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The Jersey Law Review - October 2003
CASE SUMMARIES
The Editorial Board has decided to include in this section of the Review selected cases from Guernsey which might be of interest to subscribers. The following key indicates the court to which the case reference refers.
JRC - Royal Court of Jersey.
GRC - Royal Court of Guernsey.
JCA - Jersey Court of Appeal.
GCA - Guernsey Court of Appeal.
JPC - Privy Council, on appeal from Jersey.
GPC - Privy Council, on appeal from Guernsey.
ADMINISTRATIVE LAW
JUDICIAL REVIEW
Kirk & Kirk v Law Officers of the Crown Royal Ct: (Carey, Bailiff) [2002] GRC November 15th.
N. J. Barnes for the plaintiffs; N. Van Leuven Q.C., HM Procureur, for the defendants.
The plaintiffs were the parents of a young man found dead at home. At the inquest a verdict of suicide was entered by the Magistrate based partly upon evidence which was recognised subsequently as unsupported by the facts. There was no issue but that the finding and verdict of the Magistrate was flawed and both parties urged the Court to take jurisdiction to set aside the verdict and order a new inquest.
The coroner’s jurisdiction was vested in the Royal Courtsitting as an Ordinary Courtuntil 1925 when the office of Magistrate was created and jurisdiction in respect of inquests, petty crime and petty debts given to the Magistrate’s Court. Section 9 of the Magistrate’s Court (Guernsey) Law 1954 provided only that the Court had jurisdiction to inquire into deaths. There was no statutory provision for the review (or appeal) of decisions relating to inquests.
Held, quashing the verdict and ordering a new inquest, that
(1) the Court would (in this case) assume a general jurisdiction akin to the jurisdiction claimed by courts in England to review the decisions of inferior bodies; Bassington v HM Procureur followed;
(2) the Court would adopt English authority to the effect, inter alia, that coroners’ verdicts were open to review on the basis that there was evidence that might have led the coroner to reach another conclusion.
Per curiam: The Court reserved the definition of the precise extent of its powers to review decisions of inferior bodies generally to another occasion given the early stage of development of Guernsey jurisprudence in this area.
ADVOCATES
DISCIPLINARY PROCEEDINGS
Representation of the Bâtonnier re Advocates X and Y (Disciplinary Hearing) Royal Ct: (Birt, Deputy Bailiff and Jurats Le Ruez, Rumfitt, Potter, Querée, Le Brocq, Tibbo, Le Breton and Georglin) [2003] JRC 077
J.A. Clyde-Smith, Bâtonnier in person; M. St. J. O'Connell for the advocates; S. C. Nicolle, Q.C., Solicitor General, for the Attorney General.
The judgment followed the private hearing of a disciplinary complaint brought by the Bâtonnier against two advocates. The allegation was that the advocates had improperly rendered accounts against monies held on their firm's client account for untraced employees of a union for whom their firm had acted in proceedings some years before. It was alleged that the bills were rendered, and the monies taken from the client account of the firm, without the knowledge of the untraced employees (the bills were never sent to them or to the Union) and in circumstances where no work had been carried out to justify the rendering of those bills. The Court was satisfied, in fact, that there was no dishonesty, that work had been carried out which might have justified the rendering of the bills, but that X, a partner in the firm at the material time, had failed to appreciate that the monies in the client account could not be used to pay the bills, since they belonged to the untraced employees and not the Union, to which the bills had in any event been addressed and which was the firm's client. This amounted to a breach of the Code of Conduct as a misapplication of client monies. It was accepted that Y, an employee at the material time, had acted at the direction of X and was not guilty of any misconduct; proceedings against her were discontinued.
Held, fining X £10,000 for professional misconduct -
(a) public confidence in the legal profession demanded that clients could rely on advocates to deal properly with their money. Monies should be dealt with in strict accordance with the Code of Conduct and advocates should ensure that adequate systems and accounting personnel are in place to achieve that. Where there was a serious failure by an advocate in respect of the misapplication of monies the Court would consider suspension as a starting point; where there was dishonesty, the advocate might be struck off; where it was an isolated administrative error by a member of a firm's account's department, no penalty might be required;
(b) given the significant mitigation, which included the fact that X had foregone a possible jurisdictional challenge, a fine at the level imposed was appropriate.
DUTIES TO CLIENT
Perrot & Ors practising together as Ozannes v Beetle Holdings Ltd & Ors CA: (Southwell, Nutting, Vaughan JJA) [2003] GCA April 10th.
