Establishment, (namely, an apartment and its furnishings in Residence Athena, Avenue Victoria, Le Cannet, Cannes, France), within two years of KAR s

Transcription

1 Jersey Royal Court Royal Court, Tomes, Deputy Bailiff, Lucas e Le Boutillier, Giurati, 6 giugno 1991 [Abdel Rahman v Chase Bank (C.I.) Trust Company Limited and five others] The plaintiff is the widow of Kamel Abdel Rahman ( KAR ) but is not the mother of the third and fourth defendants, and as such is interested in his estate whether he died testate or intestate. The first defendant ( the trustee ) is the trustee of the purported settlement ( the settlement ), the subject of this judgment. The second and third defendants were beneficially interested under the settlement. The fourth defendant is a party to these proceedings as a person who may be interested under the intestacy of KAR. The fifth defendant is the representative of the estate of KAR s mother by virtue of an order of the Judicial Greffier dated November 24th, 1982 and is party to these proceedings since the estate might have been interested under the settlement. The sixth defendants are the respective children and remoter issue of the third defendants and such children and remoter issue are prospectively contingently beneficially interested under the settlement. On January, 18th, 1977, KAR constituted the settlement to be governed by the laws of Jersey, containing trusts and powers that can be summarized as follows: By cl. 4(1), the trustees were directed to stand possessed of the trust fund and income thereof upon such trusts as KAR should appoint in his lifetime with the consent of the trustees but subject to the proviso that KAR could, in any period of 12 calendar months, appoint onethird of the capital of the trust fund without that consent. In default of such an appointment, the trustees were to pay the income to KAR during his life under cl. 5(1). By cl. 5(2), the trustees were directed as from KAR s death to hold the trust fund and the income thereof upon trust for such members of the specified class (as defined in the settlement) as KAR should appoint. By cl. 6, in default of any such appointment, the trustees were directed to hold the trust fund after KAR s death on trust to (a) pay US$80,000 to the plaintiff in satisfaction of the mandatory deferred payment due to her under Muslim law as stipulated in the marriage contract made on the occasion of the marriage between KAR and the plaintiff; (b) pay US$1m. to the plaintiff absolutely; and (c) transfer or convey to the plaintiff absolutely any real property (other than in the Lebanon) forming part of the trust fund as at his death used as KAR s principal residence in his lifetime. Subject to the foregoing provisions, the trustees were directed by cl. 7, during the specified period (as defined in the settlement) to pay (a) $1,250 monthly to KAR s mother during her lifetime; (b) 2 ½% of the balance of the income to the second defendant; and (c) of the remaining balance of that income, fourtenths to Nadia Abdel Rahman during her life, with remainder over to her children, fourtenths to Ferial Abdel Rahman during her life with remainder over to her children and the remaining twotenths to Ghana Abdel Rahman during her life with remainder over to her children. Subject to the foregoing, by cl. 8 the trustees were directed to hold the capital of the trust fund and on the appointed day (as defined in the settlement) to distribute fourtenths to Nadia Abdel Rahman absolutely if then living with remainder to her children, fourtenths to Ferial Abdel Rahman absolutely if then living with remainder to her children and the remaining two tenths to Ghana Abdel Rahman absolutely if then living with remainder to her children. By cl. 9, any income or capital of the trust fund not disposed of was to be held in trust for the second defendant absolutely. Notwithstanding the provisions of cll. 5, 6, 7 and 8, the trustees were empowered by cl. 10 of the settlement to pay or apply the capital or income of the trust fund to or for the benefit of KAR and to have regard exclusively to the interests of KAR in determining whether or not to exercise such power. Many other of the administrative powers contained in the settlement required the prior written consent of KAR during his lifetime for their exercise. Clause 1(1)(o) of the settlement provided that the trustees meant the original trustee ( the trustee ) or other trustees or trustee for the time being of the settlement. Clause 4(1) and other clauses of the settlement referred to the trustees being at least two in number or a trust corporation. Because the trustee is a trust corporation, trustees and trustee throughout this judgment have the same meaning. Under the provisions of the Sixth Schedule to the settlement, the Protector means Issam Ibrahim Nubani ( Mr. Nubani ) and, after his death or his rejection of or resignation from that office or his having become unfit or incapable of acting, Mohammad Hasan Mustafa El- Saadi ( Mr. El-Saadi ). The settlement was constituted by KAR paying a sum of $100 (in fact he paid only half that amount) and assigning to the trustee by deed of assignment dated January 18th, 1977, the benefit of an agreement dated December 17th, 1976, as varied by a rider thereto dated January 5th, 1977, each made between KAR of the one part and Hassib J. Sabbagh and Said T. Khoury ( Messrs. Sabbagh and Khoury ) of the other part. The sums payable thereunder had been substantially paid to the first defendant. By agreement dated January 18th, 1977 between KAR and the trustee, provision was made for compensation to the trustee. On February 10th, 1977, KAR designated in writing to the trustee that the second defendant was the Foundation for the purposes of the settlement. KAR purported to exercise the power of appointment by deed dated September 26th, 1980 ( the deed of appointment ). The deed of appointment contained trusts and powers that can be summarized as follows: By cl. 2(1) of the deed of appointment it was provided that, on the death of KAR, the trustees should (a) pay the plaintiff $80,000 in satisfaction of her claim under Muslim law to the mandatory deferred payment and also the sum of $1.5m.; and (b) forgive and release the plaintiff from all debts due from her to the trustees. By cl. 2(2), the trustees were directed to procure the realization of the assets and the winding up of a Liechtenstein anstalt held by the trustees known as the Alsadeer

