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Exclusive jurisdiction clauses in international trust deeds

Published online by Cambridge University Press:  05 April 2021

Ardavan Arzandeh Open the ORCID record for Ardavan Arzandeh [Opens in a new window]
Ardavan Arzandeh*
Affiliation:
National University of Singapore, Singapore
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Abstract

Jurisdiction clauses commonly feature in high-value international contracts. Recently, these clauses are also increasingly utilised in international trust instruments. At common law, a contentious issue vis-à-vis exclusive jurisdiction clauses in trust deeds has been whether they should be upheld in the same way as their contractual equivalents. In obiter remarks in Crociani v Crociani, in 2014, the Privy Council stated that these clauses should be afforded less weight in trusts than in contracts. However, as this paper seeks to demonstrate, the reasoning underpinning the treatment of exclusive jurisdiction clauses in trust deeds in this manner is questionable. The paper's key contention is that exclusive jurisdiction clauses in trust deeds should be enforced in the same way as those in contracts. Accordingly, an exclusive jurisdiction clause in a trust instrument should be upheld, unless the claimant can establish a strong cause why the matter should be litigated elsewhere.

Keywords

Private international lawinternational trust deedscross-border disputesexclusive jurisdiction clauses
Type
Research Article
Information
Legal Studies , Volume 41 , Issue 4 , December 2021 , pp. 527 - 544
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

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Footnotes

The original version of this article was published with an incorrect author affiliation. A Notice detailing the change has been published and the error has been rectified in the online PDF and HTML copies.

†

I would like to thank Paul Lewis, Guildhall Chambers, Bristol, for providing the inspiration for this paper. I am also grateful to him for his thoughtful insights into the issues discussed in the paper. Many thanks also to Adeline Chong, Harry McVea, and Nicholas Pointon for their valuable observations. The views expressed, and any errors in this paper are, of course, my own. Finally, I would like to acknowledge the generous support of the School of Law, Singapore Management University, which hosted me as a visiting researcher in February 2020.

References

1 ZI Pompey Industrie v ECU-Line NV 2003 SCC 27 at [20] per Bastarache J.

2 GreCon Dimter Inc v JR Normand Inc 2005 SCC 46 at [22] per LeBel J.

3 They can also opt for an ‘asymmetric’ jurisdiction clause, where one party contracts to sue in state A, and the other undertakes to commence proceedings in state B: see Merrett, L ‘The future enforcement of asymmetric jurisdiction agreements’ (2018) 67 ICLQ 37CrossRefGoogle Scholar.

4 P Matthews ‘What is a trust jurisdiction clause?’ (2003) 7 Jersey Law Review 232 at [10].

5 The related question of whether the so-called ‘forum of/for administration clauses’ in trust deeds amounts to jurisdiction clauses falls outside the purview of this paper. These clauses have been examined in detail in the case law and commentary: eg Koonmen v Bender [2002] JCA 218, 6 ITELR 56 (Jersey); Green v Jernigan (2003) 18 BCLR (4th) 366 (British Columbia); NABB Brothers Ltd v Lloyds Bank International (Guernsey) Ltd [2005] EWHC 405 (Ch), [2005] ILPr 37 (England); EMM Capricorn Traders Ltd v Compass Trustees Ltd [2001] JLR 205 (Jersey); Helmsman Ltd v Bank of New York Trust Company (Cayman) Ltd [2009] CILR 490 (Cayman Islands); In the matter of A Trust [2012] Bda LR 9 (Bermuda); Ivanishvili v Credit Suisse AG [2020] SGCA 62 (Singapore); Matthews, ibid; and N Le Poidevin QC and K Robinson ‘Jurisdictional conundrum’ (2013) 19 Trusts & Trustees 848.

6 [2014] UKPC 40.

7 See eg Donohue v Armco Inc [2001] UKHL 64, [2002] 1 All ER 749 (England); ZI Pompey, above n 1 (Canada); Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 175 (Australia); and, Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd [2018] 2 SLR 1271 (Singapore).

8 See H Beale et al Chitty on Contracts (London: Sweet & Maxwell, 33rd edn, 2018) paras 1-031–1-040.

9 [1980] AC 827, at 848.