G.S.K. Dawes for the appellants; A.J. Ayres for the first and third to seventh respondents; J.A.S. White for the eighth and ninth respondents.
Advocate J.M. Wessels joined the appellant firm in October 2002. Former litigation clients of JMW together with co-defendants of a former litigation client sought and obtained an injunction at first instance forbidding Ozannes to continue acting for the opposing parties in various sets of proceedings, notwithstanding undertakings offered by JMW not to disclose confidential information together with various reciprocal undertakings offered by the other partners of Ozannes. It was accepted by all parties that JMW possessed in his mind knowledge of confidential matters relating to each of the applicants; that he would not deliberately act in breach of his duty of confidence or deliberately breach any undertaking given.
Held, allowing the appeal upon undertakings being given by JMW and Ozannes,
(1) that the principles to be applied were derived from English law and the case of Prince Jefri Bolkiah v KPMG (a firm);
(2) that the issue was not, in truth, a matter of the Royal Court’s exercise of discretion. Given the acceptance that JMW was possessed of confidential information, the fundamental question was whether Ozannes had discharged the evidential burden of demonstrating that, in the light of the undertakings to be given to the Court by JMW and Ozannes, there was no real risk of inadvertent disclosure or misuse of confidential information;
(3) that in a small community such as Guernsey, and in a small close-knit legal community such as the Guernsey Bar, there was no real risk that an advocate of JMW’s age, experience and standing in the profession, would jeopardise his reputation and his future as an advocate by disclosing or misusing the sort of confidential information under consideration, whether inadvertently or otherwise. Reputations at the Guernsey Bar took time to establish but could be lost irretrievably by one act of folly. JMW and his colleagues at Ozannes were entitled to come to the Court and to say that, unless they could be trusted completely to comply with their undertakings to preserve the confidentiality of the information known to JMW in the present circumstances then no Guernsey advocate and no Guernsey firm to which a Guernsey advocate had moved could ever be trusted in this way;
Per curiam: It was important in a small community such as Guernsey that the realities of working as an advocate in that community should be considered in cases such as the present. Tests which might be appropriate in London should not be applied without changes appropriate to the different circumstances.
CIVIL PROCEDURE
CASE MANAGEMENT
Sinel v Goldstein and others Royal Ct: (Bailhache, Bailiff and Jurats Le Brocq and Georgelin) [2003] JRC 090.
A.Clarke for the plaintiff; the defendant appeared on his own behalf.
The plaintiff claimed £4,792 for professional fees. The action was placed on the pending list, particulars of claim lodged and an answer filed. Further and better particulars of the answer were requested and supplied. The plaintiff then applied to strike out parts of the answer and to obtain summary judgment. The application was heard before the Master who adjourned the request for summary judgment but struck out parts of the answer; the defendants were ordered to pay the plaintiff’s costs, amounting before taxation to £4,683. The defendants appealed on a number of grounds.
Held, allowing the appeal and remitting the action to the Master, that the application to strike out was in context an interlocutory game and wholly disproportionate to the nature and value of the claim; the application to strike out should not have been heard and much stricter case management should have been applied.
JUDGMENTS AND ORDERS
Roger v Roger CA: (Southwell, Clarke, Rokison JJA) [2003] GCA 313, January 10th.
M.G. Ferbrache for the appellant; N J Barnes for the respondent.
The parties were mother and daughter-in-law. They shared a home which had been owned jointly by the mother and the daughter-in-law’s late husband. On his death the mother became sole owner of the property. The daughter-in-law alleged an estoppel, notwithstanding other provision which had been made for her. At first instance the Jurats found that the daughter-in-law had a right to live in the property for her lifetime.
Held, allowing the appeal,
(1) that Guernsey law had generally followed and applied English equitable principles in appropriate cases. The Court saw no reason to exclude the possibility of proprietary estoppel being invoked in an appropriate case. The Bailiff had been right not to direct the Jurats that proprietary estoppel was unknown to Guernsey law;
(2) that on the facts of the case there was no estoppel. There was no evidence of any representation to the effect that the daughter-in-law could live in the property for the duration of her lifetime or for any other period; there were no words or conduct from which such a promise could be inferred;
(3) that it was not possible for the Court to “divine” how it was that the Jurats came to their conclusion. The Court concluded that their decision was founded upon an error of law or fact.
