Trusts - The First and Second Representors seek declarations and
directions to the trustee of the Brazilian Trusts.
[2018]JRC081A
Royal Court
(Samedi)
2 May 2018
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Before :
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J. A. Clyde-Smith, Esq., Commissioner, and
Jurats Grime and Pitman
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Between
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Anne Marie Heinrichs
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First Representor
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And
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Werner Cornelius Heinrichs
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Second Representor
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And
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G B Trustees Limited
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Third Representor
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And
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Pantrust International SA
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First Respondent
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And
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Richard George De Winton Wigley
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Second Respondent
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And
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James Richard De Winton Wigley
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Third Respondent
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IN THE MATTER OF THE BRAZILIAN TRUST
AND
IN THE MATTER OF
ARTICLE 51 OF THE TRUSTS (JERSEY) Law 1984
Advocate S. M. Baker for the First and Second
Representors.
Advocate M. L. Preston for the Third
Representor.
Advocate H. Sharp for the minor and unborn
beneficiaries.
judgment
the COMMISSIONER:
1.
The first
representor, Ms Anne Marie Heinrichs, and her father, the second representor Mr
Werner Cornelius Heinrichs, seek declarations in relation to, and directions to
the trustee of, the Brazilian Trusts.
2.
Their
application is made under the representation they issued on 5th
November, 2015, now amended, and which has given rise to three judgments of the
Court, namely on 16th June 2016 Heinrichs v Pantrust and Others
[2016] JRC 106A, on 30th September Heinrichs-v-Pantrust and Ors [2016]
JRC 174 and on 12th January 2017 Heinrichs v Pantrust and Ors [2017] JRC
006. It is supported by a detailed
affidavit by Mr Heinrichs setting out his memory of the history of the
Brazilian Trusts and affidavits by Ms Heinrichs. For ease of reading, we summarise the
background again.
Background
3.
Mr
Heinrichs was the economic settlor of a settlement made on 9th December,
1977, between Alan Norman Kimble, the named settlor of $100, and Barclaytrust
International Limited (“Barclaytrust”). The settlement was drafted by Bedell
Cristin and is the standard form of discretionary settlement with which this
Court is familiar. It is governed
by Jersey law and the beneficiaries are named as Mr Heinrichs, his wife and
their issue. Ms Heinrichs is their
only daughter. We will refer to
this as “the 1977 Brazilian Trust”.
4.
Mr
Heinrichs, who is Canadian, was introduced to Mr Howard Scholefield of
Barclaytrust by his brother-in-law, Mr John Dick, of St John’s Manor, who
has himself been involved in proceedings with the first to third respondents
(see, for example, Representation of the Manor House Trust and the Russian
Trust [2015] JRC 208). Over the
years Mr Heinrichs and Mr Dick have been involved in a number of property
development ventures.
5.
At the
time the 1977 Brazilian Trust was created, the second respondent, Mr Richard
George De Winton Wigley, was a junior employee at Barclaytrust under Mr
Scholefield. In 1984, Mr
Scholefield and Mr Richard Wigley left Barclaytrust to run a small trust
company known as La Hougue Boëte Société Fiduciaire avec
Responsabilité Limitée (“La Hougue Boëte”),
which operated from an office attached to St John’s Manor, taking the
trust business associated with Mr Heinrichs and Mr Dick with them. It was Mr Heinrichs’ understanding
that La Hougue Boëte was ultimately beneficially owned by Mr Dick. In due course Mr Scholefield retired and
Mr Richard Wigley took over the conduct of the relationship with Mr Heinrichs.
6.
There is
an unsigned copy of a deed of retirement and appointment of trustees dated 1984
by which Barclaytrust retired as trustee of the 1977 Brazilian Trust in favour
of La Hougue Boëte, which makes no reference to the assets then held in
trust. There is evidence that La
Hougue Boëte was indeed appointed trustee in that:-
(i)
There is a
share transfer agreement between Barclaytrust and La Hougue Boëte dated 1st
June, 1984, in respect of shares in a company known as Galty Investments NV, a
company associated with Mr Heinrichs and which, as we understand it, at one
time owned the house in Toronto in which he and his family lived. There is a copy of a share certificate
dated 31st August, 1984, issued in the name of La Hougue Boëte.
(ii) There is an office copy letter to Barclaytrust
initialled by Mr Richard Wigley dated 28th June, 1984, acknowledging
receipt of trust documentation relating to the Brazilian Trust and in which he
says he is looking forward to receiving the deed of retirement duly completed
by Barclaytrust.
7.
There is
no documentation in relation to the 1977 Brazilian Trust from 1984 onwards,
save for the existence of copy letters of wishes dated 27th June,
1986, 2nd September, 1987, and 28th June, 1988. There is a further lengthy handwritten
letter of wishes dated 9th February,1989, and a short memorandum
from Mr Richard Wigley to Mr Heinrichs about his letter of wishes dated 9th
July, 1990, which do not expressly state the settlement to which they refer.
8.
There is
sparse evidence as to the assets held by Barclaytrust during the period of its
trusteeship of the 1977 Brazilian Trust, save for the following:-
(i)
There is a
copy ledger from Barclaytrust relating to the 1977 Brazilian Trust covering the
period 30th January, 1978 to 1st August, 1981, listing some six
companies and a pearl necklace as assets of the 1977 Brazilian Trust.
(ii) There is a file note from Mr Richard Wigley
dated 14th May, 1981, which lists two of those companies and one
additional company as assets of the 1977 Brazilian Trust.
9.