10 See Briggs, A Agreements on Jurisdiction and Choice of Law (Oxford: Oxford University Press, 2008)Google Scholar para 2.66.

11 In principle, common law courts could also award damages against the party which has commenced proceedings in a forum other than the one chosen one under the agreement: eg Barclays Bank plc v Ente Nazionale di Previdenza ed Assistenza dei Medici e degli Odontoiatri [2016] EWCA Civ 1261, [2016] 2 CLC 859 (England), and Compagnie des Messageries Maritime v Wilson [1954] HCA 62, 94 CLR 577 (Australia).

12 Convention on Choice of Court Agreements, Hague, 30 June 2005, Art 6.

13 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) [2012] OJ L 351/1 (the Brussels Ia Regulation).

14 The situation is more complicated where the English court's jurisdiction derives from the Brussels Ia Regulation, and the agreement contains an exclusive jurisdiction clause in favour of a court in a country outside the EU. For a discussion of the possible approaches which English courts might adopt in such an instance, see eg Ferrexpo AG v Gilson Investments Ltd [2012] EWHC 721 (Comm), [2012] 1 Lloyd's Rep 588, and J Hill and M Ní Shúilleabháin Clarkson & Hill's Conflict of Laws (Oxford: Oxford University Press, 5th edn, 2016) paras 2.270–2.279.

15 Eg Donohue, above n 7. See also A Briggs Civil Jurisdiction and Judgments (Abingdon: Informa Law from Routledge, 6th edn, 2015) para 4.52 (Civil Jurisdiction and Judgments), and Lord Collins of Mapesbury et al Dicey, Morris & Collins on the Conflict of Laws (London: Sweet & Maxwell, 15th edn, 2012) paras 12-149–12-156 (Dicey, Morris & Collins).

16 Eg ZI Pompey, above n 1, and Douez v Facebook Inc 2017 SCC 33 (Canada), Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 (Australia), and Vinmar, above n 7 (Singapore).

17 [1970] P 94 at 99–100.

18 Eg The El Amria [1981] 2 Lloyd's Rep 119, and Citi-march Ltd v Neptune Orient Lines Ltd [1996] 1 WLR 1367. For more discussion, see Dicey, Morris & Collins, above n 15, para 12-152, and Civil Jurisdiction and Judgments, above n 15, para 4.53.

19 Eg Carvalho v Hull Blyth (Angola) Ltd [1979] 1 WLR 1228.

20 Eg Aggeliki Charis Compania Maritime SA v Pagnan Spa (The Angelic Grace) [1995] 1 Lloyd's Rep 87 (England); The Jian He [2000] 1 SLR 8 (Singapore); and Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724 (Australia).

21 Under EU law, English courts are prohibited from granting anti-suit injunctions to restrain litigants from commencing (or continuing) proceedings in an EU Member State, even if the action is brought in bad faith (Case C-159/02 Turner v Grovit [2004] ECR I-3565, [2005] 1 AC 101), or in breach of an arbitration agreement (Case C-185/07 Allianz SpA (formerly Riunione Adriatica di Sicurtà SpA, Generali Assicurazioni Generali SpA) v West Tankers Incorporation [2009] ECR I-663, [2009] 1 AC 1138).

22 See Civil Jurisdiction and Judgments, above n 15, para 5.38, drawing on AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35, [2013] 1 WLR 1889.

23 See eg Lord Bingham of Cornhill in Donohue, above n 7, at [23]–[39].

24 See QC, E Rajah and Robinson, A ‘Jurisdiction clauses in trusts’ (2015) 21 Trusts & Trustees 1Google Scholar at 4 (fn 20).

25 The Brussels regime covers provisions within Brussels Ia Regulation, and the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2007] OJ L 339/3 (Lugano II Convention).

26 See Dickinson, A and Lein, E The Brussels I Regulation Recast (Oxford: Oxford University Press, 2015)Google Scholar paras 9.89–9.90.

27 The position is identical under the Lugano II Convention: Art 23(4).

28 The position is identical under the Lugano II Convention: Art 23(1).

29 [2002] JCA 218, 6 ITELR 56.