Obiter: The Court cited with approval the English Court of Appeal case of Sledmore v Dalby to the effect that, notwithstanding the existence of the conditions necessary to establish the equity claimed, a balancing of the competing needs and the overall justice of the circumstances had also to be considered in order to produce a just result.
Per curiam: Procedural difficulties were caused to the Royal Court in cases concerning mixed questions of law and fact because of the difficulty, if not impossibility, of separating the issues satisfactorily when posing questions requiring “yes” and “no” answers. If nothing else, difficulty arose because this resulted in crucial questions being determined without any reasons being given, the need for which was a fundamental requirement of justice in a common law jurisdiction, citing the English case of English v Reimbold & Strick Ltd. It was a necessary requirement of a satisfactory appellate process for the appellate court to be able to understand from the judgment why the court below reached its decision.
The Court thought it would have been preferable, had Guernseyprocedural law permitted, for the Bailiff to have retired with the Jurats and for a comprehensive judgment on the law and facts to have been delivered following their deliberations.
PRE-ACTION DISCLOSURE
Deeney v States of Jersey Health & Social Services Committee Royal Ct: (Birt, Deputy Bailiff and Jurats Georgelin and Allo) [2003] JRC 065.
P.M. Livingstone for the representor; D.J. Benest for the respondent.
D, the representor, a prospective plaintiff in a personal injuries claim, sought pre-action disclosure from the respondent Committee, the prospective defendant, under article 2 of the Law Reform (Disclosure and Conduct Before Action) (Jersey) Law 1999. D, a residential care officer at a children’s home, was injured when assaulted by a child resident at the home. She alleged that the Committee was in breach of its duty of care towards her as an employee, by permitting a child with violent tendencies to stay at the home and sought disclosure of the child’s medical records and other documents relating to the recorded history of his residence whilst in the care of the Committee. The Committee, whilst not opposing the application, was concerned as to the confidential nature of the disclosure sought.
Held, granting the application and ordering certain disclosure, that having reviewed the documents, the Court was satisfied as to their relevance to the matters in issue in the prospective proceedings; it was therefore required to balance that against the public interest in maintaining the confidentiality of the material. On balance, disclosure was to be made but subject to certain limitations required to protect any unnecessary or unreasonable invasion of the child’s privacy (Campbell v Tameside M.B.C., CA applied).
CRIMINAL LAW
FRAUD
Holland v HM Procureur Royal Ct: (Carey, Bailiff) [2002] GRC October 21st.
P.T.R. Ferbrache for the applicant; P.J. Robey for the respondent.
Section 1(1) of the Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law 1991 permits HM Procureur (and HM Comptroller) to issue notices in writing requiring information to be furnished and/or documents to be produced with regard to any matter relevant to criminal investigations where he is satisfied, on reasonable grounds, that there is a suspected offence involving serious or complex fraud, wherever committed, and that there is good reason to exercise the powers for the purpose of investigating the affairs of any person. Such a notice was sent to the applicant reciting the 1991 Law powers and the fact that HM Comptroller was satisfied that the statutory criteria existed, without giving any particulars as to why. The applicant applied to the Court for an order restraining the Law Officers from taking any further steps in respect of the notice. The applicant also sought disclosure of a Letter of Request sent by the United States government to HM Procureur.
Held,
(1) that the decision of the Court of Appeal in Bassington v HM Procureur showed that the actions of the Law Officers in issuing 1991 Law notices were subject to review by the Royal Court;
(2) that the circumstances of each case would differ but this applicant was entitled to a succinct summary of what the elements of the offences being investigated were and the link between the alleged offenders and the entities which he represented;
(3) that the Court hoped that two lessons would be learned from the case: first, that 1991 Law notices must be served in good time to enable persons who receive them to obtain advice and raise proper queries concerning them; and secondly, that the notices should be accompanied by a side letter from the Law Officer giving as much detail with regard to the background of the investigation as is deemed appropriate. The detail of what was appropriate in any particular case might have to be reviewed further in the future.
Per curiam: The fraud being investigated was clearly not just a fiscal fraud vis-à-vis the United States Internal Revenue Service; but even if it was the Court saw nothing in the legislation that precluded the investigation of serious and complex fraud upon governments, whether in their capacity as tax collector or otherwise.
CRIMINAL PROCEDURE
APPEALS
Mendes v Att.Gen. Royal Ct: (Birt, Deputy Bailiff and Jurats de Veulle, Rumfitt, Tibbo, Georgelin, Allo and Clapham) [2003] JCA 106.
