[2010]JRC199
royal court
(Samedi Division)
4th November 2010
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Before :
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W. J. Bailhache, Q.C., Deputy Bailiff, and
Jurats de Veulle and Tibbo
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IN THE MATTER OF THE REPRESENTATION OF BNP PARIBAS JERSEY TRUST CORPORATION LIMITED AND IN THE MATTER OF THE PW TRUST AND
IN THE MATTER OF ARTICLE 51 OF THE
TRUST (JERSEY) LAW 1984.
Advocate J. P. Speck for the Representor.
Advocate N. M. Sanders for the Sixth
Respondent
judgment
the deputy bailiff:
1.
A hearing
took place in private on 28th
September, 2010, of the representation of the Representor, which
first came before the Court on 12th
March, 2010. Although
the representation was heard in private, as is customary with Article 51
proceedings, this judgment is given in public.
2.
When the
matter first came before the Court in March, it was ordered that the
representation be served on the Settlor, who is the widow of PW, (“the
deceased”), and her four daughters and two sons, children of her union
with the deceased. They were to be convened
for a hearing before the Court on 14th June, 2010. At that time, only the Sixth Respondent
appeared, and indeed he now appears again through his counsel. The Court is informed
that the position adopted by the Sixth Respondent is in fact supported by the
First to Fifth Respondents, his mother and four sisters, although they have not
formally entered any appearance.
His position is essentially not in accord with the approach taken by the
Seventh Respondent, his elder brother, who had written two detailed letters to
the Court, albeit he has not appeared either personally or through
counsel. The first of these letters
was apparently received shortly before the Court hearing in June, although for whatever reason the letter was
not before the Court at that time.
Both that letter and a subsequent letter have however been placed before
us for the present hearing.
3.
In its
representation, the Representor Trustee asked the Court to give directions and
declarations as to the claims of the Seventh Respondent and the origin of the
trust assets; asked that the Seventh Respondent be removed or suspended as a
Protector of the Trust forthwith; asked that the Court give directions as to
the role and identity of the successor or interim Protector if any, or alternatively
give directions as to the extent to which the Court considered the Protector
was incapable of acting as such; and asked that the Representor be indemnified
out of the trust assets in respect of the legal and administration costs and
expenses of and incidental to the application.
4.
On 14th
June, 2010, the Court adjourned the Trustee’s application until 27th
and 28th September, 2010, and directed that all the beneficiaries be
informed of the nature of the
Trustee’s application to the Court; suspended the powers of the Protector
until further order such that the Trust should be read and have effect as
though references to the Protector were omitted, with liberty to apply, and
made sundry other administrative orders.
The intended effect of the sum of these orders was that when the matter
came to be considered by the Court again in September, the Court would have
sufficient information to be able to
give directions to the Trustee on the future administration of the Trust. On 28th September, the Court
was addressed by counsel for the Trustee and for the Sixth Respondent, but no
other party appeared. The Court
reserved its decision, and judgment is now given.
Background
5.
The Court
is informed that by an instrument
dated 18th
December, 2003, the widow executed a trust surrounding the payment
of US$100 to the Trustee. The
beneficiaries were named as the Settlor, the Second to Seventh Respondents, any
trust association body or other organisation the objects of which are
charitable, and any person who might be the subject of an addition to the class
of beneficiaries pursuant to the powers conferred on the Trustee. The First Protector was named as the
Seventh Respondent, who is the elder son of the Settlor. Part D of the Trust Deed contains
provisions regarding the Protector.
The remainder of the trust instrument contains at different places
various Protector powers including, importantly, at paragraph A16.02, the power
to give directions to the Trustee as to the investment of the trust fund.
6.
The Court
is advised that the trust assets have a current value of approximately US$40
million, those assets comprising cash and investments.
7.
The nature
of the claims which the Seventh Respondent has put to the Trustee is not
entirely clear, but the broad thrust of it appears to be:-
(i)
The trust
assets were not in fact the property of the Settlor, who was thus unable to
give the Trustees any better title than she had herself, and the gift into
trust therefore would fail, in whole or in part.
(ii) The funds constituting the trust fell into and
belonged to the estate of the deceased.