2 Establishment, (namely, an apartment and its furnishings in Residence Athena, Avenue Victoria, Le Cannet, Cannes, France), within two years of KAR s death and to pay the net proceeds to the Foundation. Subject to the foregoing, the trustees were directed to pay one tenth of the remainder of the capital of the trust fund to the Foundation within six months of KAR s death. Subject to the foregoing, the trustees were further directed to hold the remainder of the trust fund and its income upon trust and to pay one third of that income to Nadia Abdel Rahman during her lifetime with remainder to her children but with provisions for the payment to Nadia Abdel Rahman of 15%, 20% and the remainder thereof respectively of both the capital and income of such one third on the first, second and third anniversaries respectively of KAR s death. The trustees were directed to hold another one third on similar trusts for the benefit of Ferial Abdel Rahman and her children and the remaining one third for the benefit of Ghana Abdel Rahman and her children. Subject as aforesaid, the trusts and provisions of the settlement should remain in full force and effect. The deed of appointment was not executed by KAR in the presence of any witnesses. We are concerned here with only one part of the plaintiff s case, which in the plaintiff s re amended representation ( the representation ) is summarized as follows: The law of Jersey rendered the settlement invalid in so far as it, or the degree of control exercised over it by KAR, infringed the principle of Jersey law that donner et retenir ne vaut... Under the terms of the trusts and powers contained in the purported settlement and in particular those contained in cll. 4(1) and, KAR retained such rights, powers or authorities exercisable directly or indirectly as would enable him substantially or wholly to revoke or otherwise terminate such settlement for his own absolute benefit. Such trusts and powers are in breach of the maxim or rule of the laws of the Island of Jersey that donner et retenir ne vaut rien and accordingly the plaintiff claims that the purported settlement and the gift to the trustees thereof by the said deed of assignment dated January 18th, 1977 are wholly invalid under those laws. Moreover, from the date on which KAR purported to constitute the settlement, he exercised dominion and control over the trustees in the management and administration of the purported settlement including all distributions of capital or loans and investments. In effect, he treated the assets comprised in the trust fund as his own and the first defendant as though it was his mere agent or nominee [ ]. The plaintiff claims that the exercise of such dominion and control breached the maxim or rule of the laws of the Island of Jersey that donner et retenir ne vaut rien and that the settlement is therefore wholly invalid under those laws. Accordingly, the plaintiff sought an order that (a) the settlement and the gift to the trustees [ ] are wholly invalid and of no effect under the law of the Island of Jersey because (i) the powers contained in the settlement, particularly those contained in cll. 4(1) and 10, breach the maxim or rule of that law that donner et retenir ne vaut rien [...] ; and (ii) the actual exercise by KAR of dominion and control over the trustees [ ] likewise breached such maxim. The first defendant denied that the maxim donner et retenir ne vaut rien applied to the settlement. Alternatively, it pleaded that if the maxim applied, none of the powers conferred by the settlement constituted a breach thereof. Alternatively, it pleaded that if the maxim applied, its effect was no more than to render voidable by the settlor during his lifetime the deed of assignment and the settlor did not during his lifetime avoid either the settlement or the deed of assignment. The first defendant further denied that in the management and administration of the settlement the settlor exercised or was in a position to exercise dominion or control over the trustee or that he treated or was in a position to treat the assets as his own or the trustee as his mere agent or nominee. It was not admitted by the first defendant that the alleged exercise of dominion and control by the settlor over the trustee (if any, which was denied) breached the maxim donner et retenir ne vaut or that the settlement or the assignment was thereby or otherwise invalid under the laws of Jersey. The second defendant pleaded that KAR did not purport to constitute but validly constituted the settlement which took effect according to its tenor. The summary of the settlement contained in the plaintiff s representation, which we have adopted, was not admitted. The second defendant further pleaded that the deed of appointment was not a purported exercise of the power of appointment conferred on KAR by cl. 5(2) of the settlement but took effect according to its tenor. The summary, which we have adopted above, was not admitted. Each and every allegation of law and of fact contained in the relevant paragraph of the representation was denied. The second defendant specifically denied that (a) the exercise of powers conferred by the settlement on the trustees (including the power conferred by cl. 10) constitutes an indirect exercise of powers by KAR; (b) any rule of the laws of the Island of Jersey applicable to the settlement was breached by the trusts and powers therein contained; and (c) the settlement or the deed of assignment are or either of them is, invalid under the laws of the Island of Jersey for the reasons alleged or at all. As to the alleged maxim donner et retenir ne vaut rien the second defendant pleaded as follows: (a) The correct form of the maxim is donner et retenir ne vaut; (b) the maxim stems from the Coûtume de Normandie; (c) the Anglo-Saxon juridical concept of trusts was wholly unknown to the Coûtume de Normandie and to the commentators on the Coûtume de Normandie; (d) the maxim does not apply to trusts; (e) the settlement is not a don within the meaning of the maxim; and (f) alternatively, it is denied that the trusts and powers contained in the settlement breached the maxim. The second defendant further denied that KAR exercised dominion and control over the trustees or treated them as his