On the
face of it, the next chronological event is the declaration by La Hougue Boëte
of a second Brazilian Trust in 1984 over $100. It is dated 15th November,
1984, and appears to be an “in-house” document in that its drafting
is not credited to any firm of lawyers.
It is governed by Jersey law and is in broadly the same terms as the
1977 Brazilian Trust save that the beneficiaries are listed as two charities,
namely Cancer Research Campaign and the British Heart Foundation. The registered office of La Hougue
Boëte is crossed out in handwriting, and a residential address inserted in
its place – “La Fallue, Gorey in the Parish of St
Martin”. We will refer to
this as the “1984 Brazilian Trust”. No reference is made in the declaration
to the 1977 Brazilian Trust.
10. There is no documentation showing what assets,
if any, were settled into the 1984 Brazilian Trust, but it was the subject of a
number of further deeds as follows:-
(i)
On 30th
June, 1997, La Hougue Boëte retired as trustee in favour of a Jersey
company, Faldouet Company Limited (“Faldouet”), a private trust
company ultimately owned by Mr Heinrichs and administered by La Hougue
Boëte.
(ii) On 30th November, 2007, Faldouet
retired as trustee in favour of the first respondent, Pantrust International SA
(“Pantrust”), a Panamanian company, and the proper law was changed
to Panama. This arose out of a
decision taken by Mr Richard Wigley that he and his family and the trust
business of La Hougue Boëte should move to Panama, it would seem to avoid
the tightening regulatory regime in Jersey.
(iii) On 15th May, 2015, Pantrust retired
as trustee in favour of Mr Richard Wigley and his son, the third respondent
James Richard De Winton Wigley, and the proper law was changed to that of
England. This followed the
cancellation by the Panamanian regulator of Pantrust’s licence to conduct
trust business in Panama.
11. The report of the superintendent of banking in
the Republic of Panama dated 4th December, 2014, into the business
of Pantrust under the direction of Mr Richard Wigley and Mr James Wigley is
damning. It refers to the refusal
of Pantrust to provide information and to cooperate in the inspection process,
using “all sorts of subterfuges and
excuses” and concludes that Pantrust is exercising the trust business
“in a harmful manner, hazardous to
the public interest, its customers and to the detriment of the good name of the
financial centre … in this jurisdiction”.
12. In its judgment of 16th June, 2016 Heinrichs
v Pantrust and Others, the Court found that the changes of proper law of
the 1984 Brazilian Trust to Panama in 2007 and the subsequent change to English
law in 2015 were invalid (although no formal declaration to this effect was
made by the Court), and indeed that was conceded by Advocate Langlois, for the
first to third respondents (see paragraphs 34-38 of the judgment). The Court appointed the third
representor, GB Trustees Limited (“GB Trustees”), at that stage a
respondent to the representation, as trustee in place of the first to third
respondents. The first to third
respondents, who denied the validity of the 1984 Brazilian Trust, were ordered
to account fully for their trusteeships of the Brazilian Trusts and to transfer
all of the assets of the Brazilian Trusts to GB Trustees.
13. The first to third respondents have not
complied with the orders made against them. They have given notice that they do not
accept the jurisdiction of this Court, and have not appeared in any subsequent
proceedings. Mr Richard Wigley and
Mr James Wigley continue to reside in Panama.
14. Save for the documents to which we have
referred, no accounts of either trust, no trustee resolutions or minutes and no
deeds of addition of assets or appointment out of assets have been found by the
representors. Barclaytrust have
been able to identify that it was trustee of the 1977 Brazilian Settlement, but
has been unable to find any files or documents which it assumes were passed
over to La Hougue Boëte in 1984.
Much of the evidence that has been obtained by the representors has been
taken from the documents found at and removed from St John’s Manor.
15. That documentation casts a serious doubt as to
the date when the 1984 Brazilian Trust was actually executed. It starts with inquiries being made in
1991 by Mr Richard Wigley of the Swiss law firm of Lenz & Staehlin for an
Anstalt “which would have been
active from the mid 1970s”.
Correspondence with Mr Heinrichs’ then legal adviser, Mr V M
Seabrook, shows that they were looking for a Liechtenstein entity to hold
shares in two companies referred to as “Quetzel” and
“Willowtree”. They were
informed that the market for such Anstalts had “dried up” and so consideration was given to the use of
a trust. A “Note to client: 0085” of 1st July, 1993,
initialled by Mr Richard Wigley said this:-
“At the moment there is
no Trust in existence to provide ultimate ownership of the various
Companies. Although we discussed
the possibility of putting a S.V.I. Trust together, and the formalities
relating to an acceptable Trust Deed have yet to be agreed with the Lawyers, I
think it might be prudent for us to at least do an in-house Trust on the usual
format to cover the present position as it will be inexpensive (disbursements
£500) and we can always amend things later.
Perhaps we could discuss
this.”
16. That was followed by a “Note for File Client: 0085” of 28th March,
1994, again initialled by Mr Richard Wigley:-
“Reviewed the trust
aspect with the client who believes it advisable to reinstate the Brazilian
Trust. We agreed that revised
Letters of Wishes would be needed and I agreed to provide him with copies of the
existing Letters when we next meet.
Diarise to review the matter
further with him and ensure that a satisfactory arrangement is put in
place.”
17. A diary note of 10th April, 1994,
has this entry:-
“DIARY
Review with WCH the need for a
new Trust or reinstate the Brazilian bearing in mind that Curitiba went and
Connaught was formed. My view is
that there should be a new Trust so as to have a clean sheet to start from
without any traceable entries.”
