Family Law & Matrimonial Assets in Jersey

Financial Remedies on Divorce

Articles 27 – 31 MCL set out the jurisdiction of the court to deal with the parties’ finances upon divorce and the process is set out within the Matrimonial Causes Rules 2005 (‘the Rules’) as amended.

If the Jersey Court does not have case law dealing with issues it will look to English case law, but is not bound by them. While the Rules state that the overriding objective is to deal with cases justly (Rule 47(1)), the statute does not set out what should be taken into account to ensure a just decision.

Following O’H v B⁷ the Jersey Court has regard to: all the circumstances of the case, financial resources of the parties, financial needs of the parties, standard of living, age, duration of marriage, any disability, contributions and needs of the children; reflecting the factors set out in s25 of the Matrimonial Causes Act 1973 as amended.

The Jersey Court has a duty to consider the desirability of a clean break between the parties⁸ and has followed the developments of the English case law of White v White, Miller v Miller, McFarlane v McFarlane and Charman v Charman.⁹  The yardstick of equality is the starting point, taking into account fairness and the factors as set out above. The Jersey Court has and continues to develop case law based on the principles of equal sharing of assets gained during the course of the relationship or used and/or seen as matrimonial assets. The welfare of any children of the marriage is of primary importance as far as the Jersey Courts are concerned. This may have an impact on the division of assets on divorce.

Assets which are owned prior to the marriage, or obtained by only one party during the marriage and/or after marriage but prior to a financial order, are often called ‘non-matrimonial assets.’ The name ’non-matrimonial assets’ gives parties a false sense that they are excluded from the asset pot to be shared on divorce. This is not the case. Essentially any asset of the marriage is a ‘matrimonial asset.’

The question is whether the asset is ring-fenced and treated separately to other marital assets. Factors which will be taken into account include: when the asset was/is received, the intention of the party giving the asset, the purpose of the asset (where appropriate), whether the asset has been used by the parties as a joint asset or kept separate and apart from other marital assets.

While similar to the English and Welsh position, practitioners should be aware that pension sharing is not an option and unlike in England & Wales, there is no equivalent to section 37 Matrimonial Causes Act 1973 as amended (avoidance of transactions intended to prevent or reduce assets).

The Court may order the transfer of a property whether real or personal to a child or children of the family or to a person for the benefit of a child or children. The court is also obliged to consider whether it should exercise its powers under the Children (Jersey) Law 2002 (‘CJL’) in respect of the children in the light of arrangements made, Art 25A MCL.

⁷ 2007 JLR N [29]

⁸ Boudin v Smith 1995 JLR N [15]

⁹ [2006] UKHL 24, [2006] 2 AC 618, (No 4), [2007] 1 FLR 1246 and [2001] 1 AC 596

Freezing Orders

The court has an inherent jurisdiction to grant an injunction to preserve assets pending determination of financial settlement upon divorce or within proceedings (and also by MCL, Art 3(2)).

The Plaintiff Spouse must show:

• a good arguable case for assets to be frozen, or a sum(s) of money equivalent in value to the assets to be frozen (as may be appropriate); and
• if the court were to make the order whether there is a real risk that the assets may not be preserved until the final determination of the financial matter; and
• the order is just; and
• the order must not be disproportionate to the object to be achieved.¹⁰

The standard of proof while high, is lower than that required for a Mareva injunction, as it preserves assets over which both parties have a proprietary claim. An order may take into account payment of bona fide liabilities. The court will look at all circumstances, including the Respondent’s other assets, to ensure it finds an equilibrium between safeguarding the assets, while not unduly restricting the Respondent’s ability to maintain himself or those assets.¹¹

An injunction may be used to prevent disposition of the assets of a company beneficially owned and controlled by the Respondent. The court will allow the company to use the injuncted assets to pay its reasonable legal and administrative expenses.¹²

¹⁰ Matthews (nee Jasper) v Matthews 2001 JLR 671

¹¹ Z v Y and A Limited 2014(2) JLR Note [10]

¹² Z v Y and A Limited supra

Obtaining Information

If there is insufficient information to obtain a freezing injunction or to identify assets to enforce against, an application may be made against a third party (such as a bank or trust company) that has been ‘mixed up’ in wrongdoing, under the Norwich Pharmacal¹³ jurisdiction.