3 mere agents or nominees or treated the assets comprised in the trust fund as his own or otherwise breached the maxim or rule donner et retenir ne vaut (if it applied to this matter at all, which was denied) so as to render the settlement invalid under the laws of Jersey. The relevant parts of the answers of the first and third named third defendants and of the second named third defendant were in identical terms to those of the second defendant. The fourth defendant relied on the wisdom of the court. The fifth defendant admitted the relevant parts of the representation. In particular, the fifth defendant admitted that the settlement and the gift into the settlement were void under the laws of Jersey as being in breach of the maxim donner et retenir ne vaut. The fifth defendant further contended that the provisions of cl. 5 of the settlement also rendered the settlement and the gift into the settlement void as being in breach of the maxim. All the sixth defendants filed answers, the relevant parts of which were in identical terms to those of the second defendant. In her reply to the answer of the first defendant, the plaintiff, inter alia, reaffirmed the claims made in the representation and also adopted the claim made by the fifth defendant that by virtue of the powers reserved to KAR in cl. 5(2) of the settlement, KAR did not divest himself of the power to control the ultimate destination of the gifted assets and therefore the gifts into trust by way of constitution of the trust fund were invalid. Furthermore, the plaintiff averred that the transfer by KAR of assets into the settlement was a don within the meaning of the maxim for the reasons given in the representation, the further reason that KAR retained under the settlement power by cl. 5(2) from time to time to direct the destination of the trust fund to persons other than himself, which powers breached the maxim in its application to a gift by him and the further reason that KAR retained under the settlement power by cl. 4(1) from time to time to direct the destination of a proportion of the trust fund to whomsoever he might think fit, which powers breached the maxim in its application to a gift of property by him. It was admitted by the plaintiff that KAR avoided neither the settlement nor the deed of assignment but denied that the breach of the maxim rendered the settlement and/or the deed of assignment voidable only during KAR s lifetime. It was further averred that the gift and/or the settlement being in breach of the maxim, it was open to any person affected, such as the plaintiff, to have the gift and/or the settlement set aside. In her reply to the answer of the second defendant, the plaintiff again reaffirmed her claims and also adopted the claims made by the fifth defendant that by virtue of the powers reserved to KAR as settlor in cl. 5(2) of the settlement, KAR did not divest himself of the power to control the ultimate destination of the gifted assets and therefore the gifts into trust by way of constitution of the trust fund were invalid. Furthermore, the plaintiff averred that the maxim may be conveniently cited either in the form set out in the representation or as set out in the answer but insofar as the plaintiff sought the application of legal principle the form in which the maxim was set out was immaterial. She further averred that the principle embodied in the maxim donner et retenir ne vaut rien is applied in Jersey because it forms part of the customary law of the Island and made averrals, admission and denial identical to those in her reply to the answer of the first defendant. The plaintiff made identical replies to the answers of the first and third named third defendants, of the second named third defendant and of the sixth defendants. The first defendant, in rejoinder to the reply of the plaintiff, denied that either the existence or the exercise of the power conferred on the settlor by cl. 5(2) of the settlement was in breach of the maxim. The first defendant further contended that the settlement was not a don within the meaning of the maxim, that the maxim did not apply to trusts such as the settlement and that there were no express reasons given in the representation for the averment that the transfer by the settlor of assets into the settlement was a don within the meaning of the maxim. Moreover, the existence of the power conferred by cl. 5(2) of the settlement, being in the nature of a special power of appointment, was not a reason supporting the said averment, nor did it result in the settlement or the assignment being in breach of the maxim and the existence of the power conferred by cl. 4(1) of the settlement was not a reason supporting the said averment, nor did it result in the settlement or the assignment being in breach of the maxim. The first and third named third defendants in rejoinder made identical contentions with the additional one that the Anglo Saxon juridical concept of trusts formed no part of the customary law of the Island until comparatively recent times and was introduced into Jersey from the mid 19th century only. The first, second, third, seventh, eighth, and ninth named sixth defendants made an identical rejoinder. The court heard the question of whether the settlement was valid or invalid for breach of the rule of Jersey law that donner et retenir ne vaut between March 5th and July 13th, On February 12th, 1990, the court announced its decision as follows: The court is satisfied that, in the words of the learned Bailiff, the maxim donner et retenir ne vaut is alive and well. For the maxim to apply, there has to be both a don and a rétention or conservation. In the judgment of the court the maxim applies to gifts into trust. The court is also satisfied that the question of validity is a mixed matter of construction and fact. The maxim applies to this particular trust because there was both a don, in that there was a gift into trust and a rétention both on the construction of the settlement and because the late Kamel Abdel Rahman retained dominion and control over the trust fund throughout his lifetime. The settlement in this case was a sham in the sense that it was made to appear to be what it was not. The court is satisfied that Kamel Abdel Rahman intended (a) to retain control of the capital and income of the trust fund throughout his lifetime; and (b) to use the trust in order to make testamentary dispositions and defeat, if he chose, the