P. C. Harris for the appellant; A. D. Robinson, Crown Advocate, for the Crown.
In January 2002 the appellant was sentenced to four years’ imprisonment for robbery and other offences and was recommended for deportation. He filed a notice of appeal against the recommendation but withdrew it in April 2002. In August 2002 the Lieutenant Governor informed the appellant that he was going to make a deportation order. In October 2002 the appellant filed an application for leave to appeal out of time and an appeal against the recommendation for deportation on the ground that it infringed his human rights. He acknowledged, following decisions of the Court of Appeal in Cuthbertson and Cairney and Doyle, that the withdrawal of the notice of abandonment could not be permitted unless something amounting to mistake or fraud had occurred. The appellant swore on affidavit that he had been advised by his former lawyer that there was no right of appeal against a recommendation for deportation. The former lawyer denied giving that advice and stated that she had however advised that the grounds for appeal were weak. The question arose as to the procedure to be followed.
Held, applying the principles laid down by the English Court of Appeal in R v Doherty, that the appellant’s new advocate should procure the swearing of an affidavit, the waiver of privilege and the obtention of a response from the former advocate.
Editorial note: on the facts the Court accepted the evidence of the former advocate but allowed the appellant to withdraw his abandonment on the ground of a possible linguistic misunderstanding. The appeal was subsequently dismissed.
COSTS
Att.Gen. v Troy Royal Court: (Bailhache, Bailiff) [2003] JRC 099.
J. C. Gollop, Crown Advocate, for the Crown; D. E. Le Cornu for the accused.
T was tried on counts of indecent assault and assault. He was convicted of the latter but acquitted of the former, and applied for his costs pursuant to art. 2 of the Costs in Criminal Cases (Jersey) Law 1961. The Crown opposed the application arguing inter alia that the Court’s discretion should not be exercised in favour of T.
Held, applying Att. Gen. v Gouveia, and refusing the application, that an award of costs where an accused had been convicted of one count but acquitted of another was unlikely to be appropriate.
FITNESS TO PLEAD
O’Driscoll v Att. Gen. Royal Ct: (Bailhache, Bailiff and Jurats Le Brocq and Georgelin) [2003] JRC 089.
C. M. Fogarty for the Crown; P. D. James for the accused.
The Attorney General appealed by case stated in the context of a prosecution for grave and criminal assault from a decision of the Magistrate. The Magistrate had indicated that he would determine whether or not the accused was unfit to plead and the legal test to be applied in assessing that unfitness.
Held, that the Magistrate’s Court did not have jurisdiction to determine this issue and that the accused should be committed to the Royal Court.
SENTENCING
Att. Gen. v Antunes & Saraiva Royal Ct: (Birt, Deputy Bailiff, sitting alone) [2003] JRC 072.
M.St.J. O’Connell, Crown Advocate, for the Crown; J.Bell for Antunes; D.Cadin for Saraiva.
The case concerned the sentencing of two accused, each charged with “being concerned in the supplying of a controlled drug” contrary to article 5(c) of the Misuse of Drugs (Jersey) Law 1978. In the case of Antunes (“A”) his only offending involved driving a third accused (“V”) to a carpark so that V might bag up some heroin for sale, on the promise of receiving a small amount for his personal use. There was no suggestion that A knew how much heroin was involved. As for S, her participation involved only the gathering of the equipment for bagging up and accompanying A and V to the car park with the equipment. Although knowing of the intention to carry out some bagging up, there was no suggestion she knew the amount of heroin involved.
The Crown moved for sentences applying the principles laid down in Rimmer and ors v Att.Gen., which gives guidelines for the appropriate sentencing bands in cases of “trafficking”. This resulted, given the amount of heroin involved, in a starting point of 11 years for each accused.
A separate issue raised by S’s counsel was that the Court was obliged to sentence S on the basis only that she was concerned in the supply of a small amount of heroin to A, as this was the only actual “supply” envisaged at the material time.
Held,
(1) On the first issue, applying the principles laid down by the Court of Appeal in McDonough v Att. Gen., which remained good law and had not impliedly been overruled by Campbell v Att. Gen. or by Rimmer and ors v Att. Gen., the Rimmer guidelines were not applicable to charges of “being concerned”;
(2) for an accused to be concerned in the supplying of controlled drugs, there does not have to be a specific identified sale in mind; it is sufficient if, with the requisite knowledge and by means of sufficiently proximate acts, the accused is concerned in the general supplying of the dealer. (Kerr v HM Advocate, decision of the Scottish Courts, applied).