(iii) Probate has never been obtained in relation to
the deceased’s estate, either in Indonesia where he was domiciled at
the date of his death or in Singapore
where the underlying funds were held.
8.
As a
result of being placed on notice of these claims, the Trustee has not in fact
made any distributions to the beneficiaries. Informal attempts at mediation have
failed. Furthermore the Trustee is
concerned that the Seventh Respondent as Protector of the Trust has a clear
conflict of interest in that he cannot at the same time both act as Protector
and assert that the Trustee is not entitled to hold the assets on trust which
it believes it does. This conflict
of interest seemed to the Court in June to be self evident, which was
accordingly why the Protector powers were suspended by the Court at that time
with liberty to apply.
9.
Advocate
Speck, for the Trustee, rhetorically asks where the Trustee is supposed to go
next. The Trustee is understandably
anxious about making any payment out of the Trust fund where the legitimacy of
the payments into trust is disputed.
At the same time, the Seventh Respondent who is the only person who has
disputed the legitimacy of these payments, has taken no action to pursue that
claim during the last five years.
The Trustee points to a number of inconsistencies in the Seventh
Respondent’s position, not least that whilst apparently wishing to contend
that the transfers into Trust were not legitimate transfers, at the same time
he wishes to maintain his position as Protector of the Trust. It would appear from the document which
was forwarded to the Court in June
that the Seventh Respondent also acknowledges that he attended when the Trust
was set up in Jakarta, Indonesia in the sense that although he was asked to
leave the room for a while when a discussion took place as to the structure of
the class of beneficiaries, he was called back a few minutes later and was told
that the Trust had been set up at that time on the signature of the Settlor,
his mother, who had appointed him as Protector, to which he agreed. Accordingly, there might be estoppel or
other arguments which might be run against him, including for that matter
limitation arguments, in any claim which he wished to make as to the validity
of the transfer of assets into Trust.
10. The real argument as to the legitimacy of the
transfers into trust seems to turn upon whether the assets belonged genuinely
to the widow Settlor, or by contrast belonged to the estate of the deceased,
the late husband of the widow Settlor and father of the other personal
beneficiaries. The deceased died as
a national and domiciliary of Indonesia
on 30th January,
2000. At that time he
owned property in Singapore.
It is alleged that this estate is
governed by his will dated 13th
February, 1996, made in Singapore, by which he appointed
his widow as his sole Executrix and Trustee. The Court has been shown advice which
suggests that the will is formally valid under the Law of Singapore. Under the will, the residue of the
estate is disposed of as to 50% to his widow, the Settlor, 15% to each of his
two sons and 5% to each of his four daughters. However, there is no information before
the Court as to the extent of the estate, and even assuming the will to be
formally valid, there is therefore the difficulty in ascertaining the extent of
the assets to which any beneficiary of the estate might claim to be entitled,
because, at this stage, the entitlement is to a percentage of an indeterminate
amount. Accordingly one does not
know the arithmetic relationship between the assets in trust and the assets in
the estate.
11. The Court has also been shown advice from an
Indonesian lawyer who indicates that the Law of Indonesia does not recognise
trusts, but does confer légitime rights which might result in a
different apportionment of the estate than that provided for by the will.
12. Advocate Speck told us that the Trustee intends
to be neutral and impartial as between the beneficiaries, but does not intend
to be supine. His contention was
that it was necessary for the Trustee to do something in the administration of
the trusts. Ideally, the Trustee
would have the following information:-
(i)
What were
the assets of the estate of the deceased at the date of his death?
(ii) What has happened to those assets since?
(iii) From what source do the assets settled into
trust in 2003 derive? In
particular, were they the widow’s assets absolutely, or were they derived
from the estate of her late husband? If the latter, there might be more
concern over the legitimacy of the transfer into trust.
13. The Trustee took the view that ideally this
information would be supplemented by the primary documents evidencing the
answers to the questions which are set out.
14. In his written letters to the Court, the
Seventh Respondent asserts that it is in his view important to identify the
source of the funds coming into the Trust and also to establish the regular
administration of the estate of his late father, the deceased. The Court has received a letter from the
Jakarta Legal Aid Institute to the effect that only the District Court of
Jakarta has the jurisdiction to handle the dispute dealing with the estate of
the deceased, and accordingly that the Seventh Respondent should not attend and
appear in front of the Royal Court.