4 rights of the widow and heirs. In the opinion of the court, Kamel Abdel Rahman s advisers and the trustee lent their services to the attainment of his wishes. In the case of the trustee, the fees to be earned were, we think, a significant factor and we note in particular the decision not to obtain the advice of a Jersey lawyer; the wishes of Kamel Abdel Rahman were, we think, paramount throughout. This was not a conspiracy but there was a wish to satisfy the requirements of the settlor at all times. Thus, the court makes an order that the settlement and the gifts to the trustee are wholly invalid and of no effect under the law of Jersey in that both the powers contained in the settlement and the actual exercise by Kamel Abdel Rahman of dominion and control over the trustee and trust fund breached the maxim or rule of that law that donner et retenir ne vaut. A fully reasoned judgment will be distributed later. The purpose of this judgment is to give those full reasons. There was what Mr. Bailhache described as much banter between my learned friends and me whether the maxim is donner et retenir ne vaut rien or donner et retenir ne vaut. He said that nothing turned on it. The court agrees. The maxim may well have been referred to historically in the old authorities as donner et retenir ne vaut rien and for that reason it went into the representation in that form. In the court s view, to add the word rien helps not at all; it is superfluous; the maxim under the customary law of Jersey is complete as donner et retenir ne vaut. (omissis) Charles Sydney Le Gros, Viscount and former Bâtonnier, in his Droit Coutumier de Jersey, published in 1943, the only modern textbook on Jersey customary law, includes the following in his review of maxims (at 457): Donner et retenir ne vaut. C est quand le donateur s est réservé la puissance de disposer librement de la chose par lui donnée entre vifs, ou qu il demeure en la possession d icelle. v. art. 445 de la Coutume Réformée. v Loysel. Livre 4. Numéro 659. v. Le Geyt Tome 2. p.517. Thus the learned author recognizes that the maxim is part of the customary law of Jersey, wherever the donor has retained the power to dispose of that which has been gifted inter vivos or where that which has been gifted remains in his possession (Bexon v Chichester). Mr. Hamon criticized Le Gros statement as a gloss and as very simplistic because the rule had by 1943 become much more complicated, certainly in France. But Le Gros cites Le Geyt and art. 445 of the Coutume Reformée de Normandie (1684), taken from the work of Loysel, a Parisian lawyer and Professor of Laws who coined the maxim in the 16th century. Although Le Geyt, to whom we shall refer later, had a great deal to say about tradition and how it became modernized, in particular as to immovables and movables which are by their nature incapable of physical delivery, he did not deny or reject the maxim. Latter v Doyen de L Isle de Jersey is recorded as follows ( T.D. at 50 51): FIDÉICOMMIS. ACTION EN CASSATION. Contrat de donation, cession et transport d un immeuble à fin d héritage, la donatrice se réservant l usufruit sa vie durant et la faculté de faire telles réparations et tels changements comme elle entend sans consulter les donataires ou leurs hoirs, étant accordé entre les parties que ledit immeuble soit vendu après la mort de la donatrice et que les argents résultant de ladite vente soient appliqués au bénéfice de l Eglise Anglicane. Prétention que l action en cassation aurait dû être intentée dans l an et jour du décès de la donatrice. Réponse que ledit contrat est nul ab initio. Considérant que la prise par acte entre vifs, soit par voie de donation, soit à titre onéreux, d un bien fonds, pour être tenu par le preneur en fidéicommis n est pas défendu par le droit commun; Que la Loi de 1862 sur les teneures en Fidéicommis etc. n a prohibé, ni en termes exprès, ni par implication, la création de fidéicommis en dehors de son empire; Que la prohibition de l Article 5 de la Loi de 1851 sur les Testaments d Immeubles ne s applique pas à un contrat héréditaire passé devant Justice; Que la transaction n était pas à cause de mort; Qu il n y a rien dans la transaction qui contrevient au principe de droit donner et retenir ne vaut [Emphasis supplied]; Jugé que ledit contrat n est pas nul ab initio et qu en conséquence l acteur vient à tard pour en attaquer la validité. (omissis) The fact remains that the present Bailiff, whose opinions of the customary law of Jersey must necessarily carry much weight, was satisfied that the maxim donner et retenir ne vaut is alive and well and is capable of application to modern trusts and settlements of personalty but that whether or not a particular trust or settlement infringes the maxim is a matter of construction depending on the individual document. In the course of his judgment, the learned Bailiff posed the question (ibid., at 27): [W]hy should it [the maxim] be excluded from applying to modern trusts and settlements? He found that it did so apply. The court agrees. After all, a prohibition on driving a carriage furiously does not fail to apply to bicycles merely on the ground that bicycles had not been invented when the prohibition was enacted: Taylor v Goodwin. The maxim donner et retenir ne vaut was further recognized in Johnson Matthey Bankers Ltd. v Shamji. In an interim judgment, the court said that the plaintiff sought a declaration that the assets in the trust funds (the Gomba trusts) had always belonged to the first defendant. The court went on: Moreover, it alleges that the two Gomba trusts are invalid because they offend against the well known principle of Jersey law of donner et retenir ne vaut. [Emphasis supplied.] On May 2nd, 1986, the court dealt with an application under r.47(3) of the Trusts (Jersey) Law, 1984, to give its consent for the institution of an action.