18. That diary note is annotated in handwriting
belonging, we believe, to Mr Richard Wigley with the words “reviewed with Client” and “consider putting Brazilian Trust back in place”.
19. That diary note was followed by this note of 27th
October, 1994:-
“NOTE
All of the attached
documentation was provided to the client during meetings in Toronto and he
notes our view that, rather than fix the amounts due to Charities, they should
perhaps be paid out of income in order that emergency funds are available for
family members in the future. He
will come back to us regarding the letter of wishes and it was agreed that a
new Trust would be put in place. We
need to ascertain whether we will utilise the same name or everything will
start afresh.”
20. Finally, there is an agenda for a meeting with
“C.0085” with one of the matters being “Outstanding matters re the Brazilian Trust and letters of
wishes.” The “Note for File” of the
meeting held on 2nd August, 1995, with “the client” has this entry “Client requested that we create a new Brazilian Trust through La
Hougue Boëte in 1984.”
21. The trust business operated by Mr Richard
Wigley used client numbers and 0085 was the client code for the Brazilian Trust
used by La Hougue Boëte, which code changed in 1997 to F.0052 when
Faldouet was (apparently) appointed trustee of the 1984 Brazilian Trust. In the
context in which the word “client”
is used in this documentation it is referring to a person and it would seem
clear, assuming the documentation is genuine, that it is a reference to Mr
Heinrichs whose initials are WCH.
22. Mr Heinrichs denies having any discussions with
Mr Richard Wigley over the setting up of a new Brazilian Trust or indeed
knowing anything about it. He says
the first he heard of it was in 2015, when he made inquiries of the Dutch administrators
of Galty BV, who gave him a copy of the trust deed, pointing out that he was
not a beneficiary. A copy of the
1984 Brazilian Trust was not amongst the papers recovered from St John’s
Manor.
23. Advocate Baker, for Mr Heinrichs, relied on
this documentation to show that the 1984 Brazilian Trust was a sham, in that it
purports to be a trust created in 1984, when it was actually created in 1995,
presumably in an attempt to show corporate assets being under the ownership of
a trust of which Mr Heinrichs and his family were not beneficiaries. He pointed out that if the 1984 Brazilian
Trust had been executed in 1984, that is inconsistent with Mr Heinrichs’
writing a letter of wishes on 27th June, 1986, expressly in respect
of the 1977 Brazilian Trust at a time when, according to Mr Richard Wigley, it
had been superseded by the 1984 Brazilian Trust.
24. Mr Richard Wigley also asserts that the 1984
Brazilian Trust is a sham, but for different reasons, although his position on
this has not been consistent--see paragraph 49 of the judgment of the 16th
June, 2016, Heinrichs v Pantrust and Others In his affidavit of 22nd
December, 2015, he states at paragraph 11 that in 1984, when Mr Heinrichs moved
his business away from Barclaytrust to La Hougue Boëte, he said it was his
intention to create a new trust which would replace the 1977 Trust entirely,
and this because he no longer wished his family to be expressly named in the
trust instrument. Quoting from
paragraphs 12 to 14:-
“12.
…….Although the 1984 Declaration purports, on its face, to have
been established for the benefit of two charities, namely Cancer Research
Campaign and the British Heart Foundation, in reality it was never intended to
be anything other than a bare Trust for the benefit of Mr Heinrichs. To the extent that assets were
subsequently transferred to La Hougue Boëte purportedly in its capacity as
Trustee of the Brazilian Trust, the reality was that La Hougue Boëte
merely held those assets as nominee for Mr Heinrichs. To the best of my knowledge, as soon as
the Brazilian Trust was established the instrument creating the 1977 Trust was
put away and never referred to again.
13. Over the years that I have known him
Mr Heinrichs has gone to great lengths to shield his assets from
creditors. Insofar as concerned the
assets held in the Brazilian Trust, he personally controlled the affairs and
assets of that Trust at all times.
14. The Brazilian Trust has therefore been
a sham from the date it was established.
At no time did either the Trustee, or Mr Heinrichs, pay any regard to
the provisions of the instrument by which the Brazilian Trust was purportedly
created. It was understood by
everyone concerned that the assets in it belonged to Mr Heinrichs
absolutely. Accordingly, his
instructions concerning those assets were always followed to the letter.”
25. Much of the hearing was taken up by Advocate
Baker examining the conduct of Mr Richard Wigley, and indeed an affidavit was
filed by Ms Clara Hamon of Baker & Partners, setting out in detail the
evidence from which she drew the conclusion that the evidential test for the
offence of perjury on his part had been “easily
passed” and that the facts demonstrate “that the offence of perverting the course of justice has taken
place.”
26. We are conscious that these are allegations of
criminal conduct on his part, and it would not be appropriate, in his absence,
for the Court to reach any conclusion in this respect, and we are not invited
to do so. However, there is
evidence to suggest that the Court should consider the affidavit evidence of Mr
Richard Wigley with considerable caution:-
(i)
In
proceedings in Colorado, brought by the first to third respondents against Mr
Dick and his family for the repayment of some US$29M allegedly due in respect
of loans, Mr Richard Wigley admitted formally that the loan documentation
(covering facility letters, promissory notes and minutes from 1994-2010) which
had been relied on and filed in evidence were, in fact, manufactured in 2013,
(ii) That same manufactured documentation had been
filed by Mr Richard Wigley and relied on in the Jersey proceedings of Stock
v Pantrust International and Others [2016] JRC 053 (see paragraphs 27 and
28 of the judgment of 4th March)
(iii) Mr Richard Wigley has admitted making untrue
statements in these proceedings. Quoting
from his third affidavit of 17th March 2016, he said this:-
“5. The reason I am
filing this third affidavit is because it is necessary for me to correct one of
the statements made in my affidavit of 22 December 2015. At paragraph 26 of the affidavit, I
stated that the Heinrichs Loans were made by the company Oxford Financial
Services Limited in its capacity as agent for the Trustee of certain third
party Trusts in which Mr Heinrichs had no interest. That statement was untrue. The actual lenders of the various loans
which comprise the Heinrichs Loans were the companies La Hougue Boëte
Société Avec Responsabilité Limitée and Pantrust
respectively. In each case they
made loans with monies obtained from third parties.
