Steenson Nicholls acts in landmark Jersey case approving the largest ever settlement under the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018 (AG v Allied Trust Company Limited [2020] JRC 020).
The Royal Court of Jersey has approved the largest ever settlement under new Civil Forfeiture Law in relation to trust assets alleged to be connected to the Teamsters Union (AG v Allied Trust Company Limited [2020] JRC 020).
Mini-summary:
In a landmark judgment the Royal Court of Jersey has approved the largest ever settlement under the recently enacted Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018 whereby the entirety of a Jersey trust fund (with a value of just under US$17 million) was divided as between the Jersey Criminal Offences Confiscation Fund and three named Charities.
This article considers the principles upon which the Court’s discretion was exercised.
Written by Paul Nicholls, Advocate and Partner at Steenson Nicholls LLP
AG v Allied Trust Company Limited and B [2020] JRC 020
What was the background?
Jersey plays an active role in the fight against financial crime through MONEYVAL, a Financial Action Task Force regional body. In 2016 MONEYVAL recommended that it should consider the introduction of a non-conviction based confiscation regime to run in parallel with its conviction based system and in 2018 the States of Jersey implemented the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018 (the Law).
The Law established a procedure for the summary forfeiture of cash and property in Jersey bank accounts which had been subject to a “No Consent” regime for 12 months or more. The Law is radical and draconian in nature enabling the Attorney General to commence proceedings to forfeit property where it has “reasonable grounds” to believe cash or property held at a bank in Jersey to be “tainted property” (being property “used in, or intended to be used in, unlawful conduct or obtained in the course of, from the proceeds of, or in connection with unlawful conduct”). The Law then reverses the normal civil burden of proof requiring the account holder to satisfy the Court that the property is not tainted. Significantly, the Law also fetters the ability of the account holder to recover any legal costs from the Attorney General in the event that it is ultimately successful in defending the proceedings.
Here the account was held by the trustee of a Jersey discretionary trust which had been established to benefit various named charities, initially including UNICEF and the Red Cross (a Jersey Charity, the Durrell Wildlife Conservation Trust was subsequently added as a beneficiary).
The provenance of the funds was difficult to establish (the initial settled funds having been settled on a Liechtenstein foundation over 40 years beforehand by individuals who were long deceased). The trustee had commissioned a report and then filed a suspicious activity report which sought to link the trust assets to a deceased US lawyer whose client list was alleged to have included high profile individuals connected to organized crime, including a high ranking member of the Teamsters Union who had been convicted of conspiracy to bribe in the US in the 1980s. The Attorney General then brought proceedings seeking the summary forfeiture of the account.
The settlor of the trust successfully applied to intervene in the proceedings denying that the accounts contained tainted property and contending that the property should be distributed to the trust’s charities.
The parties ultimately agreed terms of settlement on the basis that 65% of the trust fund would be paid into Jersey’s Criminal Offences Confiscation Fund with the remaining 35% being distributed to the three named charities. The parties then applied to the Court for an order approving settlement on those terms.
What did the court decide?
Art 34 of the Law provides that “On an application made by the Attorney General…..the Court may make an order….in terms agreed between the Attorney General and other parties to the proceedings, for the disposal of the proceedings”.
The Court held that the clear purpose of the Law was to provide a mechanism by which assets can be forfeited where those who claim to be the owner of them are unable to demonstrate that they are not the proceeds or instrumentalities of crime.
It was common ground that Art 34 was permissive in nature, giving the Court a discretion to approve a settlement, but did not oblige it to do so. Furthermore, and although not required to determine the same, the Court was inclined to the view that Art 34 carried the necessary implication that the extent of the Court’s discretion was limited to an order which approved the terms agreed between the parties and that it ought not to prevent a settlement having effect unless it was either unlawful or contrary to public policy.
The Court also accepted that counsel would be better informed by the Court as to the different factors which might need to be taken into account in considering a settlement, and would be better placed to make an assessment of litigation risk which was clearly a material part of any negotiations which lead to a compromise. The Court agreed that as far as the Settlor was concerned, the assessment of litigation risk was that the charities would not benefit at all if the proceedings were lost.
The Court also accepted that the proposed settlement was clearly not contrary to the public interest or to public policy not only because the statute provided for a mechanism (under Art 34) by which such agreements can be put before the Court for approval, but also because the agreement before it was consistent with the stated purpose of the legislation.
In this case the settlement agreement was explicitly subject to a condition precedent which required the Court to approve the compromise. The Court noted that this would give the charities in question comfort that they could properly receive their share of the monies in question.
Significantly the Court made clear that it was not approving the terms of the settlement insofar as the trustee of the trust was concerned in the capacity of a Beddoe Court but as what it described as a “Forfeiture Court”. It also made clear that it was not giving the trustee any confirmation (blessing) that in the exercise of its powers as trustee to make the compromise, it had acted appropriately.
What are the practical implications of this case?
Art 34 confers power on the court to consent to settlement of forfeiture proceedings under the Law. In most instances it is likely to be unnecessary to seek the court’s approval before entering into compromises in relation to proceedings under the Law, however, where the proceedings concern assets held in a fiduciary capacity or where the settlement involves appropriations to the third parties, this procedure affords a framework for relatively cost effective and speedy resolution. Any approval given in the context of Art 34 should not be construed by trustees as analogous with approval given by a Beddoe Court to a trustee and naturally, in appropriate circumstances, a trustee may well still need to separately invoke the jurisdiction of that Court.
Case details
Court: Royal Court
Judge: Sir William Bailhache
Date of judgment: 30 January 2020
Steenson Nicholls LLP acted for the Intervener in this case