5 (omissis) Thus the court decided that in the particular case, the retention by the settlor of powers to nominate new trustees and to veto additional members of the class of beneficiaries and payments out of the trust fund did not infringe the rule. Nevertheless, the rule existed and was capable of applying to trusts and settlements. Is this court then to overrule Bexon v Chichester, which the learned Bailiff agreed in Ex p. Viscount Wimborne applied the maxim; Latter v Doyen de L Isle de Jersey, which recognized and considered the application of the maxim in Full Court; the dicta, obiter or otherwise, of the learned Bailiff in Ex p. Viscount Wimborne, which recognized the maxim and held that it applied to trusts and settlements; and Johnson Matthey Bankers Ltd. v Shamji, which also recognized the application of the maxim to trusts and settlements? 26 Halsbury s Laws of England, 4th ed., para. 580, at 301, deals with decisions of coordinate courts as follows: There is no statute or common law rule by which one court is bound to abide by the decision of another court of coordinate jurisdiction. Where, however, a judge of first instance after consideration has come to a definite decision on a matter arising out of a complicated and difficult enactment, the opinion has been expressed that a second judge of first instance of coordinate jurisdiction should follow that decision; and the modern practice is that a judge of first instance will as a matter of judicial comity usually follow the decision of another judge at first instance unless he is convinced that that judgment was wrong. In In re Cohen, Danckwerts, J. felt bound to follow a decision of Harman, J. which had been doubted, although not overruled, in a dissenting Court of Appeal judgment. It is undesirable that different judges of the same division should speak with different voices: In re Howard s Will Trusts, per Wilberforce, J., and other cases. This court therefore has no hesitation in saying that it should consider itself bound to follow Bexon v Chichester, Ex p. Viscount Wimborne and Johnson Matthey Bankers Ltd. v Shamji, unless it is convinced that the decisions were wrong. It is not necessary, therefore, for this court to review the whole of the very substantial amount of authority, much of it foreign, academic and historical, which was put before us. We proceed on the basis that the existence of the maxim, its present day application, and its application to trusts are all sufficiently established by the Jersey authorities we have cited and by which this court should consider itself to be bound, as to have the result that only a superior court could now interfere, unless this court can be persuaded to the extent of being convinced that those decisions were wrong. The purpose of the maxim, as we conceive it, is to protect the rights of succession of heirs, to protect creditors and to prevent frauds. In Jersey we still have rights of succession to personalty. There is still the légitime. Taking the simple case of a married man with children, as KAR was, under our law the widow is entitled to one third of the personal estate, as are the child or children in equal shares. Only one third (le tiers disponible) can be bequeathed by will. Of course, gifts made inter vivos can defeat or reduce those rights of succession, provided the gift is perfected, provided there is both don and tradition, subject in appropriate cases to the rules about avancement de succession and rapport à la masse. This is where the maxim donner et retenir ne vaut comes into play. If there has not been don et tradition the maxim applies, and the gift is invalid and the object of the gift comes back into the estate for the widow and heirs to take their légitime. Heirs and creditors do still need protection against imperfect or fraudulent purported gifts. The maxim has arisen out of public policy and principle and is not lightly to be set aside. Mr. Hamon referred us to Lissenden v C.A.V. Bosch Ltd., a House of Lords case, where Lord Wright said ([1940] 1 All E.R. at ): In Johnson s case, however, the Court of Appeal, having held that the award was one entire award, proceeded to decide the appeal by applying the principle, rule or maxim that one cannot both approbate and reprobate. I am induced here to quote the language of LORD ESHER, M.R. in Yarmouth v France [...]: [...] I detest the attempt to fetter the law by maxims. They are almost invariably misleading: they are for the most part so large and general in their language that they always include something which really is not intended to be included in them. Indeed, these general formulae are found in experience often to distract the court s mind from the actual exigencies of the case, and to induce the court to quote them as offering a ready made solution. It is not safe to act upon them, however, unless, and to the extent that, they have received definition and limitation from judicial determination. Counsel also referred us to Basden Hotels Ltd. v Dormy Hotels Ltd., where two maxims are dealt with. The court said (1968 J.J. at 914) that The defendant company s first line of defence is the maxim quoted by Mr. Cristin nulle promesse à héritage ne vaut. That this maxim is valid in Jersey law is indisputable, but in the present action it is inapplicable. The Deputy Bailiff went on to explain why and then said (ibid., at 919): But we cannot leave this matter without referring to another maxim. It is the often quoted maxim La convention fait la loi des parties. Like all maxims it is subject to exceptions, but what it amounts to is that courts of justice must have high regard to the sanctity of contracts [Mr. Wheeler sought to add here, of settlements] and must enforce them unless there is a good reason in law, which includes the grounds of public policy, for them to be set aside. Mr. Hamon suggested that if one looks through the index of Jersey judgments, one finds the maxim la convention fait la loi des parties discussed time and again. That was only right and proper, he said, because it is a live, well and very important maxim indeed. It was, in his view, surprising that all parties had been able to find so very limited authority on the maxim donner et retenir ne vaut. With respect to Lord Esher, M.R. in Yarmouth v France, we cannot share his strong dislike of maxims, provided they are both interpreted and applied with care. Le Gros in his Droit Coutumier de Jersey (1943) considered them important and relevant enough to include a whole chapter entitled Recueil de maximes.