For these purposes “wrongdoing” can include non-disclosure by a party in matrimonial proceedings. The Court may order the third party to disclose information needed to identify or trace assets.

¹³ Norwich Pharmacal Co and Others, Customs and Excise Commissioners [1974] AC133

Trusts and Divorce

The Jersey Court has the power under MCL Art 27 to vary a post-nuptial settlement between the parties to a marriage.

For the Court to exercise this power, the settlement must confer a benefit on the beneficiaries as husband and wife and the settlement must have a ‘nuptial quality’ about it.¹⁴ 

Where this is not applicable the Court must decide whether the trust is a resource available to the parties: if a spouse were to request the trustees to advance capital from the trust fund, whether the trustees would be likely to do so.¹⁵

¹⁴ J v M 2002 JLR 330

¹⁵ F v G [2012] JRC 215

Considerations for a Trustee

The most likely scenario for a Jersey corporate trustee is that a divorce will involve a Jersey law trust with divorcing beneficiaries, who are resident in a foreign jurisdiction.¹⁶

There are three important factors to consider:

• Provision of information; and
• Submission to the jurisdiction of a foreign court; and
• Enforcement of a foreign judgment.

¹⁶ Based upon the then Deputy Bailiff’s speech to ACTAPS November 2008. See also Deputy Bailiff Birt JGLR 2009 Issue 1 p.2 and Birt, Commr, JGLR (2015) Issue 2

Provision of Information

Disclosure of trust documentation falls under the inherent jurisdiction of the Court to supervise the administration of the trust.¹⁷

The most sensible way forward is to seek a directions hearing (under Art 51 Trusts (Jersey) Law 1984 (‘TJL’)) for an endorsement of a trustees’ decision of documents to be disclosed or withheld. If a trustee unreasonably refuses to disclose documents at an early stage it may be liable for indemnity costs.¹⁸

A starting point for documents that can be released are those that a beneficiary is normally entitled to see: the trust deed, accounts (which may include accounts of underlying companies), bank statements and portfolio valuations.¹⁹

While there is a presumption in favour of disclosure of the above trust documents to beneficiaries, there is a discretion to withhold documents, if to do so is in the best interests of all beneficiaries.

A trustee would not normally be expected to provide trust documents to a spouse who is not a beneficiary. There are exceptions to this presumption such as in Re M Trust,²⁰ where the grandfather was a beneficiary and the documents were disclosed to him in the knowledge they would be provided to his non-beneficiary son to produce in divorce proceedings in the UK.

The trustee should consider the following points when deciding whether or not to provide the information requested:

• The context for the application for disclosure;
• The capacity in which a beneficiary seeks disclosure;
• Relevance to current or potential issues;
• Purpose;
• Whether it is a substantive request for specific documents or a fishing exercise;
• Whether the documents concern third parties and their interests;
• Whether disclosure would amount to pre-action discovery.

The Court will normally order the provision of the fullest information to assist a foreign Court in determining how to divide matrimonial assets, even when a trustee has not submitted to the jurisdiction of the foreign court.²¹

¹⁷ Schmidt v Rosewood [2003] 2 AC 709

¹⁸ Hogg v. Williamson 2003 JLR N [38]

¹⁹ Re B Settlement 2011 JLR 236

²⁰ 2012 (2) JLR 51

²¹ Re H Trust 2006 JLR 280

Documents to Withold

Ordinarily, a trustee would be entitled to withhold documents containing deliberations as to the exercise of its powers or discretions, the reasons for same and the material on which the reasons are based.

Letters of Wishes and minutes of trustees meetings would ordinarily fall within this category. The Court may order disclosure of this information but the starting position is that disclosure will be refused.²² If a spouse has a copy of an old Letter of Wishes and has disclosed this within matrimonial proceedings, the Court may feel it appropriate for the most up to date information to be before the foreign Court.

If there is any indication that the information is sought in order to attack the trust, by asserting the trust is a sham, disclosure may be withheld. In R v C²³ the Jersey Court issued a Letter of Request to the Seychelles in divorce proceedings, on the condition that an allegation that the Seychelles trust was a sham be abandoned.

