Answer these questions
- The Minister of Justice of Suntopia, a small European civil law state, seeks your advice on (i) the question of the possible ratification by his country of the Hague Trusts Convention, and (ii) the introduction of a substantive trust law into Suntopia law. Advise him, paying particular attention to the impact of ratification, the kinds of trusts that might be introduced (and limits on them that may be desirable), and also to the relationship between the trust institution and other institutions known to the civil law which perform similar functions to the trust.
- Ten years ago John was invited to become a partner in the City law firm of Borden Dull, where he had been working as a solicitor for several years. John accepted the invitation, but a week before he actually became a partner he transferred the ownership of his London flat and its valuable contents, plus £500,000 in cash, to his Jersey-based banker George, on trust for himself for life, but with the trustee having power to advance capital to him at any time, and subject to that on trust for such person or persons as John should appoint by deed (revocable or irrevocable) or will, and in default of appointment for such person or persons who at the date of his death would inherit his property if he died intestate. At that time he was unmarried and had no children or other dependants. His own parents were dead, and he was an only child. Eight years ago John met and married Paola, an Italian, and after a year in England, during which time Paola was homesick and upset, they settled down in Italy to be with Paola’s large extended family, and where John worked in the Milan office of his firm. George as trustee sold the London flat and its contents and invested the proceeds, about £2 million. The fund is now worth about £3.5 million. John and Paola had two children, now aged 7 and 5 years old. However, he also met another Italian lady, Lolita, with whom he began an affair. A year ago John made a revocable deed appointing half the trust fund to Lolita after his death. Recently the world financial crisis drove Borden Dull into insolvency, with huge debts the partners cannot pay, and John committed suicide. Richard, the (English) trustee in bankruptcy, appointed before John’s death, has found out about the trust in Jersey, and is considering whether it may be attacked. Paola has also found out about the trust, about Lolita, and about the deed of appointment in her favour, and is considering whether she also wishes to attack the trust. Lolita however would like to claim the half share of the trust fund. Advise George. (Do not consider Italian insolvency law.)
- Bluster is a successful property developer. Twenty years ago, on advice, he settled all the shares in his newly-formed property company, Bluster Developments Ltd, of which he was and remains the sole director, on a discretionary trust. The trustee was and still is Prim’s Bank Trust Co Ltd.
The trust was for the benefit of a class which at the date of the trust consisted of himself, his mother Mona, and the International Red Cross, but with power for the trustee to add further objects in future. None has so far been added. Bluster has run the company without interference from the trustee ever since. He sends the trustee the annual accounts, but nothing else. Because he has been good at his job, the company has prospered, and the shares have increased in value manifold. To date the only cash distribution from the trust has been to pay the medical expenses of an operation for his mother, fifteen years ago. This followed a letter from Bluster to the trustee suggesting the payment, though Bluster could easily have afforded to pay from his own lavish earnings from running the company, and he continues to live a luxurious lifestyle. The only other transaction has been the purchase of a large country house, in which Bluster lives, bought for the trust ten years ago with accumulated company profits, but transferred to Bluster’s name. A year ago Bluster was ordered by the High Court to pay £2 million to his former long-term model girlfriend, Vamp, after they split up, but he has refused to comply with the judgment. He says he has no assets, that the shares in the company are all owned by the trust, and that he holds the country house as nominee of the trustee.
- Bulimia, an offshore UK island with a tax and legal system independent of the UK but closely modelled on that of England, needs to raise a lot of extra revenue to cope with the current financial crisis. It receives no help from the UK Government, and is considering the possibility of marketing itself as an offshore finance centre. It has been suggested that such a centre needs ‘designer’ legislation relating to both non-charitable purpose trusts and asset protection trusts. The Attorney-General of Bulimia asks you to prepare a memorandum for her on the questions (i) what kinds of legislation (if any) is needed for an offshore finance centre, and (ii) whether in any event such legislation should be enacted. Prepare such a memorandum.
- Bryn, born in Wales, moved to France when he was a student, where he
met and married Cecilia, born in Italy, also a student. They are about the same age. After graduating, they began a successful business as opera impresarios. Eventually they settled in Switzerland, and had two children, José and Angela. José grew up, and after going to university started to work hard in his parents’business. He is exceptionally good at dealing with the artistes, but as no head for figures. He has never married, and has no children. Angela on the other hand has been a disappointment. After finishing school, though clever and capable, and with a head for figures, she showed no inclination to get a job. Being pretty, and personable, however, she has had a succession of short-term relationships, each with a rich or famous man, without marrying any of them, but nevertheless acquiring three children (of different fathers) on the way. Her parents cannot see this pattern of life changing. She currently lives in New York with her latest lover. Bryn and Cecilia have homes in Lugano, Tuscany, Paris and St David’s in South Wales. Cecilia owns the one in Tuscany, Bryn the one in South Wales, and the other two are owned together. They have a large art collection divided up between their various homes. Their business is run through a Swiss company, which they wholly own between them. They are concerned about what will happen on their deaths. They do not think that José is clever enough to run the company successfully on his own, though he is very good at what he does. They think that Angela might be capable of running the business, but also might take advantage of her brother. They love both children, and the grandchildren, dearly, and want to provide for them in the future. They know about trusts, but also about the various institutions of the civil law, and seek your advice as to what they might do by way of estate planning.
Advise Bryn and Cecilia.
- Ten years ago, when Radical was living in England, unmarried and without children, and her international law practice was doing very well, and sustaining a high standard of living for herself, she inherited a very large sum of money from her late father which she did not then need. After taking appropriate professional advice, she declared in writing that
she held the money on trust for herself for life, with power for the trustee to pay or apply capital to or for her benefit, then on trust for any widower who might survive her for his life, and subject to that on trust for such of her children as reached the age of 25, and if more than one in equal shares
absolutely. The declaration of trust declared that the trust was to be governed by English law, and that the forum for administration was that of England. Eight years ago she married Suave, a Frenchman, and moved
to live and work in Paris, and they now have a child, Cuddle, aged 3. Since the financial crisis began, however, Radical’ s legal practice has become less profitable, and Suave has lost his previous, well-paid job, so they now rely more on the income from the trust. Radical has fallen into arrears with Wallet, a French bank which lent Radical money to set up her
French office, and Numbers, the English accountant who prepares the trust accounts and gives general advice, has not been paid. Both are threatening to sue Radical, Wallet in her personal capacity, and Numbers in her capacity as trustee. Radical is concerned to know how far the trust fund may be attacked by either creditor, and in which forum. Advise her.
- Evaluate the reasons why a trust might migrate from one jurisdiction to another. Describe the advantages and disadvantages of the ways in which it may do so. Are there any traps to avoid under English law, and, if so how can they best be avoided? To what extent do the rules of jurisdiction and judgments in relation to trust disputes reflect trust law ideas, and how far do they reflect general rules about litigation? How far does the Hague Convention impact upon this?