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The interpretation and weight of exclusive jurisdiction clauses in trust deeds

12/12/14

by Henry Hickman and Victoria Empson

Crociani & others (Appellants) v Crociani & others (Respondents) & Princess Camilla de Bourbon des Deux Siciles (Intervener) [2014] UKPC 40

The Privy Council has delivered judgment in this long running Jersey case concerning the applicability of exclusive jurisdiction clauses in trust deeds. After a two day hearing in October 2014, the Judicial Committee has advised that the appeal should be dismissed.

The key question that the Board was asked to determine was whether the substantive proceedings (“the Proceedings”), brought in the Royal Court of Jersey for a series of breach of trust claims amounting to $100 million, should be stayed in favour of the Mauritian courts. The original application was made on the ground that the Proceedings were brought in breach of an exclusive jurisdiction clause contained in clause 12 of a Trust Deed, made on 24 December 1987 (“the Grand Trust Deed”). The Appellants argued that when the First to Third Appellants retired as trustees in 2012, this clause required any proceedings then to be brought in the courts of Mauritius, the jurisdiction of the Fourth Appellant who had been appointed as the new trustee.

Did the clause confer exclusive jurisdiction?

Clause 12 of the Grand Trust Deed provided the trustees with the power to resign and appoint new trustees outside of the jurisdiction and, when exercising that power, to declare the governing law of the trust to be the law of the country of residence or incorporation of the new trustees. Clause 12(6) 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”.

The Privy Council held that no part of Clause 12(6) of the Grand Trust Deed was concerned with identifying which country’s courts should have jurisdiction to determine disputes relating to the trust. The Appellants, relying on the decision in Koonmen v Bender [2002] JCA 218, suggested that “forum” referred specifically to the courts of Mauritius. The Board, disagreeing, found that the phrase “forum for administration” indicated the place where the trust may be administered on a day to day basis. It was found that in order to confer exclusive jurisdiction on the courts, a draftsman would be expected to make an explicit reference to the courts of a country, rather than simply using the wider term of “forum”.

The weight of exclusive jurisdiction clauses in trust deeds

While the Board concluded the appeal on the interpretation of clause 12(6), they continued to address a larger point of principle. This related to a scenario in which if the Mauritian courts were deemed to have exclusive jurisdiction, whether, as is required for contractual exclusive jurisdiction clauses, the claimant must provide “strong reasons” (Donohue v Armco Ltd [2001] UKHL 64) in order for proceedings to be continued elsewhere. It was found that in the case of a trust deed, the weight to be given to the existence of an exclusive jurisdiction clause is less than the weight to be given to such a clause in a commercial contract where the parties have agreed to be bound by its terms. The Board distinguished between trusts and contracts on the basis that the court has an inherent jurisdiction to supervise and, if necessary, to intervene in the administration of trusts, which primarily exists to protect the interests of beneficiaries.  

The Privy Council’s decision in Crociani therefore clarifies the current position of the law on both the interpretation of and weight to be given to exclusive jurisdiction clauses in trust deeds. This is likely to be of particular significance to those involved in future with the drafting of such clauses and, of course, disputes arising out of them.

Harcus Sinclair acted as Privy Council agents for the successful Respondents. In recent years, Henry Hickman has acted in most of the significant trust related appeals that have come up to the Privy Council from offshore jurisdictions including Spread Trustee Co Ltd v Hutcheson & others [2011] UKPC 13 (Guernsey) and TMSF v Merrill Lynch Bank & Trust Co (Cayman) Ltd & others [2011] UKPC 17 (Cayman) as well as Crociani and other appeals in other areas of the law. The firm continues to develop a very strong Privy Council Agency practice which is generated from its extensive offshore network. 

Henry Hickman is an Associate and Victoria Empson is a Paralegal at Harcus Sinclair.

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