Be aware of the status of the documents created or obtained in, so-called Article 51 applications. Such hearings are held in private and the documents relating to same are confidential, however, in Re M Trust²⁴ the beneficiary children applied to intervene in the parents’ divorce proceedings in England. The condition of joinder in England was that they gave an undertaking to the English Court to produce, if ordered to do so, all documents they received in connection with the trustee’s Article 51 application in Jersey. This meant the children, as beneficiaries, would be in contempt in one jurisdiction or the other.

The Royal Court in Jersey granted leave to disclose the material, save for legal advice obtained by the trustee prior to the application. The Royal Court noted that if the Courts in England were to make this a routine requirement, the Court in Jersey would have to change its procedures to protect confidentiality.

²² Trilogy Management Ltd. v. YT Charitable Foundation (Intl.) Ltd 2015 (2) JLR 15; Re Rabaiotti 1989 Settlement 2000 JLR 173; Breakspear v Ackland [2008] EWHC 220 Ch

²³ [2008] JRC 179

²⁴ 2012 (2) JLR 51

Submission to the Jurisdiction of a Foreign Court

A trustee would be at risk of being found to be in breach of trust if it were to submit to the jurisdiction of a foreign court without seeking an Article 51 direction.²⁵

Ordinarily the Court would order a trustee not to submit to the jurisdiction of a foreign court.²⁶

As a matter of private international law submitting to the jurisdiction means submitting to the outcome of those proceedings. A trustee is not normally advised to submit, so discretion remains with the Jersey Court.

The Court may endorse submission to a foreign jurisdiction in certain circumstances. For example, where the assets of the trust are situated in the foreign jurisdiction and it would be unreasonable for the trustee not to submit. In Re Otto Poon Trust²⁷ the Royal Court agreed that the trustee should submit to the jurisdiction of the Hong Kong Court as 70% of the trust assets were situated there.

As an alternative to submitting to the jurisdiction the trustee might consider providing evidence as a witness to try to avoid adverse inferences being drawn as to the nature and availability of trust assets. There are difficulties with this position.²⁸

²⁵ Re The Fountain Trust 2005 JLR 359

²⁶  Re H Trust 2006 JLR 280

²⁷  [2011] JRC 167

²⁸  BJ v MJ [2011] EWHC 2708, Mostyn J & Birt, Commr JGLR (2015) para 38

Enforcement of a Foreign Judgement in Jersey

Enforcement will depend on whether the foreign Court applied foreign law or Jersey Law.

If a trustee has submitted to the jurisdiction and the foreign Court applied Jersey law to any question concerning the trust the judgment will be enforceable, although at the discretion of the Jersey Court.²⁹

If the trustee does not submit to the jurisdiction of the foreign Court, the judgment would not be enforceable in Jersey.

If the foreign Court applied foreign law to any question concerning the trust any order will not be enforceable in Jersey.³⁰ A trustee will therefore have to consider whether to exercise its discretion to give effect to the foreign Court order.

If the foreign Court made an order which varies the trust and the variation is such that a trustee has the power to make it under the terms of a trust deed, a trustee may choose to give effect to the order. In any event it is advisable to obtain the blessing of the Court (Article 51 TJL hearing).

If the foreign Court made an order purporting to alter the trust, a trustee cannot give effect to the order without the consent of all the beneficiaries. Where all beneficiaries are ascertained and are adult and of sound mind, they may agree the alteration. Where beneficiaries include minors, unborn or unascertained beneficiaries, a trustee will need to seek the consent of the Court to any alteration to the trust.³¹

A trustee maintaining a neutral position should represent the interests of unascertained beneficiaries.³² If the foreign Court has ordered appointment of capital to a sub-trust for the benefit of one spouse, a trustee may be the trustee of both.³³ However, a trustee should be aware of the risk of conflicts of interest. For example, if the beneficiary spouse of the sub-trust requests payment out of the entire capital of the sub-trust for tax purposes, giving consideration to the interests of the beneficiary spouse of the main trust will place you in conflict.³⁴