TRIAL BY JURY
Baglin v Att. Gen. CA: (Southwell, Nutting and Smith JJA) [2003] JCA 082.
G. S. Robinson for the appellant; J. Martin for the Crown.
The appellant appealed against his convictions for grave and criminal assault and assault on grounds (inter alia) that (1) the judge had wrongly referred in his summing up to the appellant’s failure to call a particular witness and (2) questions put by the jury after they had retired were considered initially by the judge and counsel privately in the absence of the appellant.
Held, allowing the appeals and ordering a re-trial, that both grounds were made out and must lead to the convictions being quashed.
INJUNCTIONS
ANTI-SUIT INJUNCTIONS
Ashton v Ansol Ltd. CA: (Southwell, Clarke, Rokison JJA) [2003] GCA 322 January 10th.
J.P. Greenfield for the appellant; P.T.R. Ferbrache for the respondent
The appellant sought, and had ultimately been refused at first instance, an anti-suit injunction to prevent the respondent continuing proceedings against him in the High Court, London. The London proceedings related to certain confidential documents which had been produced to the appellant and had been used in very substantial proceedings then carrying on in the Royal Court of Guernsey. The appellant was not himself a party to the Guernseyproceedings but was a legal adviser of the Guernsey plaintiff. The respondent was one of the Guernsey defendants.
Held, allowing the appeal, that
(1) (following English principles governing the grant or refusal of anti-suit injunctions) it was for the appellant (i.e. the party seeking the injunction) to show that it would (a) be vexatious and oppressive for the respondent to pursue the foreign proceedings (b) that Guernsey was clearly the natural forum for the determination of the dispute and (c) that the injustice to the appellant, if the respondent were to be allowed to pursue the foreign proceedings, would outweigh the injustice to the respondent if not allowed to proceed abroad;
(2) on the facts of the case and given that the dispute was ancillary to the main action in Guernsey, the appellant satisfied each test.
LAND LAW
OWNERSHIP EN INDIVIS
Pirito v Curth CA: (Carey Bailiff, and Southwell, Nutting JJA) [2003] GCA 321 April 10th.
F.J. Haskins for the appellant; P J G Atkinson for the respondent.
The appellant and respondent purchased a property in Alderney in 1981. The property was registered in their names jointly and for the survivor of them absolutely. Accordingly they were joint owners as opposed to owners in common. They had three daughters but never married. Their relationship broke down. The respondent brought proceedings seeking severance of the joint interests, licitation (i.e. judicial auction) and a declaration that he was entitled (ultimately) to all of the proceeds of sale on the basis that he had made substantially the greater financial contribution to the purchase of the plot and the building of the home. The Court of Alderney found that when buying the land in 1981 both parties had signed the transfer documents placing the land in joint ownership and the respondent had been aware that the property was owned by both the appellant and himself. The Court of Alderney found that the property should be held in equal undivided shares and ordered licitation. The Royal Court dismissed the appeal which was renewed to the Court of Appeal.
Held, dismissing the appeal, that
(1) except for the specifics of land registration in Alderney there was no reason on the facts of the present case to distinguish between Alderney and Guernsey law;
(2) the land laws of Alderney and Guernsey had developed through centuries on the basis of ancient Norman customary law. To seek to engraft on to Alderney or Guernsey customary law relating to immovable property different concepts of English common law or equity was an exercise to be undertaken with the greatest care. English equitable principles could not be imported wholesale into the Guernsey law of real property;
(3) in particular, English law concerning presumptions of advancement was not to be followed. Such presumptions were a bad example of lazy thinking in English law. English law concerning the property rights of men and women who had long lived together, without marrying, and who had later parted, was in a seriously inadequate state. The laws of almost all other civilised countries had developed so as to avoid results still possible under unreformed English law;
(4) nevertheless the Court was required to consider equitable interests in the property as well as legal title;
(5) the Guernsey Court of Appeal case of McCormack v Waterman was cited with approval and the following paragraph set out in full: “In both forms of co-ownership, unless different shares are stated in the conveyance, the parties hold in equal shares, subject, of course, in the case of joint ownership to the right of survivorship. Subject to the proviso below, in the event of a severance of joint ownership, the parties are entitled to the property, or to the proceeds of sale of the property, in equal shares. The proviso is that there seems to us no reason in principle why the parties to a conveyance into joint ownership should not, if they so wish, make different provision for the sharing of the property or the proceeds of sale in the event of severance. Such provision would obviously be included in the habendum. We leave open the question whether a private arrangement outside the conveyance could validly be made to the same effect.”