6. I also wish to make clear
that in seeking to recover the Heinrichs Loans, the lender companies will not
be relying on the loan documentation exhibited to Mr Heinrichs’ affidavit
at AMH1/4 (“the Documentation”). The reason for this is that, although
all of the loans referred to in the Documentation were genuinely made (and, if
necessary, this will be proved in proceedings before the Courts of Ontario) the
Documentation itself is a fiction, and was executed with the knowledge and
approval of Mr Heinrichs for the sole purpose of disguising the true identity
of both the lender and the borrower.
7. I very much regret that my
December Affidavit contained a misleading statement and I apologise
unreservedly for this.”
Mr Heinrichs denies any involvement in or
knowledge of the manufacture of such documentation.
27. Mr Heinrichs and Ms Heinrichs allege serious
malpractice on the part of Mr Richard Wigley, going back many years, by which
they say millions have been extracted from the 1977 Brazilian Trust through
such devices as secret interest turns, false loans and other illicit transfers
disguised in what they describe as a complex and sophisticated operation. That malpractice allegedly extends to
the illicit use of Mr Heinrichs’ personal KYC documentation for entities
around the world with which he has no connection, and the use of an asset of
the 1977 Brazilian Trust to enable another client of La Hougue Boëte to
evade UK tax. Exhibited to Mr
Heinrichs’ affidavit is a letter to an unconnected family dated 6th
July, 2000, enclosing papers that should not “fall into the wrong hands”. These papers summarise some eleven
methods by which La Hougue Boëte was apparently willing to assist in tax
evasion.
28. Ms Heinrichs calculates that some CAD$4.8M has
been illicitly extracted by the first to third respondents from the 1977
Brazilian Trust by way of interest turns between 1994 and 2014. The full extent of the claims for breach
of trust against the first to third respondents is in the region of CAD$50M.
29. The first to third respondents have chosen not
to participate in these proceedings, and are not here, therefore, to respond to
these allegations by Mr Heinrichs and Ms Heinrichs, but these allegations are
independently supported to this extent by the report of the Superintendent of
Banking in the Republic of Panama, who says this at paragraph 2 of his report
of 4th December, 2014:-
“2. PANTRUST
INTERNATIONAL, S.A., in an apparent scheme of opacity and lack of transparency,
created the following corporation: QUARTZ INTERNATIONAL FINANCE LIMITED and
OXFORD FINANCIAL SERVICES LIMITED as intermediaries of the “loans”
in order to hide, on the one hand, the identity of lender customer, and on the
other hand, the identity of the borrower client, i.e. the beneficiaries. In addition, as mentioned above, they
receive a percentage of the interest collected.”
30. Although not part of the relief being sought by
Mr Heinrichs and Ms Heinrichs, to which we will come shortly, Advocate Baker
invited us to regard the 1984 Brazilian Trust as a sham, not on the basis put
forward by Mr Richard Wigley, but on the basis that firstly it had been
back-dated, and secondly, that Mr Heinrichs knew nothing about it.
31. That request places the Court in some
difficulty. We accept that the
documentation set out above supports the notion that the 1984 Brazilian Trust
was in fact executed in 1995, some eleven years later, but that same
documentation implicates Mr Heinrichs in its backdating. Accordingly, it is difficult for the
Court to conclude from that documentation both that the 1984 Brazilian Trust
was backdated and that Mr Heinrichs knew nothing about it.
32. Mr Richard Wigley is a person who, by his own
admission, is capable of “manufacturing”
documents and using them in court proceedings, but it would seem unlikely
that he would manufacture this correspondence and numerous file notes (found as
we understand it amongst the documents at St John’s Manor) in order to
undermine his own contention that the 1984 Brazilian trust was indeed executed
in 1984. The documentation includes
correspondence to and from a well-known firm of Swiss lawyers and contains
numerous file notes annotated in hand writing; it has the look of authenticity
to the Court. We discuss this
further below.
Declarations and directions sought
33. The summons issued by Mr Heinrichs and Ms
Heinrichs is in the following terms:-
(i)
“(1) That declarations shall be
made in relation to the following issues:-
(a) The terms of the trust or trusts on which the
property was formerly held by the First to Third Respondents as trustees and,
in particular, whether the trust assets were held by First to Third Respondents
on the terms of the settlement dated 9 December 1977 rather than 12 November
1984 Declaration:
(b) That the Brazilian Trust [the 1977 Brazilian
Trust] was or is not a sham;”
34. The first part of the relief, which reflects
part of the relief sought in the amended representation, was not pursued at the
hearing. Instead Advocate Baker
sought the following declaration, namely that the 1977 Brazilian Trust is a
valid Jersey discretionary trust.
He further sought a direction that GB Trustees should administer the
1977 Brazilian Trust on the basis of the 1977 trust deed and to ignore the 1984
Brazilian Trust. That relief was
supported by Advocate Preston for GB Trustees.