30 Collins, L et al. Dicey & Morris on The Conflict of Laws (London: Sweet & Maxwell, 13th edn, 2000)Google Scholar para 12R–074. This rule related to the treatment of exclusive jurisdiction clauses in contracts.

31 [2002] JCA 218, 6 ITELR 568 at [49] per Groberman J.

32 (2003) 18 BCLR (4th) 366.

33 Ibid, at [49].

34 1996 26 BCLR (3d) 143.

35 2003 SCC 27.

36 [2009] EWHC 2338 (Comm), [2010] 1 Lloyd's Rep 365.

37 Ibid, at [16].

38 Harris, J ‘Jurisdiction and judgments in international trusts litigation – surveying the landscape’ (2011) 17 Trusts & Trustees 236CrossRefGoogle Scholar at 254.

39 Ibid. See also L Tucker et al Lewin on Trusts (London: Sweet & Maxwell, 19th edn, 2014) para 11-058.

40 [2001] JLR 205.

41 Ibid, at [12].

42 Ibid, at [14].

43 Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460 (England); The Adhiguna Meranti [1988] 1 Lloyd's Rep 384 (Hong Kong); Brinkerhoff Maritime Drilling Corp v PT Airfast Services Indonesia [1992] 2 SLR 776 (Singapore); and McConnell Dowell Constructors Ltd v Lloyd's Syndicate 396 [1988] 2 NZLR 257 (New Zealand). In the context of private-international-law disputes in Australia, the forum non conveniens doctrine enables Australian courts to stay their proceedings if they are satisfied that Australia is a clearly inappropriate forum for entertaining the dispute: Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538.

44 EMM Capricorn, above n 5, at [16] per Deputy Bailiff Birt.

45 Ibid, at [18].

46 Ibid, at [19].

47 Ibid, at [31] (emphasis added).

48 Now His Honour Judge Matthews, following promotion to the Circuit Bench of England and Wales.

49 Matthews, above n 4, at [9].

50 Ibid, at [10].

51 [2014] JCA 89.

52 The Board consisting of Lord Mance, Lord Reed, Lord Hughes, and Lord Hodge.

53 Crociani, above n 6, at [23]–[29].

54 Ibid, at [17].

55 Ibid, at [20].

56 Eg Crociani, above n 51, at [73]–[74] and [83]–[85] (unchanged by the Privy Council's judgment); Helmsman, above n 5; RY Tan ‘Jurisdiction clauses in trust instruments’ [2015] Lloyd's Maritime and Commercial Law Quarterly 278 at 280; and Matthews, above n 4, at [21]–[22].

57 Crociani, above n 6, at [35].

58 Ibid, at [36].

59 Ibid, citing Lord Walker of Gestingthorpe's remarks in Schmidt v Rosewood Trust Ltd [2003] UKPC 26, [2003] 2 AC 709 at [51].

60 Ibid.

61 Ibid, at [35].

62 Ibid, at [38]–[47].

63 See also A Scott ‘Jurisdiction clauses in deeds of trust: Crociani v Crociani’ (2015) 85 BYIL 279 at 283.

64 Ibid.

65 Crociani, above n 6, at [33]–[35].

66 Ibid, at [36].

67 For different grounds for critiquing the Privy Council's reasoning, see Jones, G ‘Trusts on tour: jurisdiction clauses in trust instruments’ (2015) 19 JGLR 309Google Scholar at 334, and Yao, Q ‘“Not so strong” cause for trust jurisdiction clause – a solution to a non-problem?’ (2017) 31 Trust Law International 51Google Scholar.

68 The existence of this distinction has been questioned in certain corners. For example, it has been stated that ‘the deal between settlor and trustee is functionally indistinguishable from the modern third-party-beneficiary contract. Trusts are contracts’: Langbein, JH ‘The contractarian basis of the law of trusts’ (1985) 105 Yale Law Journal 625Google Scholar at 627. Similarly, it has been observed that ‘the traditional distinctiveness of fiduciary relationships has been eroded: fiduciary relationships are not now fundamentally different from contractual relationships’: AS Hofri-Winogradow ‘Contract, trust and corporation: from contrast to convergence’ (2017) 102 Iowa Law Review 1691 at 1717.

