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Landmark ruling on trust jurisdiction clauses: Crociani, Foortse, BNP Paribas Jersey Trust Corporation Ltd & Appleby Trust (Mauritius) Ltd v Crociani & Others [2014] JCA 089

09 April 2014

In Crociani, Foortse, BNP Paribas Jersey Trust Corporation Ltd & Appleby Trust (Mauritius) Ltd v Crociani & Others [2014] ("Crociani"), the Jersey Court of Appeal has delivered a landmark ruling which will have far reaching effects for trust lawyers (both contentious and non-contentious) all over the world.

The Jersey proceedings
The Jersey proceedings (issued in January 2013) involve breach of trust claims to recover funds and assets believed to be worth in excess of USD $100 million removed from a trust created in 1987 called the Grand Trust. The impugned transactions principally took place between 2007 and 2011 while the Grand Trust was governed by Jersey law and administered by the First to Third Appellants, including a Jersey professional trustee BNP Jersey. By a deed dated 10 February 2012, the First to Third Appellants purported to retire as trustees of the Grand Trust in favour of the Fourth Appellant, Appleby Mauritius, and to change the proper law of the trust to that of Mauritius ("the 2012 Retirement"). The validity of the 2012 Retirement is challenged in the proceedings.

The Mauritius proceedings
In March 2013, the Appellants applied ex parte to the Supreme Court of Mauritius on the basis that, pursuant to the 2012 Retirement, the Grand Trust was now governed exclusively by the laws of Mauritius. By the relief sought by the Appellants in the Mauritius proceedings, they seek that court's approval of their actions which lie at the heart of the Respondents’ breach of trust action in Jersey.

Following the issuing of an application by the Appellants in Jersey to stay the Jersey proceedings on forum grounds in favour of Mauritius, the Royal Court issued a temporary anti-suit order (itself the subject of a pending appeal) to stay the Mauritius proceedings pending the resolution of the Appellants’ forum challenge by the Royal Court.

The Royal Court decision
On 2 October 2013, after a hearing lasting 3 days before a Royal Court presided over by Commissioner Clyde-Smith, the Royal Court refused the Appellants’ application to stay the Jersey proceedings on the ground of forum non conveniens. The Appellants applied for permission to appeal against this decision.

Construction of "Clause Twelfth"
"Clause Twelfth", which the Appellants contended was an exclusive jurisdiction clause in favour of Mauritius, gave the trustees the power to appoint new trustees in another jurisdiction and to declare that the trusts shall be read and take effect according to the laws of the country of the residence or incorporation of the new trustees. If this power was exercised, the critical part of the clause went on to provide that: "… thereafter the rights of all persons and the construction and effect of each and every provision hereof shall be subject to the exclusive jurisdiction of and construed only according to the law of the said country which shall become the forum for the administration of the trusts hereunder."

In the Royal Court decision on forum, it held that the clause did not, on its true construction, amount to an exclusive jurisdiction clause in favour of the Mauritius court but that, even if it did, there existed exceptional circumstances justifying the refusal to stay the Jersey proceedings and it would, to the extent necessary, exercise its discretion to do so on that alternative basis. The Appellants sought leave to appeal to the Court of Appeal contending that the Royal Court had erred both on its approach to construction and in terms of its assessment of how its discretion ought to be exercised when departing from the application of the clause.

The Court of Appeal decision
Following a two day hearing which concluded at the end of January 2014, the Court of Appeal has now handed down its decision, Beloff JA (in his last sitting as President of the Jersey Court of Appeal) giving the leading judgment. The Court of Appeal granted leave to appeal but unanimously dismissed the appeal.

The Court of Appeal preferred the Respondents’ arguments on construction. Firstly, the reference to "exclusive jurisdiction" did not make the courts of Mauritius the only locus in which disputes from the time of the appointment of the Fourth Appellant, Appleby Mauritius, could be resolved. Rather it meant that the governing law applies to all aspects of the trust. Secondly, the reference to "the forum for the administration of the trusts hereunder" did not make the courts of Mauritius from that time the only locus in which such disputes could be resolved; it merely referred to the place where the trust was to be administered.

Furthermore, the Court of Appeal detected no flaw in the Royal Court’s conclusion, in the alternative, that there were exceptional circumstances which justified it in overriding the so-called exclusive jurisdiction clause, if it had taken effect. 

Forum for administration
In Koonmen v Bender [2002] JCA 218 ("Koonmen"), the Jersey Court of Appeal had previously construed the term "forum for administration" in a forum dispute (where the contest lay between Jersey and Anguilla) as conferring jurisdiction on the courts of Anguilla for contentious trusts disputes. This decision, relied on heavily by the Appellants in the present case, has attracted much criticism, most notably from Professor Paul Matthews.

The Court of Appeal has now recognised and endorsed the validity of this criticism. The forum for administration of a trust and the forum for the resolution of disputes relating to it need not be the same. The Court of Appeal has now made clear that it considers Koonmen to have been incorrectly decided on this point. The draftsman's intention in Koonmen (objectively construed) in using the words "forum for administration" was not to alter the forum for hostile trust litigation but simply the forum for matters of administration. Koonmen can no longer be considered to be good law.

So what does the term "forum for administration" really mean? As the Court of Appeal has now pointed out, while the term "forum" may sometimes have a meaning associated with a court, it does not always have that meaning. It may simply refer to the place where trusts are administered.  Furthermore, in construing the phrase "forum for administration", it is appropriate to recognise the broad distinction which has long existed in trust law between matters of administration, on the one hand, and hostile claims on the other. The suggestion that "forum for administration" is necessarily intended to confer an exclusive jurisdiction for the resolution of contentious disputes involving beneficiaries was incorrect.

Clause Twelfth did not and was not intended to place restrictions on the right of beneficiaries to action former trustees for the recovery of assets allegedly improperly paid away or to alter the law governing transactions entered into under the old domicile (whether expressly or impliedly). The Respondents' claims were and remained governed by Jersey law and they were not subject to the exclusive jurisdiction of the Mauritius Courts. The Jersey proceedings will continue and the Court of Appeal has on a separate application by the Respondents maintained the integrity of those proceedings by imposing a further anti-suit injunction to prevent the Appellants' proceedings in Mauritius from continuing in parallel pending an appeal to the Privy Council for which leave was given by the Court of Appeal.

Significance for contentious and non-contentious trusts lawyers
Clauses in trust documents designed to prescribe that the courts of a particular country shall have exclusive jurisdiction over all disputes remain rare. However, in this context, the use of the expressions "exclusive jurisdiction" and "forum for administration" in trust instruments can often invite mis-understanding and must now be approached with additional care. If the intention is to identify that the proper law is to apply to all aspects of the trust, from inception to execution, the present judgment makes clear the need for clear and simple drafting which has plain meaning.

According to Martin JA, the expression "exclusive jurisdiction" should be reserved for cases where it is genuinely intended to confer exclusive jurisdiction over all trust disputes on the courts of a particular country while the expression "forum for administration" ought to be abandoned altogether. The impact of the Crociani decision is clear and requires trusts draftsmen in all jurisdictions to carefully reflect on and review their use of this terminology in trust instruments.

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