35. The need for a declaration of validity in
relation to the 1977 Brazilian Trust is not entirely clear to the Court. No one, as far as we can see, has
alleged that it is a sham. The
evidence of Mr Heinrichs was that Mr Richard Wigley had little to do with its
creation in 1977 when he was a relatively junior employee of Barclaytrust; Mr
Heinrichs’ dealings were with Mr Scholefield. In his affidavit of 22nd
December, 2015, Mr Richard Wigley said this in relation to the 1977 Brazilian
Trust:-
“9. I am aware
that, whilst Mr Heinrichs’ financial affairs were still being managed by
Barclaytrust, he settled a trust known as the “Brazilian
Trust”. For reasons which
shall shortly become clear, in the remainder of this Affidavit I shall refer to
this Trust as the “1977 Trust”.
10. The party expressed to be the settlor
of the 1977 Trust was an individual by the name of Alan Norman Kimble
(“Mr Kimble”). In
reality, the true economic settlor was Mr Heinrichs. The original Trustee of the 1977 Trust
was Barclaytrust International Limited.
The beneficiaries identified in the Third Schedule to the Trust
instrument were Mr Heinrichs, his wife Elfrieda and Miss Heinrichs. The initial Trust Fund comprised
US$100. I have no knowledge of
whether any additional assets were subsequently settled into the 1977 Trust or,
if they were, what became of them.”
There is no suggestion here that the 1977
Brazilian Trust is a sham.
36. Whilst acknowledging that there was no
allegation of sham in relation to the 1977 Brazilian Trust, Advocate Baker drew
two matters to our attention:-
(i)
In their
letter of 21st March, 2016, Sinels, acting for the first to third
respondents, contended that they had never been appointed trustees of the 1977
Brazilian Trust, but there was no suggestion in that letter that it was a sham.
(ii) In his affidavit of 19th December,
2017, sworn in connection with the proceedings in Ontario, which we come to
below, Mr Richard Wigley said this at paragraph 11:-
“It is my belief based
upon my dealings with Werner Cornelius Heinrichs (“Vern”) over some
35 years that the Brazilian Trust has never filed a Canadian Income Tax return
even though all decisions relating to that bare Trust were made by Vern
for his benefit solely …….” (our emphasis)
It is not clear which Brazilian Trust he
was referring to, but his reference to 35 years would take us back to 1982, and
we do not think this can be interpreted as an allegation by Mr Richard Wigley
that the 1977 Brazilian Trust, created some 40 years ago and in which creation
he had little involvement, was a sham.
37. Advocate Baker submitted that a declaration as
to the validity of the 1977 Brazilian Trust was necessary in any event, because
Mr Richard Wigley, who he described as inherently unreliable, might at some
stage in the future change his position and allege that the 1977 Brazilian
Trust was also a sham.
The law
Sham Trusts
38. Where there is a document establishing a trust,
the presumption is that the document means what it expresses itself to be on
its face and the court should not lightly find a trust to be sham. See National Westminster Bank plc v
Jones [2001] BCLC 98 per Neuberger J at 59:-
“…. There is a very
strong presumption indeed that parties intend to be bound by the provisions of
agreements into which they enter, and, even more, intend the agreements they
enter to take effect” and “there is a very strong and natural
presumption against holding a provision or a document a sham.”
39. The leading statement of Jersey law on what is
necessary to prove a trust to be a sham is Mackinnon v Regent Trust Company
Limited & Ors [2005] JLR 198 at 14:-
“In Re Esteem Settlement
[2003] JLR 188, at paras. 42-60, the Deputy Bailiff had occasion to consider
what were the necessary ingredients for a claim that trust deeds were
shams. He held that it must be
shown that both settlor and trustee had a common intention that the true
position should be otherwise than as set out in the trust deed which they both
executed. I agree. The Deputy Bailiff went on, in that
passage, to consider whether an intention of both settlor and trustee to
mislead third parties or the court, by giving the appearance of creating
between the parties legal rights and obligations different from the actual
rights and obligations (if any) which the parties intend to create, is a
necessary ingredient for such a claim.
He held that this is a necessary ingredient. Again, I agree. He so held in reliance
on the relevant English authorities, as did the Bailiff on this case; and in my
judgment, this branch of the law, having been most fully developed in England
and Wales (and also in Australia) it is entirely appropriate that Jersey law
should take full account of English law in this regard.”
40. In the English decision of Shalson v Russo
[2003] EWHC 1637 per Rimer J at 189 with which the Royal Court in Mackinnon
agreed, it was said:-
“When a settlor creates a
settlement he purports to divest himself of assets in favour of the trustee,
and the trustee accepts them on the basis of the trusts of the settlement. The settlor may have an unspoken
intention that the assets are in fact to be treated as his own and that the
trustee will accede to his every request on demand. But unless that intention is from the
outset shared by the trustee (or later becomes so shared), I fail to see how
the settlement can be regarded as a sham.
Once the assets are vested in the trustee, they will be held on the
declared trusts, and he is entitled to regard them as so held and to ignore any
demands from the settlor as to how to deal with them. I cannot understand on
what basis a third party could claim, merely by reference to the unilateral
intentions of the settlor, that the settlement was a sham and that the assets
in fact remained the settlor’s property. One might as well say that an
apparently outright gift made by a donor can subsequently be held to be a sham
on the basis of some unspoken intention by the donor not to part with the
property in it. But if the donee
accepted the gift on the footing that it was a genuine gift, the donor’s
undeclared intentions cannot turn an ostensibly valid disposition of his
property into no disposition at all.