69 See Tan, above n 56, at 283.

70 Different phrases – eg ‘trustee exoneration clauses’, ‘trustee scope-of-duty clauses’, and ‘trustee exclusion clauses’ – are used to characterise terms which seek to limit or expunge liability on the part of trustees to beneficiaries, among others. For present purposes, the term ‘trustee exemption clauses’ is employed. For a brief discussion of the different types of trust exemption clauses see P Matthews ‘The efficacy of trustee exemption clauses in English law’ (1989) 4 Conveyancer and Property Lawyer 42 at 43–44.

71 Eg Wilkins v Hogg (1861) 66 ER 346; Pass v Dundas (1880) 43 LT 665; and Knox v Mackinnon (1888) 13 App Cas 753. See G McCormack ‘The liability of trustees for gross negligence’ (1998) 13 Conveyancer and Property Lawyer 100 at 100–104.

72 See Tucker, L et al. Lewin on Trusts (London: Sweet & Maxwell, 20th edn, 2020)Google Scholar paras 41-131–41-132.

73 Risks of a similar nature could affect parties in commercial litigation: see Fentiman, R International Commercial Litigation (Oxford: Oxford University Press, 2nd edn, 2015)Google Scholar ch 1.

74 See Kessler, J QC and John, C Drafting Trusts and Will Trusts (London: Sweet & Maxwell, 14th edn, 2019)Google Scholar paras 6.19–6.29.

75 Trusts (Jersey) Law 1984, s 26(9), as amended by the Trusts (Amendment) (Jersey) Law 1989, Art 5.

76 Trusts (Guernsey) Law Act 1989, s 34(7), as amended by the Trusts (Amendment) (Guernsey) Law 1990.

77 [1998] Ch 241.

78 Ibid, at 251. Before the Court of Appeal's ruling in Armitage, it was considered that a clause of the kind under litigation in the case would not protect trustees against liability for losses arising from gross negligence: see eg Wilkins, above n 71; Pass, above n 71; Rae v Meek (1889) 14 App Cas 55. See generally Matthews, above n 70, at 47–50.

79 Armitage, above n 77, at 251.

80 Notably, in April 2000, during debates in the House of Lords concerning the Trustee Bill – which broadly concerned trustees’ powers and duties – Lord Goodhart was critical of the Bill for its failure ‘to restrict the inclusion of trustee exemption clauses in trust instruments’. He was concerned that the English law's treatment of trust exemption clauses had meant that ‘[h]owever negligent, lazy or misguided the trustees may have been, they cannot be held liable for the loss that they have caused to the trust fund’: Trustee Bill [HL], Hansard (HL), 14 April 2000, vol 612, col 383.

81 Law Commission Report No 301, Trustee Exemption Clauses (Cm 6874), Executive Summary, paras 1.7–1.11. Some of the main reasons for this stance were set out at para 1.06(5).

82 Law Commission Report No 301, Trustee Exemption Clauses (Cm 6874), Full Report, 2006, para 6.65.

83 Law Commission ‘Executive summary’, above n 81, para 1.16.

84 Law Commission ‘Full Report’, above n 82, para 6.25.

85 See an acknowledgement of this possibility in Law Commission ‘Executive summary’, above n 81, para 1.09.

86 See also Tan, above n 56, at 283.

87 Crociani, above n 6, at [36].

88 See Williams, N ‘Jurisdiction in the dock’ (2015) 13 Trust Quarterly Review 30Google Scholar at 36.

89 See Nolan, R “‘The execution of a trust shall be under the control of the court”: a maxim in modern times’ (2016) 2 Canadian Journal of Comparative and Contemporary Law 469Google Scholar at 489.

90 Eg Morice v Bishop of Durham (1805) 32 ER 947; Chapman v Chapman [1954] AC 429; McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623; Re Rabaiotti 1989 Settlement [2000] WTLR 953; and Schmidt, above n 59.

91 For an illustrative summary of the type of situations in which the courts’ inherent jurisdiction to supervise trusts is of relevance see Nolan, above n 89, at 471–483.

92 Eg Re Chetwynd's Settlement [1902] 1 Ch 692; Re Harrison's Settlement Trusts [1965] 3 All ER 795; and Chellaram v Chellaram [1985] Ch 409.