The foreign Court may make an order that the beneficiary spouse pay a lump sum to a non-beneficiary spouse. If the beneficiary spouse requests payment of that lump sum, a trustee has discretion how to act. Payment to a nonbeneficiary will not amount to a fraud on a power if it is made for the benefit of the beneficiaries, because it discharges a legal and moral obligation which is recognised by the beneficiary spouse. For example, it would allow the spouse to meet an order made in divorce proceedings, or because it brings an end to long-running litigation between spouses, allowing the entire family to get on with their lives.³⁵

²⁹ Brunei Investment Agency v Fidelis Nominees Ltd [2008] JRC 152

³⁰ Art 9(4) TJL

³¹ Art 47 TJL

³² Mubarak v Mubarik [2008] JCA 196

³³ Re B Trust 2006 JLR 562

34. A Trustees Ltd v W, X, Y and Z [2008] JRC 097

35. Otto Poon Trust [2014] JRC 254A

Relations with Other Jurisdictions

It may sometimes be perceived, from outside the jurisdiction, that Jersey adopts a protectionist stance.

Art 9 TJL is often raised in support of this:

“(1) Subject to paragraph (3), any question concerning –

(a) the validity or interpretation of a trust; shall be determined in accordance with the law of Jersey and no rule of foreign law shall affect such question.

(4) No foreign judgment with respect to a trust shall be enforceable to the extent that it is inconsistent with this Article irrespective of any applicable law relating to conflicts of law.”

Article 9 was introduced because it was felt that foreign Courts had repeatedly failed to have sufficient regard to Jersey trusts law. In The Matter of M and Other Trusts³⁶ Jersey indicated again, it would consider amending its law, if the English Courts repeatedly failed to have regard to the confidentiality of documents in Art 51 hearings (see above).

Notwithstanding this, case law shows that Jersey Courts have normally given effect to the orders of the English Court in matrimonial proceedings. The leading Jersey case is In the Matter of IMK Family Trust.³⁷ The Royal Court could not enforce a judgment of the Family Division of England and Wales varying or altering a Jersey trust under the provisions of the MCA because of Art 9 TJL. It indicated it could, however, in certain circumstances, give effect to an Order of the Family Division by giving Art 51 TJL directions. In this case this was not possible, as it would have been directing the trustees to act outside of the powers conferred on them by the trust deed. This did not end the matter. In order to take part in the English proceedings, the First Respondent in the Jersey case, Mr Mubarak, (the husband) had written a letter in 2006 to the trustees in which he consented to the payment of a lump sum to his wife from the Trust. The Royal Court found it could give approval under Art 47 TJL to a variation of the trust deed, because it considered all adult beneficiaries had consented to the variation, Mr Mubarak’s consent being by way of the letter from 2006. The representative of the minor and unborn beneficiaries also consented.

³⁶ 2012 (2) JLR 51

³⁷ 2008 JLR 250

Post-Nuptial Agreements

The traditional outlook has been that an agreement entered after marriage to regulate affairs on future separation or divorce would not be upheld as it was contrary to public policy.

A post-nuptial agreement is distinct from a separation agreement between couples who are either in the process of separation or about to separate, which are upheld, subject to the proviso that the Court’s jurisdiction cannot be ousted.

The Privy Council decision of MacLeod v MacLeod³⁸ upheld a Post-Nuptial agreement and was seen as extremely significant. MacLeod has been applied in Jersey in Re II.³⁹ The Royal Court expressed the following principles:

• A Court would apply a greater level of scrutiny when considering whether to enforce a post-nuptial settlement than it would when considering whether to ratify an agreement reached between parties after negotiations in financial provision proceedings; and
• When considering the weight to be given to a post-nuptial agreement, the Court would bear in mind that effect should be given to formal agreements properly and fairly arrived at with competent legal advice, unless there were good and substantial grounds for concluding that it would be unjust to do so; and
• The Court would consider all the circumstances surrounding the making of the agreement, including the conduct of the parties and issues such as pressure or the exploitation of a dominant position to secure an unreasonable advantage, inadequate knowledge, possibly bad legal advice and an important change of circumstances.