6 The logic of Mr. Hamon s argument escapes us. Multiple sclerosis is no less an illness than is cancer albeit the latter is more prevalent and thus mentioned and written about more often. We adopt Mr. Bois words in Basden Hotels Ltd. v Dormy Hotels Ltd. (1) and apply them to donner et retenir ne vaut: that this maxim is valid in Jersey law is indisputable. The question is whether it is applicable in the particular case. No doubt its application has not troubled the court on many occasions. Jersey law rests in the bosom of the practitioners and we are sure that Jersey lawyers over the years have advised against and avoided breaches of the maxim. In Bradshaw v McCluskey, the court held that according to the customary law of Jersey, a sale by a vendor who dies of natural causes within 40 days of the contract is annullable at the instance of the heirs or the devisees of the property so disposed of. The rule had not fallen into disuse. The defendants denied that such a rule had ever had a life of its own but argued that even if it had, the statutory freeing of the right to alienate one s real property by will or deed inter vivos commencing with the Loi (1834) sur le retrait foncier and continuing right up to the Loi (1960) modifiant le droit coutumier had effectively abrogated the rule. The defendants said that the rule formed but a part, and a secondary part at that, of the Jersey principle la conservation du bien dans la famille and that with the disappearance of that principle the 40-day rule which was tied in with other restrictions affecting gifts à cause de mort fell with it. It was common ground that the 40-day period was not to be found in the Ancienne Coûtume but had established itself by the time of the Coûtume Réformée. It might have been linked originally with other matters such as the avoidance of fraud and the cloaking of testamentary dispositions under the guise of gifts and probably was so linked. The defendants failed. The court found that so far as the decisions of the Royal Court were concerned, there was no evidence that the rule had been abrogated in any way. On the contrary, the findings of the court expressly rejected any such suggestion. And for a statute to alter the common or customary law, its provisions must be clear and unambiguous. Few principles of statutory interpretation are applied as frequently as the presumption against alterations in the common law. In our judgment, the principles set out in the Bradshaw case in relation to the 40-day rule apply equally in the present case to the maxim donner et retenir ne vaut. Mr. Le Cras argued that in trusts things are not given but that beneficiaries have interests, whereas Terrien in Du Droict Civil, 2nd ed., at 213 (1578), was referring to la propriété de la chose donnée. Mr. Le Cras admitted that Terrien was difficult to construe where he said that one could not have ownership and seigneurie of the same thing in two persons at the same instant. But Terrien says that que si le donneur se réserve à pouvoir disposer de la propriété de la chose donnée, la donation est nulle. Car donner et retenir ne vaut [...] Routier s Principes Généraux du Droit Civil et Coutumier de la Province de Normandie, paras. III, IV and V, at 281 (1742) says: Il est de l essence de la donation entre-vifs, que le donateur se dépouille de la propriété de la chose par lui donnée & qu il en saisisse son donataire, qui l y peut contraindre par les voïes de droit: car donner & retenir ne vaut, suivant l art de la Coutume. Or donner & retenir, est suivant l art de la Cout. quand le donateur s est réservé la faculté de disposer librement de la chose par lui donnée entre-vifs ou qu il demeure en la possession d icelle. C est encore donner & retenir, & rendre la donation nulle, comme il est déclaré par l art. 16. de l Ordonnance de si elle est faite à condition de païer les dettes & charges de la succession du donateur en tout ou en partie, ou autre dettes & charges que celles qui existoient lors de la donation, ni sous des conditions dont l exécution dépende de la volonté du donateur [ ] The Ordonnance of 1731 forms no part of the law of Jersey but para. V is not necessary to further explain the maxim because paras. III and IV and, in particular, the extract from Terrien, are sufficient in themselves. Houard, in his Dictionnaire de la Coûtume de Normandie, at (1780) said: Pour opérer une donation entre-vifs, il faut que le donateur se dessaisisse de la chose donnée, & en saisisse le donataire, de manière que le donataire soit actuellement revêtu de la propriété, sans, par le donateur, en pouvoir retenir la disposition; autrement il n y auroit aucune différence entre la donation testamentaire. Ici le donateur ne se dessaisit de rien; il donne ce qui lui restera de meubles après son décès, & dont il n aura point disposé de son vivant; car il s est retenu la liberté d en faire tel usage & telle disposition qu il voudra de son vivant; c est donc une donation à cause de mort [ ] [...] Un caractère essentiel dans les donations entre-vifs, est que la propriété des choses données, soit pleinement & irrévocablement acquise au donataire dès l instant de la donation; il faut donc, en donation entre-vifs d immeubles ou de meubles, qu il y ait une tradition, soit réelle, soit civile, mais si parfaite de la chose donnée, que le donateur ne puisse plus en disposer. [...] Donner & retenir ne vaut, c est-à-dire que toute donation doit être irrévocable entre-vifs; qu elle est nulle si le donateur reste maître d en anéantir l effet; qu en un mot, il doit y avoir en cette espèce de donation, irrévocabilité du don et certitude de l objet donné [ ]» Like Routier, Houard goes on to deal with the Ordonnance of 1731 but he has first stated the basic rule which, in our estimation, is unaffected by the Ordonnance and does not rely upon it. The court disagrees with the contention that in trusts things are not given. It is true that beneficiaries have interests but there is an initial gift (don) by the settlor, who has dispossessed himself, to the trustee. If one translates seigneurie as control, there is no difficulty. If the settlor retains the power to dispose of the gift into trust then the gift is invalid