That letter is dated 15th
June, 2010. The Seventh
Respondent also has brought before the Court information which suggests that
his financial position is not very good, which may cause him a practical
difficulty in relation to the institution of proceedings before this
Court.
15. By contrast, his younger brother, the Sixth
Respondent, contends that he and the rest of the family consider that the
assets in question did belong absolutely to their mother at the time of the
settlement, and that the Seventh Respondent has had quite long enough in order
to decide whether or not to bring a claim.
The family do not apparently regard the Seventh Respondent as impecunious,
but it is noted that we have no evidence of any real substance on that point
one way or the other. The Sixth
Respondent contended that the Seventh Respondent should be encouraged to bring
his claim within a narrow timescale, or concede that if he failed to do that,
the Trustees were entitled to be given protection for any distribution they
might make.
16. Reliance was placed by both the Trustee and the
Sixth Respondent on the case of Barclays Private Bank and Trust Limited-v-Hsu
and Others [2010] JRC
003A. In that case, on an Article
51 application, the Court directed that the Trustee should administer the Trust
without regard to any possible claims by or on behalf of the estate of many of
the beneficiaries convened, and that insofar as the plaintiff in parallel
proceedings was bringing a claim that the deed of exclusion was invalid, the
Court ordered that an application, seeking to amend the Order of Justice so as
to limit the claims made therein to those which were properly brought in the
Royal Court, must be brought within a seven or eight week time span, and if not
brought within that period, then the Order of Justice would be struck out
without the need for further Court process.
17. Before us, the Trustee asserted that there were
three possible courses of action:-
(i)
An order
that the Seventh Respondent should be required to bring proceedings or be
barred from any subsequent complaint - in effect put up or shut up.
(ii) An order that the beneficiaries should all be
advised that they will not benefit from the trust fund unless they provide to
the Trustee all appropriate information on the source of funds.
(iii) An acceptance of inaction such that the Trustee
would do nothing until a 10 year period had expired when no further limitation
issues could arise, and a distribution of the trust assets could be made safely
in the absence of any claim as to their provenance by any third party.
18. Both the Trustee and the Sixth Respondent
contended that the first of these options was the right course to follow.
The Law
19. It is trite law that where trustees are faced
with an adverse claim in respect of the trust fund, yet the claimant has issued
no proceedings and appears to have no immediate intention of doing so, the
trustees are at risk if any distribution is made without the sanction of the
Court. This statement of principle
arises out of the dicta of Lord Romer in Guardian Trust and Executors
Company of New Zealand Limited-v-Public Trustee of New Zealand [1942] AC115 at
127:-
“…if a trustee or other
person in a fiduciary capacity has received notice that a fund in his
possession is, or may be, claimed by A, he will be liable to A if he deals with
the fund in disregard of that notice should the claim subsequently prove to be
well-founded”.
20. That case involved a bank executor who had paid
legacy under will after it had received notice from the next of kin that they
intended to challenge the will. The
executor was made personally liable to account for the amount of the legacy so paid
after the next of kin’s challenge proved successful and the grant to the
executor was revoked. This decision
of the Privy Council was considered by our Court of Appeal in Sinel Trust
Limited and Others-v-Rothfield Investments Limited and Others [2003] JCA
048. In that case, the appeal
succeeded on other grounds but the Court of Appeal nonetheless had some
comments to make on the dicta of Lord Romer which is set out above. Southwell, J A, said this at paragraph
29:-
“Lord Romer was one of the
greatest equity judges of the 20th century. It is clear that what he meant by
“notice of the claim” was notice of a claim which is, prima facia,
a reasonably arguable claim. Lord
Romer was not referring to specious claims with no arguable foundation.”
21. The
Court of Appeal therefore disapproved one of the contentions made by one of the
parties in the Royal Court
to the effect that if the test were as set out by Lord Romer, any rumoured
claim, however outlandish, would paralyse the administration of the trust and the
enjoyment of the trust assets by the beneficiaries. It was made plain that specious claims
with no arguable foundation were not what Lord Romer had in mind.