The Court in Re II did not uphold the postnuptial agreement because it was not expressed to be a formal agreement; there was evidence of improper pressure and the husband had had no legal advice.

³⁸ [2010] 1 AC 298

³⁹ 2010 JLR N [50]

Pre-Nuptial Agreements

The issue of pre-nuptial agreements has received only very limited consideration by the Jersey Court.

The Court did consider the leading English case of Radmacher v Granatino⁴⁰ in L v M.⁴¹ finding that a pre-nuptial agreement could be considered as part of ‘all the circumstances of the case,’⁴² but the parties could not oust the jurisdiction of the Court. In this case the pre-nuptial agreement failed because the parties’ needs dictated a different outcome. However, a detailed analysis of the circumstances in which the Jersey Court would be prepared (or not) to uphold a pre-nuptial agreement has not reached the Court and the law in Jersey waits to be clarified.

⁴⁰ [2010] UKSC 42

⁴¹ [2017] JRC 062A

⁴² Art 29(1) MCL

Civil Partnership and Same Sex Marriage

The Civil Partnership (Jersey) Law 2012 (‘CPL’) governs civil partnerships between same sex couples.

If a civil partnership breaks down it is dissolved. Grounds for dissolution are similar to grounds for divorce, save that there are no grounds of adultery⁴³ or imprisonment. The court’s powers to make orders in relation to financial settlement upon dissolution can be found at Art 44 – 51 CPL and follow those governing divorce. A notable difference between CPL and the MCL is that Article 47 CPL permits the Court to cancel, vary, modify or terminate terms of separation made during the partnership or in anticipation of its formation i.e. a pre-partnership agreement. Article 27 MCL makes no such reference in relation to agreements made in anticipation of marriage.

As on divorce, upon dissolution of a civil partnership, neither party will be entitled to any share or interest in the estate of the other party or to rights of dower (a right of enjoyment) over the immoveable estate, unless they are named as a specific beneficiary of a will. If a will exists referring to the other as a civil partner, and there is no additional will, the initial will is read as if the parties had never been civil partners, as for divorced couples.

A law allowing same sex marriage is now in draft form and was lodged in the States Assembly for debate in October 2017.

Cohabitation

This is not the case. The term ‘common-law marriage’ has not helped as it gives an impression of some form of legal tie.

If there are children of the relationship, under Schedule 1 of the Children (Jersey) Law 2002 (‘CJL’) as amended the Court can transfer property to a child for their benefit, providing the caring parent with a home. Sale of the home may be deferred until the occurrence of a specified event. This was confirmed in P v Q⁴⁴ when the court decided that the definition of ‘property’ contained within Schedule 1(1)(iv) CJL should include immoveable property, mirroring the position had the parents been married.⁴⁵

This construction of the legislation was consistent with the International Covenant on Civil and Political Rights, which Jersey signed up to through the UK. Article 26 of this Covenant guarantees equality before the law for all persons without discrimination.

A parent with care of a child can also seek a lump sum payment and maintenance provision under Schedule 1 (1)(i) CJL. Only one lump sum payment can be awarded, although this can be made by way of several payments. Any application for lump sum payment must be carefully

The child’s welfare is considered as part of the circumstances of the case. The carer’s needs are relevant in the sense that he or she must be in a position financially and generally to care for the child. Whilst the parents’ financial resources are considerations, the Court will guard against unreasonable claims, going wider than those reasonably necessary. The overall result aimed for is one of fairness and reasonableness.⁴⁶

In relation to property upon separation of cohabitants, the law in Jersey has been usefully clarified in Flynn v Reid.⁴⁷ The facts reflect a common scenario. The parties, who did not marry, lived in the family home and had two children. The defendant purchased the property and provided the deposit, although a bank loan was taken out jointly by the parties. The property was placed in the sole name of the defendant because the plaintiff lacked housing qualifications. The defendant continued the loan payments for some six years after the couple separated and the plaintiff had moved out with the children.

Jersey does not recognise a division between legal and equitable interests in immoveable property and therefore the Court would not impose a common intention constructive trust over the property to achieve fairness between the parties, as would have been the approach of the English Courts.⁴⁸ An argument based on proprietary estoppel similarly failed. The Court instead relied on the doctrine of unjust enrichment (following Scottish Law⁴⁹ which also does not distinguish between legal and beneficial ownership, together with the French principle of enrichissement sans cause).