To set that sort of case up the donee must also be shown to be a party
to the alleged sham. In my
judgment, in the case of a settlement executed by a settlor and a trustee, it
is insufficient in considering whether or not it is a sham to look merely at
the intentions of the settlor. It
is essential also to look at those of the trustee.”
41. The relevant subjective intentions in the case
of the 1977 Brazilian Trust are those of:-
(i)
Alan
Norman Kimble in relation to the US100 he settled; and
(ii) Those of Mr Heinrichs as the economic settlor
on each occasion that he transferred assets to Barclaytrust or to its successor
Le Hougue Boëte, to be held on the terms of the 1977 Brazilian Trust. In this case, we have no evidence as to
when assets were settled.
42. A valid trust does not become a sham because
the trustee subsequently departs from the terms of the trust and administer it
in a particular way. In the English
decision of A v A [2007] EWHC 99 (Fam) per Munby J at 42-43:-
“it seems to me that as a
matter of principle a trust which is not initially a sham cannot subsequently
become a sham. The reason is that
elaborated by Rimer J in the passage in Shalson and others v Russo and others
(Mimran and another, Part 20 claimants) [2003] EWHC 1637 (Ch), [2005] Ch 281 at
para [190] which I have just set out.
Once a trust has been properly constituted, typically by the vesting of
the trust property in the trustee(s) and by the execution of the deed setting
out the trusts upon which the trust property is to be held by the trustee(s),
the property cannot lose its character as trust property save in accordance
with the terms of the trust itself, for example, by being paid to or applied
for the benefit of a beneficiary in accordance with the terms of the trust
deed. Any other application of the
trust property is simply and necessarily a breach of trust: nothing less and
nothing more.
A trustee who has bona fide
accepted office as such cannot divest himself of his fiduciary obligations by
his own improper acts. If
therefore, a trustee who has entered into his responsibilities, and without
having any intention of being party to a sham, subsequently purports, perhaps
in agreement with the settlor, to treat the trust as a sham, the effect is not
to create a sham where previously there was a valid trust. The only effect, even if the agreement
is actually carried into execution, is to expose the trustee to a claim for
breach of trust and, if may well be, to expose the settlor to a claim for
knowing assistance in that breach of trust. Nor can it make any difference, where
the trust has already been properly constituted, that a trustee may have entered
into office – may indeed have been appointed a trustee in place of an
honest trustee – for the very purpose and with the intention of treating
the trust for the future as a sham.
If, having been appointed trustee, he has the trust property under his
control, he cannot be heard to dispute either the fact that it is trust
property or the existence of his own fiduciary duty.”
Declarations
43. The Court has eschewed the structured and
technical approach to the granting of declaratory relief under English law. Quoting from the judgment of Sir Michael
Birt, then Deputy Bailiff, in the case of In re Curatorship of X [2002]
JLR 259 at paragraph 18:-
“We think that the broad and
flexible approach summarized above [referring to the Scottish approach] is
preferable to the more structured and technical approach which appears to hold
sway in England, which is based partly upon historical considerations which
have no application in Jersey. The
principles of Scottish law described above offer a sensible and convenient
approach to the question of when the court should agree to give declaratory
relief and we hold that they represent the correct approach under Jersey law.
… In our judgment, the court should not become embroiled in a technical
consideration of whether a matter can be categorized as a future or
hypothetical right. The court
should adopt a broader approach and consider whether there is a live practical
question with practical consequences when deciding whether to exercise its
discretion to grant declaratory relief.”
44. As the Court said in Rahman Showlag v
Mansour [1994] JLR 269 at 275, the jurisdiction to grant a declaratory
judgment should be exercised with caution, but without hesitation where
necessary to do justice between the parties.
45. In Eckman v Sidem International Limited
& Michault [2010] JLR 299 the Court held that in general a declaration
would not be granted in advance of a trial if based on admissions or in default
of defence, particularly if the declaration sought was that the defendant had
acted fraudulently, but the Court would consider granting a declaration if the
applicant could not obtain the fullest justice to which he was entitled without
it. It is no bar to the giving of
declaratory relief that the respondents had not entered an appearance, and that
the Court only has affidavit evidence before it, although in that case,
declaratory relief was denied because the affidavit evidence did not come up to
the high standard necessary for declarations that extended to allegations of
fraud.
46. Mr Heinrichs and Ms Heinrichs are seeking
declaratory relief from this Court for use in the Ontario proceedings, and as
Sir Michael Birt has said in the case of In re Curatorship of X, we need to
consider the practical consequences of the declaration that we have been asked
to make. We need to understand how
such a declaration might be used in the Ontario proceedings, and how it might
affect the rights of other parties to those proceedings.
Ontario proceedings
47. On 12th January, 2017, the Court
declined an application by GB Trustees to order an account on the basis of
wilful default to be taken by the Master in relation to the Brazilian Trusts
for the reasons set out in the judgment of that date Heinrichs v Pantrust
and Ors [2017] JRC 006, one of the principal reasons being that the first
to third respondents, who are best able to provide that account, were outside
the jurisdiction of the Court and had given notice that they would ignore any
orders made by the Master.
48. Shortly afterwards on 19th January,
2017, GB Trustees, Mr Heinrichs, his wife and Ms Heinrichs commenced
proceedings in Ontario against the first to third respondents and other
connected persons and entities:-
(i)
To enforce
the orders made by this Court on 16th June, 2016, in particular for
the transfer of the assets of the Brazilian Trusts to GB Trustees, and on the
30th September, 2016, in relation to costs.
(ii) For an account of their administration of
“the Brazilian Trust”.