7 under the maxim. In Berault, Godefroy & d Aviron, 2 La Coutume Reformée de Normandie, at 181 (1684), Berault says: Ce n est point donner sinon quand on cède & transporte la proprieté & possession de la chose: ce qui est conforme à l ancien droit Romain, parce que la tradition estoit nécessaire à la translation de la propriété. There is a gift of both ownership and possession where the asset put into trust is transferred to the trustee but not, of course, if the tradition is incomplete because the donor has retained the right to take the asset back (rétention). The plaintiff can rely on art. 445 of the Coûtume (op. cit., at 181): Donner & retenir est quand le donateur s est réservé la puissance de disposer librement de la chose par lui donnée entre vifs, ou qu il demeure en possession d icelle. The court will deal with the question of construction later but if KAR as settlor retained the power freely to dispose of the assets given by him into trust or if he diverted the assets before they reached the trustee with the result that he remained in possession, the maxim clearly applies to the gift. Godefroy appears to disagree with Berault but the court is entitled to take its own view of art. 445 and Mr. Le Cras has not convinced us that we should adopt Godefroy s commentary, particularly where Godefroy relies on Arrests de Paris (op. cit., at 182). Whether or not Latter v Doyen de l Isle de Jersey was correctly decided on its facts, it is sufficient authority to support the existence and application in Jersey of the maxim; it is only the application of the maxim to the particular facts which causes difficulty. The court turns to Basnage, 2 Commentaires sur la Coutume de Normandie, 4th ed., at 294 (1778). There, Basnage repeats art. 445 and says that several Coûtumes are the same as that of Normandy ( sont conformes à la notre ). He cites those of Paris and Orléans and says: Ce seroit donner imaginairement que de retenir la libre disposition de la chose donnée; on rendroit ce contrat fort commun si l on pouvoit donner, & en même-temps faire dépendre de sa pure volonté l effet de la donation, & il ne resteroit aucune différence entre la donation entre-vifs & la testamentaire: Il faut donc pour donner entre-vifs que le donateur se dessaisisse actuellement de la propriété, & sans en pouvoir retenir la disposition [...] That is a perfectly clear statement of the law and those counsel opposing the plaintiff have failed to persuade us that it is not correctly reflected in the Jersey cases that we feel bound to follow. Whilst we shall deal with the question of construction later, the overwhelming case for the plaintiff appears to be that what KAR did was donner imaginairement, both as a matter of law and on the facts. It is true that according to Basnage, Godefroy, Houard and other commentators there appears to have been an exception. A gift of biens présents et à venir, effective at death and subject to payment of the donor s debts, was held to be a valid exception to the maxim until the French Royal Ordonnance of 1731, which forms no part of the law of this Island, prohibited it. But the gift into trust by KAR was not a gift of biens présents et à venir effective only at death. Why should the maxim not apply to a gift into trust? It is a gift because there is no consideration. It is a gift on terms. The trustee has to hold for the beneficiaries but the actual transfer of property is still a gift. The alternative is that it was a gift to the reversioners in the terms of cll. 6 8 of the settlement but if so, the donor could take the gifts back in their entirety and clearly the maxim would apply. Why should it make any difference that a trustee is interposed to hold legal title and to manage the assets, when the effect is still the same? These are matters of logic and principle and the fact that trusts were not known at the time that this doctrine came into being is itself no good reason not to apply it (Taylor v Goodwin ). Common law or customary law maxims must always, in our view, be applied to changing circumstances. Although trusts were unknown to the law of France, the concept of substitution was and gifts could be made into substitution. In modern French law, substitutions have been prohibited under art. 896 of the Code Civil (albeit with exceptions under arts. 897, 898 and 899). Before then, there was variation across France. Some Coûtumes permitted substitution, others did not. Normandy accepted it to a limited degree. An example is to be found in Terrien s Du Droict Civil, 2nd ed., at 194 (1578). But in other Coûtumes which had donner et retenir in exactly the same form as in Normandy and also had substitutions, donner et retenir was applied to gifts into substitution. Pothier, Traité des Substitutions, 2nd ed., at (1861) wrote: 1. Nous n avons dans le pays coutumier que deux espèces de substitutions, la substitution vulgaire ou directe, et la substitution fidéicommissaire [...] 2. La substitution fidéicommissaire est la disposition que je fais d une chose au profit de quelqu un par le canal d une personne interposée, que j ai chargée de lui remettre. [ ] 7. Les substitutions fidéicommissaires se font le plus com munément par testament; elles se peuvent faire aussi par des actes de donation entre vifs, étant permis à un donateur de prescrire telle loi que bon lui semble à sa donation. [The analogy is testamentary trusts and inter vivos trusts.] 8. [ ] Cette substitution peut se faire même sans que le substitué le sache, même quoique le substitué ne soit pas encore né, ni même conçu. [The analogy here is with the ultimate beneficiary, who does not know about the existence of the trust, who is not born or even conceived.] [...] 10. La nature des substitutions suit la nature de l acte qui les contient. La substitution portée par un testament, est une disposition testamentaire, et a la nature d une disposition testamentaire: celle portie par une donation entre-vifs, suit la nature des donations entre-vifs. At para. 11, Pothier deals with a substitution created in a will. There then follows (op. cit., art. II, at ):