93 Eg Re Beddoe [1893] 1 Ch 547.

94 Eg Schmidt, above n 59.

95 Yao, above n 67, at 54.

96 See similarly Jones, above n 67, at 337.

97 [1953] Ch 218 at 234.

98 Ibid, cited with approval by Lord Morton of Henryton on appeal: Chapman, above n 90, at 451.

99 Conaglen, M ‘The enforceability of arbitration clauses in trusts’ (2015) 74 Cambridge Law Journal 450CrossRefGoogle Scholar at 476.

100 Conaglen, M ‘Trust arbitration clauses’ in Nolan, RC et al. (eds) Trusts and Modern Wealth Management (Cambridge: Cambridge University Press, 2018) p 113Google Scholar.

101 403 SW 3d 840 at 844 (Tex SC, 2013).

102 See also Harris, above n 38, at 254, and Yao, above n 67, at 56 and 58.

103 Eg Conaglen, above n 99, at 475.

104 Crociani, above n 51, at [105], citing, with approval, Professor Harris's view on the matter: Harris, J ‘Jurisdiction and the enforcement of foreign judgments in transnational trusts litigation’ in Hayton, D (ed) The International Trust (Bristol: Jordan Publishing Ltd, 3rd edn, 2011)Google Scholar para 1.297.

105 See also Conaglen, above n 99, at 474 (in relation to arbitration clauses in trust deeds), and Yao, above n 67, at 56–57.

106 [1994] 2 AC 324.

107 Contrast the Privy Council decision in The Mahkutai [1996] AC 650, another case concerning an appeal from the Court of Appeal of Hong Kong. In this case, it was held that a third party was not able to enforce an exclusive jurisdiction clause in favour of courts in Indonesia because the term was held to fall outside the scope of the Himalaya clause in the bills of lading.

108 Contracts (Rights of Third Parties) Act 1999, s 1(1)(a).

109 Contracts (Rights of Third Parties) Act 1999, s 1(1)(b), s 1(2), and s 1(3).

110 By virtue of Arbitration Act 1996, Part 1.

111 Eg Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 (Comm), [2004] 1 Lloyd's Rep 38.

112 See, however, Explanatory Notes on Contracts (Rights of Third Parties) Act 1999 (HMSO, 1999), [32], which assumes that jurisdiction clauses, too, are covered by the Act.

113 Civil Jurisdiction and Judgments, above n 15, para 4.47 (citations omitted). See also Burrows, A ‘The Contracts (Rights of Third Parties) Act 1999 and its implications for commercial contracts’ [1999] Lloyd's Maritime and Commercial Law Quarterly 540Google Scholar at 552 (fn 28), and Andrews, N ‘Strangers to justice no longer: the reversal of the privity rule under the Contracts (Rights of Third Parties) Act 1999’ (2001) 60 Cambridge Law Journal 353CrossRefGoogle Scholar at 375.

114 Robertson, DW ‘Forum non conveniens in America and England: “a rather fantastic fiction”’ (1987) 103 Law Quarterly Review 398Google Scholar at 414. See also Slater, AG ‘Forum non conveniens: a view from the shop floor’ (1988) 104 Law Quarterly Review 554Google Scholar, and Hill, J ‘Jurisdiction in civil and commercial matters: is there a third way?’ (2001) Current Legal Problems 439CrossRefGoogle Scholar at 449–450.

115 Civil Jurisdiction and Judgments, above n 15, para 4.23.

116 See most recently Lungowe v Vedanta Resources plc [2019] UKSC 20, [2019] 2 WLR 1051 at [6]–[14] per Lord Briggs.

117 Eg Colosseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd [2005] NSWSC 803 at [72] per Palmer J, and Suzlon Energy Ltd v Bangad (No 3) [2012] FCA 123 at [51] per Rares J.

118 See similarly Hofri-Winogradow, AS ‘Trust jurisdiction clauses: their true ambit’ (2017) 13 Journal of Private International Law 519CrossRefGoogle Scholar at 523, citing Faust, D ‘International trust litigation, jurisdiction and enforcement’ in Kaplan, A (ed) Trusts in Prime Jurisdictions (London: Globe Law and Business Ltd, 4th edn, 2016) p 490Google Scholar.