(iii) For an order requiring them to deliver up all
records of “the Brazilian Trust”.
(iv) For damages for breach of fiduciary duty,
breach of trust, fraudulent breach of trust, fraudulent misrepresentation,
negligence, negligent misrepresentation and other intentional and unintentional
torts in the amount of CAD$50M.
(v) For further and/or alternative relief.
49. The statement of claim in the Ontario
proceedings appears to treat the 1977 Brazilian Trust and the 1984 Brazilian
Trust as one trust, which is consistent with the way the representation before
this Court is framed, paragraph 15 of the representation being in these terms:-
“It is averred that the
1984 declaration and the 1977 settlement are and have always been treated by
the Trustee and beneficiaries (and it is averred now fall to be treated by the
court) as the same Trust; the Brazilian Trust.”
The position of the representors has now
changed, in that they maintain that the 1984 Brazilian Trust is a sham, to be
ignored by GB Trustees.
50. The first to third respondents are challenging
the jurisdiction of the courts of Ontario in respect of the proceedings brought
by GB Trustees and the Heinrichs family, on the grounds inter alia that they are not domiciled in Canada, do not carry on
business in Canada, have no assets in Canada, the alleged unlawful acts did not
occur in Canada, “the Brazilian Trust” is not a trust located in
Canada, nor does it have assets there, the majority of the documentary evidence
is either in Jersey or Panama, but not in Canada, and the Jersey court had
implicitly judged, they say, that the accounting in regard to “the
Brazilian Trust” should take place in Panama. No date has been fixed for the hearing
of this application.
51. This Court, in its judgment of 12th
January, 2017, Heinrichs v Pantrust and Ors [2017] JRC 006 had
questioned why advice had not been taken by the representors on whether an
account could be sought from the first to third respondents in Panama, where
they are based and to the jurisdiction of whose courts they are subject, but
they have chosen Ontario and the Court acknowledges that:-
(i)
the known
assets of the Brazilian Trusts are in Ontario, namely the sale proceeds of a
property, the benefit of a judgment against Mr Heinrichs, life insurance
policies on the lives of Mr and Mrs Heinrichs and shares in an Ontario
corporation.
(ii) Mr Heinrichs and his family live in Ontario.
(iii) Advocate Langlois, for the first to third
respondents, had argued before this Court that the courts of Ontario, not
Panama, were the most appropriate forum for all of the relief sought in the
representation (see paragraph 42 of the judgment of 16th June Heinrichs v
Pantrust and Others [2016] JRC 106A.
(iv) There are serious concerns over the
practicality of trust proceedings in Panama. Mr Heinrichs puts it this way in his
affidavit at paragraph 135:-
“In the later Jersey
judgment of January 2017 there is some implicit criticism at paragraph 7 that
neither we nor the trustee have pursued our rights against Richard in Panama or
Ontario. I do not think that
criticism is particularly fair. My
family and I have and continue to be put through a hellish ordeal to defend
ourselves from Richard’s chicanery who is a law unto himself. I (and the Jersey court) was advised
first by Hatstones Panama and subsequently by the Panamanian lawyer David
Mizrachi that it is near impossible to obtain even basic relief before the
Panamanian courts in anything approaching a reasonable time. As it turns out from evidence Richard
has filed in the Ontario proceedings that he never had control of the assets he
claimed to have to both us and the Jersey court. Chasing Richard down in Panama would
have been pointless and I have no desire to spend my later years battling
through interminable legal proceedings in Central America.”
(v) There are already four other sets of
proceedings on foot in Ontario involving the same parties, including claims by
the first respondent and others against Mr Heinrichs and others for the
repayment of alleged loans in the sum of CAD$16m.
Decision
Declaration
52. It is unusual, in our view, for a court to be
asked to declare that a trust is valid because of the strong presumption that a
trust is properly constituted and that the parties to it intended to be bound
by its provisions, as per Neuberger J in National Westminster Bank plc v
Jones at paragraph 59 quoted above.
That presumption of validity remains in place until a court of competent
jurisdiction determines otherwise.
53. It is also a more complex issue than it might
appear in that the intention of the settlor and the trustee have to be examined
on every occasion that a settlor settles assets. From the limited documentary evidence we
have seen and from the evidence of Mr Heinrichs, the 1977 Brazilian Trust has
been extremely active. We were
shown a copy of a handwritten ledger for the stockbroking account of Curitiba
Holdings Limited for the year 1985 (Curitiba was listed in the Barclaytrust
ledger as an asset of the 1977 Brazilian Trust in 1980), which show regular and
substantial cash movements.
54. A declaration now that the 1977 Brazilian Trust
“is valid” would
therefore purport to extend to and cast a mantle of legitimacy over numerous
transactions into and out of the trust of which the Court has no knowledge.
55. Mr Heinrichs and Ms Heinrichs seek such a
declaration for use in the proceedings brought by them, together with GB
Trustees, in Ontario, but from an examination of the statement of claim, the
application challenging the jurisdiction of the courts of Ontario and the
evidence filed by Mr Richard Wigley in support, the validity of the 1977
Brazilian Trust is not a live issue there, and so it is not at all clear to the
Court what purpose a declaration as to its validity would serve or what the
practical consequences would be.
Because it is not a live issue, it cannot be argued that without such a
declaration the representors will not obtain the fullest justice before the
courts of Ontario.