(6) the Court of Appeal in McCormack had itself been right not to express itself in terms of an irrebuttable presumption;
(7) on the evidence before them the Jurats were fully entitled to decide that the parties knew and intended that the land should be held jointly and for the survivor and that the respondent intended (notwithstanding their unequal contributions) that the interests of himself and the appellant should be equal. For the same reason the beneficial as well as the legal interests in the property were to be treated as equal;
(8) the Court’s conclusions were expressly noted to be consistent with the approach of the Court of Appeal in McCormack.
Obiter: The Court of Appeal considered that McCormack “may not have been right” in expressing the view that one joint owner could alienate or hypothecate his or her interest without the assent of the other joint owner, preferring Jersey authority in the form of Re Dégrèvement of the Real Property of Bonn. The implications of the McCormack Court of Appeal’s conclusions needed fuller consideration.
Per curiam: The Court of Appeal was not bound by its previous decisions on the law of Guernsey; however, it was not appropriate for the Court to depart from previous decisions without good and clear reasons for doing so.
It was a matter of no little regret that a relatively simple case had taken over 4 years to reach the Court of Appeal. The objective of all involved in civil proceedings, viz parties, lawyers, Court staff and Courts, must be to progress to a final determination of the dispute in accordance with agreed or ordered timetables, at a reasonable level of cost, and within a reasonably short time.
The Court gave directions as to the future composition and presentation of papers in appeal cases.
Editorial note: The two judgments in McCormack and Pirito do not sit entirely comfortably together; but the net effect appears to be the same. Unless there is cogent evidence that the parties intended their property rights to be other than equal, severance of jointly owned property will result in equal shares, either of the property itself or the proceeds of sale.
MENTAL HEALTH
INSANITY
Att. Gen. v O’Driscoll (No 2) Royal Ct: (Bailhache, Bailiff) [2003] JRC 117
C. M. Fogarty for the Crown; P. D. James for the accused.
Counsel sought a ruling as to how the Jurats should be directed as to the meaning of insanity in art. 1(1) of the Criminal Justice (Insane Persons) (Jersey) Law 1964, there being a doubt as to whether the accused was fit to plead. The Court considered English and Scottish jurisprudence and the reports of the Law Commissions of both countries.
Held, that the Jurats would be directed that -
“An accused person is so insane as to be unfit to plead to the accusation, or unable to make the nature of the trial if, as a result of unsoundness of mind or inability to communicate, he or she lacks the capacity to participate effectively in the proceedings.
In determining this issue, the Superior Number shall have regard to the ability of the accused –
to make the nature of the proceedings so as to instruct his lawyer and to make a proper defence;
to understand the substance of the evidence;
to give evidence on his own behalf;
to make rational decisions in relation to his participation in the proceedings, (including whether or not to plead guilty), which reflect true and informed choices on his part.”
REINSTATEMENT OF INTERDICT
Representation Att. Gen. in the matter of S.M.F. Royal Ct: (Birt, Deputy Bailiff and Jurats Potter and Allo) [2003] JRC 073.
S.C. Nicolle Q.C., Solicitor General, for the representor.
The Attorney General applied to reinstate S.M.F., who had been made the subject of a curatorship which it was intended should come to an end, but who was to remain under guardianship, under Article 21 of the Mental Health (Jersey) Law 1969 (“the Law”). Although considered in need of guardianship, the medical evidence was that he was capable of managing his own property and affairs and not in need of a curator.
The question was raised as to whether the Court had jurisdiction to reinstate the interdict and discharge the executor in circumstances where the guardianship was not to come to an end.
Held, discharging the curatorship order and reinstating the interdict, that although there was no provision in the Law dealing with this particular situation, the Court had inherent jurisdiction to reinstate an interdict where satisfied that he was no longer incapable of managing and administering his property and affairs.
SUCCESSION
ADMINISTRATION OF ASSETS
Re estate Wood Royal Ct: (Birt, Deputy Bailiff and Jurats Le Ruez and Georgelin) [2003] JRC 138.
P. D. James for the executor; A. Clarke for the first defendant.
The executor brought a representation in relation to the administration of the estate of the deceased who died domiciled in Zimbabwe. The sole asset in Jersey was the balance on a bank account held jointly by the deceased and his nephew, the first defendant. The deceased’s will purported to make various dispositions in favour of, inter alia, the first defendant. The mandate for the bank account however contained a survivorship provision in unequivocal terms providing that on the death of either account holder the balance would be held by the bank for the survivor.
