Trusts (Amendment No. 6) (Jersey) Law 201-: Draft lodged 'au Greffe'

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A decision made 29 May 2013:

Decision Reference: MD-E-2013-0053

Decision Summary Title :

Draft Trusts (Amendment No.6) (Jersey) Law 201-

Date of Decision Summary:

24 May 2013

Decision Summary Author:

Officer,

Finance Industry Development

Decision Summary:

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

Written Report

Title :

Report to Draft Trusts (Amendment No.6) (Jersey) Law 201-

Date of Written Report:

23 May 2013

Written Report Author:

Officer,

Finance Industry Development

Written Report :

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Subject:

Approval of the draft Trusts (Amendment No.6) (Jersey) Law 201- for lodging.

Decision(s):

The Minister approved the draft Trusts (Amendment No.6) (Jersey) Law 201- (“the amendment Law”) for lodging, signed the declaration of compatibility with the European Convention on Human Rights and directed that the documents should be lodged au Greffe so as to allow the Law to be debated by the States on 16 July 2013.

Reason(s) for Decision:

The amendment Law inserts into the Trusts (Jersey) Law 1984 a statutory provision setting out the ‘rule in Hastings-Bass’ (established in a UK case of the same name in 1975) and the doctrine of Mistake. This is currently the law of Jersey as established by case law (i.e. the rulings of the Royal Court of Jersey).

The Attorney General has confirmed that the amendment Law is compliant with the European Convention on Human Rights.

Resource Implications:

There are no resource implications as a result of this decision.

Action required:

That the documents be lodged au Greffe for debate by the States on 16 July 2013.

Signature:

Senator Ian Joseph Gorst

Position:

Chief Minister of Jersey

Acting on behalf of the

Minister for Economic Development

Date Signed:

Date of Decision (If different from Date Signed):

Trusts (Amendment No. 6) (Jersey) Law 201-: Draft lodged 'au Greffe'

MINISTER FOR ECONOMIC DEVELOPMENT

Report to Draft Trusts (Amendment No.6) (Jersey) Law 201-

Issue and Recommendation

The draft Trusts (Amendment No.6) (Jersey) Law 201- (“the draft Amendment”)

places on a statutory basis, the existing law of Jersey as established by case law (i.e. the rulings of the Royal Court of Jersey), what has become known as the ‘rule in Hastings-Bass’ (established in a UK case of the same name in 1975) and the doctrine of Mistake.

It is recommended that the Minister should approve the draft Amendment and the report attached to it, sign the Decision Summary and the statement of human rights compliance and that the documents should be lodged au Greffe for debate by the States on 16 July 2013.

There are no manpower or cost implications arising to the States of Jersey as a result of this decision.

Background

Trustees commonly are given certain powers e.g. in relation to the management and distribution of trust assets. The rule in Hastings-Bass enables the court to set aside a trustee’s exercise of such a power if the trustee failed to take into account relevant considerations which he ought to have taken into account, or took into account considerations which should properly have been disregarded.

A similar ‘rule’ has been formed in relation to settlors of trust property (individuals who settle assets into a trust). This ‘rule’ known as the doctrine of Mistake operates on similar principles and allows a settlor who settles assets into a trust to apply to the Royal Court to set aside or unwind his actions.

In relation to both of the provisions above, the “considerations which ought to have been taken into account, or considerations which should properly have been disregarded” is often advice provided by a professional adviser (usually an accountant or lawyer) which transpires to be incorrect.

The ultimate benefit from the provisions is certainty for settlors and beneficiaries that if a transaction is made that results in adverse consequences to the trust fund, an application can be made to the court to state that the transaction can be unwound. This avoids the alternative option which would involve the uncertainty and costs of litigation against the professional adviser who provided the “bad” advice.

Development and Consultation

The concept of the amendment was first considered by the Trusts Law Working Group which compromises leading members of industry, the Economic Development Department (“EDD”) and Jersey Finance Limited (“JFL”). On considering the amendment, the working group and the Society of Trust and Estate Practitioners (“STEP”) decided to engage the services of a senior English barrister to provide an opinion on amending the Law. It was also decided to include a number of litigation practitioners in the consultation group on this project as it was felt by the working group that consultation with those practitioners would enhance the quality of the amendment as, if adopted by the States, the amendment would be predominantly used by litigators.

Drafting Instructions on the amendment were provided by EDD to the Law Draftsman along with the opinion of counsel. Counsel was retained to review further drafts of the amendment and through working with the working group, EDD provided further instructions to the Draftsman. The final draft was reviewed by EDD, the working group and counsel.

As the working group comprised members of all the major law firms in the island as well as STEP representatives, and the vast majority of trusts are set up by professional trustees following legal advice, it is believed that there has been adequate consultation with the trust industry without going out to a wider public consultation.

Scrutiny

This legislation has been referred to the Economic Affairs scrutiny panel for their consideration.

Benefit of the amendment to Jersey

The Trusts Law working group, comprising leading members of industry who have worked with Government on his amendment, are confident that the amendment will provide significant benefits to the Trusts industry in Jersey.

Industry state that the additions of these provisions will encourage a number of existing Trusts to alter the Governing law of their trust and establish themselves under Jersey law (often with Jersey based trustees). It is also felt that this will assist in intermediaries recommending Jersey to become the most prominent jurisdiction for new trusts to be established under Jersey law.

Since Ministerial support was provided for the amendment in February 2013, Jersey Finance have carried out a targeted marketing campaign on intermediaries who advise clients on which jurisdictions to establish trust structures in. There has been significant interest in the proposed amendment to the Law from large intermediaries in London and it is thought their advice to clients on where to establish a structure will be altered by this amendment.

Recommendation

It is recommended that the Minister should approve the draft Amendment and the report attached to it, sign the Decision Summary and the statement of human rights compliance and that the documents should be lodged au Greffe for debate by the States on 16 July 2013.

Officer, Financial Industry Development

24 May 2013