56. The jurisdiction of the Court to make
declaratory judgments has to be exercised with caution, particularly as, in
this case, the Court is on notice that it is required for the purpose of
foreign proceedings, and the Court is not prepared to exercise that
jurisdiction in circumstances where:-
(i)
the
validity of the 1977 Brazilian Trust is not a live issue in those foreign
proceedings;
(ii) the Court is not clear as to the practical
consequences of making the declaration sought in those foreign proceedings in
advance of trial there; and
(iii) because its validity is not a live issue in
those foreign proceedings, it cannot be said that the representors will not
obtain the fullest justice from the courts of Ontario without it.
Directions
57. Whilst GB Trustees supports the application by
Mr Heinrichs and Ms Heinrichs for a declaration, we note that it has not itself
sought that relief or the assistance of the Court in its supervisory jurisdiction
over a Jersey trust. However, the
second part of the relief sought by Mr Heinrichs and Ms Heinrichs constitutes a
direction to GB Trustees as to the administration of the Brazilian Trusts and
that does bring into play the Court’s supervisory jurisdiction.
58. We think we can assist GB Trustees in relation
to the administration of the 1977 Brazilian Trust in this respect. As per Neuberger J in National
Westminster Bank plc v Jones, the presumption is that a trust is properly
constituted and that the parties to it intended to be bound by its
provisions. In the case of the 1977
Brazilian Trust, the presumption is that it was properly constituted on 9th
December, 1977, between the named settlor Alan Kimble and Barclaytrust and that
assets were subsequently properly vested in it. We have seen no evidence to rebut that
presumption. Once properly
constituted and vested with property, the trust cannot subsequently become a
sham (as per Munby J in A v A at paragraphs 42 and 43).
59. Whether the 1977 Brazilian Trust exists today
as a trust depends upon whether there are currently trust assets comprised
within the trust fund and that is an evidential issue on which we cannot
comment. However, at the very
least, it would seem that the trust fund comprises causes of action against
those who have administered it in the past.
60. The 1977 Brazilian Trust should therefore be
administered by GB Trustees on the basis that it was properly constituted in
1977 and, to the extent that it has trust assets, is presumed to be valid
today.
61. The position in relation to the 1984 Brazilian
Trust is more difficult. It is
regarded by Mr Richard Wigley, who caused it to be declared by La Hougue
Boëte, as a sham, because that was, he said, his intention and that of Mr
Heinrichs in 1984 when he says it was created. Mr Heinrichs denies any such intention
or indeed any knowledge of the 1984 Brazilian Trust until he came across it in
2015, and it would follow that he would not knowingly have settled assets upon
it. He regards it as a sham,
because he says it was executed in 1995 and back-dated to 1984. Advocate Sharp described it as a
forgery, which inevitably involves dishonesty in its creation. The Court is not asked to make a finding
as to its validity, but it would be difficult on the evidence provided to us to
declare it a sham on the basis that it was back dated, without finding that Mr
Heinrichs was involved in that back dating.
62. However, we question whether it is wise for GB
Trustees to be directed to ignore the 1984 Brazilian Trust completely. There is a dearth of evidence as to what
assets, if any, were purported to be vested in it, or indeed about its
administration generally. The
communication from Mr Richard Wigley to Mr Seabrook of 6th March,
1991, indicated that it was to hold two companies at least, namely Quetzel and
Willowtree, but we have no evidence as to whether the shares in these companies
were ever purportedly added.
63. If assets were purported to be added to the
1984 Brazilian Trust, then there seems to us to be two possibilities:-
(i)
If the
1984 Brazilian Trust is valid, as it is still presumed to be, then those assets
constitute assets of that trust, of which GB Trustees is now the successor
trustee.
(ii) If the 1984 Brazilian Trust is found to be a
sham, then whoever holds those assets holds them as bare trustee for whoever
purported to settle them.
64. The fact is that GB Trustees has been appointed
trustee of the 1984 Brazilian Trust by the Court on the basis that it is a
validly constituted trust and will remain so until determined
otherwise—see paragraph 50 of the judgment Heinrichs v Pantrust and
Others [2016] JRC 106A, of the 16th June 2016. The Court has not been asked to
determine otherwise and until it does so, GB Trustees has duties as trustee
which in the circumstances the Court acknowledges are difficult to perform and
which bring with them potential liabilities. We would be minded to give directions to
GB Trustees therefore that would limit those duties, so as to protect GB
Trustees to the extent that it is proper and just to do so - for example a
direction to take no steps as trustee of the 1984 Brazilian Trust unless and
until directed by the Court to do so. We therefore invite GB Trustees to draft
directions to that effect for our consideration when this judgment is handed
down.
Conclusion
65. In conclusion the Court declines to give the
declaration sought, but in the exercise of its supervisory jurisdiction over
Jersey trusts it is prepared to give directions to GB Trustees limiting its
duties as trustee of the 1984 Brazilian Trust.
Authorities
Heinrichs
v Pantrust and Others [2016] JRC 106A.
Heinrichs-v-Panturst
and Ors [2016] JRC 174
Heinrichs
v Pantrust and Ors [2017] JRC 006
Representation
of the Manor House Trust and the Russian Trust [2015] JRC 208
Stock
v Pantrust International and Others [2016] JRC 053
National Westminster Bank plc v Jones
[2001] BCLC 98 per Neuberger J at 59
Mackinnon
v Regent Trust Company Limited & Ors [2005] JLR 198 at 14
Shalson v Russo
[2003] EWHC 1637 per Rimer J at 189
A v A [2007]
EWHC 99 (Fam) per Munby J at 42-43
In
re Curatorship of X [2002] JLR 259
Rahman
Showlag v Mansour [1994] JLR 269 at 275
Eckman
v Sidem International Limited & Michault [2010] JLR 299.