Held, applying Channing v Harrison, that the balance on the account accrued to the nephew by right of survivorship and did not fall to be administered by the executor.
TRUSTS
SHAM - DONNER ET RETENIR – PIERCING THE VEIL – PUBLIC POLICY – REMEDIAL CONSTRUCTIVE TRUSTS
Grupo Torros S.A. v Sheikh Fahad Mohammed Al Sabah & ors Royal Ct: (Birt, Deputy Bailiff and Jurats de Veulle and Bullen) June 13th 2002 unreported.
J.A. Clyde Smith for the trustee; N.F. Journeaux for the plaintiffs; N.M. Santos-Costa for the second and third defendants; the first, fourth and fifth defendants did not appear and were unrepresented.
Sheikh Fahad (the “first defendant”) was the chairman of Grupo Torros S.A. (“GT”) a company owned by the Kuwait Investment Office. Between May 1988 and October 1990, he conspired with others to defraud GT of the sum US$430 million of which his share was $120 million.
GT subsequently obtained judgment against the first defendant in the UK in the sum of $800 million, which was registered in Jersey under the Judgments (Reciprocal Enforcement) (Jersey) Law 1960. The first defendant had since been declared bankrupt in the Bahamas, where he now resided, and his trustee in bankruptcy was the second plaintiff.
The first defendant established the Esteem settlement in 1981. Prior to the commencement of the fraud he contributed assets (“clean assets”) to the settlement for bona fide tax and inheritance planning reasons. From 1990 onwards he contributed assets to the settlement with an intention of defeating GT as his creditor and in 1992 he contributed a further £4.4 million of funds stolen from GT.
In proceedings commenced in 1999 GT laid claim to the assets held in the settlement in order to satisfy its judgment debt. Judgment on certain preliminary issues was given in March 2002. Essentially the court gave judgment in favour of GT holding that GT was entitled to trace the balance of the stolen £4.4 million and setting aside the various gifts made after March 1990 to the extent of any continuing enrichment therefrom of the settlement. Accordingly, following the March judgment, the only assets left in the settlement were the clean assets settled for legitimate purposes by the first defendant out of his own funds before he commenced his fraud and before GT became his creditor.
GT and the trustee in bankruptcy now sought to recover those assets from the settlement. Their claim was brought on five different grounds -
(1) the settlement was a sham and the assets had at all times therefore been held on bare trust for the first defendant;
(2) the first defendant had in practice retained substantial or effective control over the trust assets at all times and the settlement was therefore invalid as being in breach of the maxim donner et retenir ne vaut;
(3) by reason of the first defendant’s substantial or effective control of the settlement and his misuse of the settlement (e.g. by contributing the stolen funds, contributing assets with an intention of defrauding his creditor, and causing the clean assets to be left in the settlement with the intention of preventing GT from becoming entitled to those assets) the court should pierce the veil of the settlement so that the clean assets should be treated as the first defendant’s for the purposes of GT’s enforcement of its judgment;
(4) by reason of the second defendant’s substantial or effective control of the settlement and his misuse thereof, it should be declared invalid as being contrary to public policy;
(5) by reason of the second defendant’s substantial or effective control of the settlement and his misuse thereof, the assets of the settlement should be made the subject of a remedial constructive trust in favour of GT, alternatively the trustee in bankruptcy.
The first two causes of action were conventional causes of action to the effect that the Esteem settlement had never been validly constituted as a discretionary settlement and the assets were therefore held on bare trust for the first defendant as settlor. The remaining three causes of action contended that, even if the settlement was initially valid, it should now be declared invalid and/or not be enforced because of the second defendant’s substantial or effective control coupled with his misuse of the settlement.
Held, dismissing all five causes of action.
Sham
(1) applying Snook v London and West Riding Investments Limited, in order for a trust deed to be a sham, both the settlor and the trustee must have a common intention that the trust deed is not to create the legal rights and obligations which it gives the appearance of creating; it is not sufficient that the settlor alone has such an intention;
(2) on the facts, neither the first defendant nor the trustee had any such intention; both intended that the trustee should act as a genuine trustee of a discretionary trust in accordance with the trust deed.