22. This Court applies that approach in principle
but of course it is impossible, at this stage, to know whether the claim which
might be brought by the Seventh Respondent is or is not specious. We simply do not have enough information
to be able to form a judgment on that issue. At the same time, it seems to us that
equity demands that a person who has a claim brings it timeously, and does not
sit on his hands making unparticularised threats or assertions and causing
embarrassment thereby to a counterparty.
When that counterparty is a trustee owing duties to others, that is a
demand that the Courts of equity will support to the extent that they properly
can. The Court’s trust
jurisdiction after all arises out of the need to apply equitable principles to
the issues which are before it.
23. In this instance, the Court has no doubt
whatsoever that it is wholly unacceptable for the present uncertain state of
affairs to continue. It is quite
wrong that the Trustee of what appears to be a perfectly valid Jersey trust
should be hamstrung in the performance of its trustee duties by an
unparticularised and vague complaint which has neither been substantiated by
detail provided to the Trustee nor taken forward by any hostile
litigation. It is not fair to the
Trustee that it should be placed in this position. Neither is it fair to the other
beneficiaries of the Trust, who are precluded thereby from receiving any
benefit out of the Trust for as long as the Trustee does not know whether it
holds assets on the trusts of the settlement or on trust for the would be
claimant.
24. It goes without saying that this Court makes no
finding whatsoever today as to the merits or otherwise of any claim which the
Seventh Respondent might bring.
However the Court does make the finding that it is incumbent on the
Seventh Respondent to bring his claims before the Royal Court for adjudication, and that he
should in effect be penalised, if he fails to do so, by being prevented from
bringing any such claims without special leave of the Court to do so. It is inconceivable that leave would be
given to bring such claims against the Trustee unless it could be shown that
the Trustee had acted intentionally, recklessly or with gross negligence in
misleading the Court on this current application.
25. Accordingly the Court now orders that unless
the Seventh Respondent brings proceedings in Jersey within six months of the
date of this judgment, seeking to set aside all or part of the original
transfers of assets into the Trust, the Trustee shall be entitled to administer
the Trust free and clear of all and any claims which the Seventh Respondent might
have or purport to have to the assets of the Trust (save as a beneficiary of
the trust).
26. The Court has considered further the
possibility of the Seventh Respondent being sufficiently impecunious that an
order of the kind mentioned above may cause difficulty. The Trustee has conceded that it would
be appropriate to make provision for payment of the costs of such proceedings
albeit with a cap on the amount.
Advocate Sanders for the Sixth Respondent said that in his view the same
provisions ought to be available for other family beneficiaries. In the circumstances the Court considers
that in order to be sure that the Seventh Respondent has access to justice in
this matter, the Trustee should pay out of the trust fund the legal costs of
the Seventh Respondent with a cap of £50,000, provided that these are
incurred with a view to seeking advice upon and / or instituting a claim before
the Royal Court of Jersey challenging the original transfers of assets into the
Trust within the time set. The
Trustee is clearly not entitled to see the detail of the legal advice which has
been received, which is privileged, but a certificate from a Jersey lawyer to
the effect that the bills, for which reimbursement is sought, have been
incurred within the four corners of this order will be a sufficient discharge
to the Trustee. The Seventh
Respondent will have liberty to apply in relation to any legal fees which might
be incurred and which would take him above the cap of £50,000 which has
been imposed.
27. It does not appear to the Court that it is
necessary at this stage to make provision for the costs of other family
beneficiaries in the same way.
However, if the Seventh Respondent does in fact bring claims within the
next six months challenging the original transfers of assets into the Trust,
the Trustee similarly has authority from this Court to reimburse the other
respondents with legal fees incurred by them in relation to these proceedings,
on the same terms mutatis mutandis as applied to the Seventh Respondent. Once again, the other family
beneficiaries have liberty to apply if their costs look like exceeding the sum
of £50,000. It is clear that
the Court considering these costs applications will be differently constituted
from the Court dealing with any claim as to the validity of the transfers of
the assets into the Trust.
Authorities
Barclays
Private Bank and Trust Limited-v-Hsu and Others [2010] JRC 003A.
Guardian Trust and Executors Company
of New Zealand Limited-v-Public Trustee of New Zealand [1942] AC115 at 127.
Sinel
Trust Limited and Others-v-Rothfield Investments Limited and Others [2003] JCA 048.