ENFORCEMENT/FINANCIAL RELIEF/TRUSTS: IMK Family Trust (Mubarak v Mubarik and Ors)

15 AUG 2008

(Royal Court of Justice; Deputy Bailiff of Jersey; 15 August 2008)

The husband and wife had created a Jersey discretionary trust: the assets included shares in a Bermuda company which acted as the holding company for the husband's business; the beneficiaries were the husband, the wife, their named children and other children. Following the couple's separation the husband excluded the wife as a beneficiary. In ancillary relief proceedings the English court awarded the husband just under £5 million. In order to be permitted to participate in the English proceedings, the husband was required to write a letter to the Jersey trustees stating that he wished them to assist him in meeting his obligations under the English order. Despite the letter being sent, no payments were made. When the total amount owing under the English order was £7.6 million, including costs and interest, the English court made an order varying the terms of the Jersey trust so as to require the trustees to pay the wife the sums due.

Unless a trustee had submitted to the English jurisdiction, which had not happened in this case, it was hard to see how any decision of an English court varying or altering a Jersey trust could be enforced in Jersey. Even if the trustees had submitted to the English jurisdiction, such an order would not necessarily be enforced. When an English court purported to alter the terms of a Jersey trust there was no jurisdiction in a Jersey court to give directions directing the trustees to act in a manner outside the powers conferred on them by the trust deed. The Jersey court could not enforce the English order in this case. However, the court would treat all the adult beneficiaries as having agreed to the variation of the trust in a manner consistent with the English order, and would consent to a variation on behalf of the minor and unborn beneficiaries, because it was in the interests of the minors and unborn beneficiaries to extract cash from the business in order to pay the wife.

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