Donner et retenir ne vaut
(1) the maxim required there to be a retention of power on the part of the donor freely to dispose of the thing given. That power must exist at the time of the gift; otherwise the gift was irrevocable and the maxim was not infringed. A later assumption by the donor of such a power did not infringe the maxim;
(2) as the trust deed did not contain any such power on the part of the settlor, the first defendant could only have retained a power freely to dispose of the trust assets if there was an understanding between him and the trustee at the time of contribution that the trustee would act as a mere nominee or agent rather than as a genuinely independent trustee in accordance with the provisions of the trust deed. These requirements were the same as those necessary for a sham and accordingly the case in donner et retenir added nothing to the case in sham;
(3) in the case of a trust, in order for a settlor to retain a power freely to dispose of the trust assets, the trustee must have abdicated its fiduciary responsibilities; a trustee who genuinely and in good faith considered whether or not to exercise a particular discretion was not under the control of the settlor and accordingly a settlor in such circumstances did not have power freely to dispose of the trust assets (Johnson Mathey Bankers Limited v Shamji (Jersey Unreported May 2nd 1996) approved).
(4) On the facts the trustee had acted in good faith as an independent trustee and accordingly the first defendant had not retained a power freely to dispose of the trust assets. The maxim was therefore not infringed.
Piercing the veil
(1) in the case of a company the court could pierce the corporate veil where the shareholder had control and where he used that control to cause the company to become involved in some impropriety, the combined result being that the company acted as a façade to conceal the true facts;
(2) however, the principle could not be applied to trusts. In the case of a trust the requisite degree of control could only arise because the trustee, in breach of its fiduciary duties, had allowed itself to come under the domination of a settlor. Such failure by a trustee did not operate to deprive the beneficiaries of their beneficial interest in the trust fund even if the settlor used such control to misuse the trust by, for example, fraudulently transferring assets to the trust. The court would no doubt be vigilant to confer upon a creditor all the remedies which the law allowed (such as proprietary claims, setting aside fraudulent dispositions, restitutionary actions etc) so as to remove any benefit which the trust had derived from such misuse; but once these remedies were exhausted and the benefit had been removed from the trust, there was not some further cause of action called `piercing the veil’ which allowed the court to ignore the terms of the trust and transfer the beneficial interest in the remaining trust fund from the beneficiaries to the settlor (for the benefit of his creditors);
(3) furthermore, in Jersey there was statutory recognition for this principle. Under Article 10(1) of the Trusts (Jersey) Law 1984 the court had to recognise and enforce a trust unless it fell within any of the provisions of paragraph (2) of Article 10. The only provision in paragraph (2) which could be relevant was para (2)(a)(i) which provided that a trust would be invalid to the extent that “it purports to do anything the doing of which is contrary to the law of Jersey”. Following the March judgment (which had deprived the settlement of any benefit resulting from the first defendant’s misuse) there was nothing about the settlement which fell within this provision;
(4) even if, contrary to the above, the doctrine of piercing the veil was applicable to trusts, the claim failed on the facts because the first defendant did not have substantial or effective control of the settlement. In order for there to be the requisite degree of control the trustee must have abdicated its fiduciary responsibilities. If a trustee genuinely and in good faith considered the exercise of the discretionary powers conferred upon it, it could not be said to be under the control of another person. On the facts the trustees had not abdicated its fiduciary responsibilities.
Public policy
(1) the settlement was not invalid on the ground that it was contrary to public policy. Following the March judgment the settlement was a conventional discretionary trust consisting of clean assets which were contributed lawfully well before GT became the first defendant’s creditor. The fact that a controlling settlor subsequently formed a dishonest intention that such clean assets should remain in a trust rather than be paid out to him for the benefit of his creditors could not render a trust invalid as being contrary to public policy;
(2) in any event the claim failed on the facts because the first defendant had not been in control of the settlement.
Remedial constructive trust
(1) the court inclined to the view that the remedial constructive trust was not a remedy available to the courts of Jersey. However it was not necessary to decide that issue because, even assuming that such a remedy was available, there were no grounds for imposing such a trust in this case;
(2) although the remedial constructive trust had not yet been applied in England, it was clear that the juridical basis for imposing such a trust lay in unjust enrichment (Canada) or unconscionability (Australia);
(3) following the March judgment the settlement comprised only of clean assets which had belonged to the settlement well before any fraud by the first defendant or any misuse by him of the settlement. There had therefore been no enrichment of the beneficiaries at the expense of the plaintiffs, let alone any unjust enrichment. It was therefore not unconscionable for the settlement to retain the clean assets;
(4) in any event, as already described, the first defendant had not been in substantial or effective control of the settlement.
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