The test to be applied is:

• Has the plaintiff been enriched at the expense of the defendant and what is the nature of that enrichment?
• If so was the enrichment unjust?
• If so, what remedy, in the particular circumstances of this case, is open to the defendant and is that remedy equitable?

The Court had no doubt the defendant had been enriched at the expense of the plaintiff, not only in monetary terms but also more interestingly, by provision of domestic services in caring for the children, which was of value to the defendant. In the courts of England and Wales a claim under the Trusts of Land and Appointment of Trustees Act 1996 does not acknowledge any value in the provision of domestic services, such as raising children, to create an interest in property.

⁴³ Art 28 CPL

⁴⁴ [2014] JRC 146A

⁴⁵ Art 28 MCL

⁴⁶ C v L 2009 JLR Note 41 and I v J 2013 (2) JLR Note [16]

⁴⁷ 2012 JLR (1) 370

⁴⁸ Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2012] 1 A.C.776

⁴⁹ McKenzie v Nutter, 2007 SLT (Sh Ct) 17, at para 33

Children - Private Law Proceedings

The Jersey Court has the power to make orders in respect of children under the CJL.

The English practitioner will be familiar with many of the principles from the Children Act 1989 as amended, such as the welfare of the child is paramount, delay is likely to be prejudicial and the child’s wishes and feelings are important.

The Court has the power to grant parental responsibility, residence, contact, prohibited steps and specific issue orders, Art 10(1) CJL. Further it can make orders enabling a child’s name to be changed and for a child to be removed from the jurisdiction under Art 14 CJL. Unmarried fathers of children born prior to 2 December 2016, even if named on their child’s birth certificate, do not automatically obtain parental responsibility. An unmarried father of a child born on or after 2 December 2016, if named on the birth certificate, automatically obtains parental responsibility for the child, whether married or not.⁵⁰ This important change does not apply retrospectively.

⁵⁰ Children and Adoption (Amendment) (Jersey) Law 2016

The Hague Convention on Child Abduction

Jersey is an independent member having signed up to same as of 2005.

If a child is abducted from Jersey to another signatory country, an application is made by the wronged parent through the Central Authority, for the return of the child to Jersey, where the abducting parent should make the appropriate application for leave to remove under the CJL. An application form is completed and the details are passed to the receiving signatory state for the appropriate action to be taken. The Hague Convention only applies to children aged under 16.

If a child is abducted to Jersey and an application is made under the Hague Convention on Child Abduction, the abducting parent will be served with papers and given the opportunity to defend the application. A summary of the defences are:

• The wronged parent has known the location of the child and agreed to the removal. Agreement can be by way of acquiescence, for instance the wronged parent had known the location of the child, but not taken any steps to have the child returned for a period of time.
• The wronged parent is not actually exercising custody rights.
• There is a grave risk of physical or psychological harm or placing in an intolerable situation. This can be a risk to the mother which would impact on her care of the child.
• The child’s objections.
• The child is settled in its new environment.
• Discretion of the Court.

Case law on the defences is of limited value, because the cases are fact specific. There has only been one case in Jersey which has followed English case law. In Re Max (Family)⁵¹ the child was not returned to the applicant jurisdiction, the defence of consent being found.

⁵¹ [2014]JRC 190

Children's Maintenance

Unlike England and Wales where there is a set formula to decide maintenance, with top ups available in high income cases, in Jersey there is no such formula.

However, a guide is that out of net salary a paying parent will provide 15% for one child, 20% for two and 25% for three or more children. The Court will look at the impact such an order would make on the paying parent’s financial position and will vary the amount to be paid if it were to cause hardship. Such payments are usually made until the child reaches 18 or finishes full-time secondary/tertiary education.

Given the lack of funding in Jersey for children to attend university, leave is normally given for a return of the issue to court upon a child going to university, if agreement cannot be reached.

* This publication is intended for general information purposes only and should not be relied upon as a source of legal advice. Information correct as of February 2018. Independent legal advice should be sought before taking any action based on information contained within this publication.