requested the transfer to be made to the underlying company.  It would seem possibly to include a case where the trustee receives property in which there is a beneficial interest, or even where there has been no formal conveyance or assignment of property but a declaration has been made of a beneficial interest in favour of the trustees.  Nonetheless, whether one gives a broad or narrow construction to the words "in favour of", it seems to us to be a requirement in equity of the definition of notional settlor that that person be aware that they were making a disposition of property in favour of the trustees as trustees of the settlement.  On the facts in this case, there is no indication that B was ever aware that this was what she was doing.  It would be unfair to hold that a person who made a payment or transfer without realising that she/he was making it as an accretion to the trust property thereby became an Excluded Person.  On a proper construction, a transferor must be shown to have that intent.  In the circumstances, we do not think that she falls to be treated as a notional settlor. 

(iii)      The definition of notional settlor also requires that the transfer be made otherwise than for full consideration in money or money's worth.  In the case of the transfer of cash to B Inc., B's evidence is that she made those transfers by way of loan.  She did not intend that the transfer should amount to a gift or a settlement.  There is no evidence to gainsay this assertion.  In those circumstances, it appears to us that it cannot be said that there was a transfer of assets otherwise than for full consideration, because on the only available evidence the transfer of assets was achieved by way of loan. 

45.      There were other more sophisticated reasons advanced by Advocate MacRae as to why the artwork transfers in P and the share transfer in R Limited - for which B received no consideration - could not be treated as transfers made by her beneficially because on one analysis she may not ever have been the owner of the assets in the first place.  We make no finding on those contentions, because it is unnecessary to do so.  Similarly it is not necessary to determine whether we should set the gifts aside on the grounds of mistake pursuant to Article 47(E) of the Trusts (Jersey) Law 1984.  These are issues which can be ventilated on another occasion if it is appropriate to do so. 

46.      For all these reasons, we find that B was not a member of the excluded class and therefore was properly appointed, and remains, a beneficiary of the Y Trust. 

Authorities

Re Fountain Trust [2005] JLR 359.

Re the H Trust [2006] JLR 280.

Deary v Continental Trust Company Limited and Watts [2010] JRC 001.

Trusts (Jersey) Law 1984.

In the matter of the M and Other Trusts [2012] (2) JLR 51.

Midland Bank Trust Co Limited v Green [1980] Ch 590.