8 Au contraire, les substitutions portées par des actes de donations entre-vifs, ne sont point sujettes aux formalités des testaments. Elles peuvent être faites par des personnes incapables de tester, pourvu qu elles soient capables de faire des donations entre-vifs. Elles peuvent être faites au profit de personnes incapables de recevoir par testament, pourvu qu elles soient capables de recevoir par donations entre-vifs. Elles peuvent aussi être faites jusqu à concurrence de tout ce dont on peut disposer entre-vifs. Elles ne sont point astreintes aux réserves coutumières, comme les dispositions testamentaires. Enfin, le donateur ne peut plus, après l acte de donation conclu, y rien changer par sa seule volonté. Mr. Birt submitted that this is a key passage: Pothier is clearly there saying that this is a gift like any other gift; it cannot be revoked. He does not say so in express terms, but it is clearly what he is saying. The maxim donner et retenir, the need for irrevocability, applies to gifts in substitution just like any other gift. Whilst the court appreciates that there are substantial differences between a substitution fidéicommissaire and a settlement trust and Mr. Le Cras stressed these the court nevertheless felt able to accept Mr. Birt s submission. Mr. Le Cras says that a substitution fidéicommissaire more closely approximates to an entail he says it is in some form or other an entail. He provided the court with an interesting review of the emergence of entails in Jersey law, not as something derived from Normandy or from France but from Orders in Council between 1617 and Mr. Le Cras argued that any form of substitution or entail (amortissement) any form of trust referred to realty and what was happening in France was not what was happening in Jersey. We were feeling our way to something quite different, he said, and doing it not by any form of common law, since none existed, but by petitioning His Majesty in Council. We are not called upon to comment, much less to rule, upon Mr. Le Cras historical review and argument because Mr. Birt was not, as the court understood it, suggesting that the French substitution fidéicommissaire applied in Jersey. He was merely drawing the attention of the court to characteristics in the French substitution fidéicommissaire and the modern Jersey settlement trust and suggesting (a) that donner et retenir ne vaut applied to a French substitution fidéicommissaire and therefore (b) why should not donner et retenir ne vaut apply equally to a modern Jersey settlement trust? It is the force of that submission, in logic and in principle, which the court accepts. Mr. Le Cras conducted us through long passages of Allen, Law in the Making, 7th ed., at 384, 385 and (1964) on legal rules, uniformity and equity as a source of law and of Megarry & Wade, The Law of Real Property, 3rd ed., at (1966) on Uses and Trusts, in order to show the extraordinary difference, as he called it, in the way in which the law began to develop in England. He submitted that equity in the courts of chancery had nothing to do with an adoucissement of the rigour of the law but was in effect setting out a complete system dealing with interests in land and any other property. He also referred us to 48 Halsbury s Laws of England, 4th ed., para. 501, at 272 for the meaning of trust and, in particular, that a trust is a purely equitable obligation and is enforceable only in a court in which equity is administered. He went on to Underhill s Law of Trusts & Trustees, 13th ed., at (1979), Summary Analysis of a Trust. The object of these authorities was to show that when one looks at the English system one enters a different world. It is a regular system where equitable interests are recognized and enforced by the courts and a whole system of law and authority has been built up over centuries very early in which development trusts or uses were revocable. The intention on Mr. Le Cras part was to show the comparison, or rather contrast, between the system as it was in Normandy, the conditions in Jersey in the 17th century and the unitary title which held sway in France (Amos & Walton s Introduction to French Law, 3rd ed., at (1967)) and still does, on the one hand, and the confusion and complexity of interests which were creatable in English law. He submitted that the two systems were so distinct as to have virtually no reference one to the other. His whole purpose, of course, was to persuade the court that the maxim donner et retenir ne vaut cannot apply to settlements and trusts. Mr. Le Cras next invited the court to consider the position as it was in Jersey in 1860, to see where Jersey stood in relation to these two as he put it conflicting, competing and separate systems. He referred us to the Report of the Commissioners (1861). As to its effect and its weight he referred us to Cooper v Public Health Cttee, where Bois, Deputy Bailiff, said (1966 J.J. at 688): The findings of the Commissioners were based on the best evidence available and, whilst it would be wise to treat with caution any expression of opinion given by an individual witness, the conclusions of the Commissioners on points of law, drawn as they were from the evidence as a whole, must be treated with the utmost respect and accepted as correct unless cogent evidence to the contrary is produced. Mr. Le Cras cited the whole of the passage entitled The Sources of the Law of Jersey at ii to iv, which it is not necessary for us to set out here. He stressed that we had a body of law which was our own and was not based on English law. He also stressed that what are not parts of the law of the Island are the Royal French Ordonnances of 1731 and 1747 and that, as one knows from Poingdestre s commentaries, one has to look very closely at the Coûtume Réformée because it, too, does not form part of the law of this Island. Mr. Le Cras went on to deal with tenures of land, the rights of feudal lords and the different interests in land. The Commissioners also dealt with the law of succession (op. cit., Report, Pt. II, at xiii). After having described the tendency to subdivision of property and the privileges of the eldest son in which respect the Jersey system differs from and is preferable to that of France and the right of the younger children to a partage, the Commissioners said this: That the eldest son should have some advantages over the other members of the family is both reasonable and socially beneficial, and the privilege to hold the property for his own benefit, until the demand for a partition is made, may still, we think, continue to be one of such advantages. No complaints of this privilege were addressed to us and it is further to be remarked, that an alteration to this effect would necessarily involve the introduction of a system of trusts, unknown