Trust – further directions to trustees of the ZIII and ZII trusts.
[2015]JRC214
Royal Court
(Samedi)
20 October 2015
Before :
|
J. A. Clyde-Smith, Esq., Commissioner, and
Jurats Nicolle and Blampied
|
Between
|
Barclays Private Bank & Trust Limited
(now known as Barclays Trust Company (Jersey) Limited) as trustees of the Z
III Trust
|
Representor
|
|
And
|
Advocate Steven Chiddicks representing the
minor beneficiaries of the Z III Trust
|
First Respondent
|
|
And
|
Mrs C
|
Second Respondent
|
|
And
|
Volaw Trustee Limited as trustee of the Z
II Trust
|
Third Respondent
|
|
|
AND
|
|
|
Between
|
Volaw Trustee Limited as trustee of the Z
II Trust
|
Representor
|
|
And
|
Advocate Steven Chiddicks representing the
minor beneficiary of the Z II Trust
|
First Respondent
|
|
And
|
Mrs C, and F, G, H, J and K, all adult
beneficiaries of the Z II Trust
|
Second Respondent
|
|
And
|
Equity Trust (Jersey) Limited
|
Third Respondent
|
|
And
|
Volaw Trustee Limited (in its personal
capacity)
|
Fourth Respondent
|
|
And
|
Fielden Holdings Limited
|
Fifth Respondent
|
|
And
|
Rawlinson & Hunter Trustees SA, as
trustee of the Z Trust
|
Sixth Respondent
|
|
And
|
Mrs C, as a fiduciary power holder of the Z
II Trust
|
Seventh Respondent
|
|
And
|
Rawlinson & Hunter Trustees SA
(replacing RBC Trustees (CI) Limited) as trustee of the X Trust
|
Eighth Respondent
|
|
And
|
E
|
Ninth Respondent
|
|
|
|
|
|
|
IN THE MATTER OF THE REPRESENTATION OF
BARCLAYS PRIVATE BANK & TRUST LIMITED IN ITS CAPACITY AS TRUSTEE OF THE Z
III TRUST
AND IN THE MATTER OF THE REPRESENTATION
OF VOLAW TRUSTEE LIMITED IN ITS CAPACITY AS TRUSTEE OF THE Z II TRUST
AND IN THE MATTER OF ARTICLES 51 AND 53
OF THE TRUSTS (JERSEY) LAW 1984, (AS AMENDED)
Advocate M. P. Cushing for Barclays Private
Bank & Trust Limited.
Advocate N. G. A. Pearmain for Volaw Trustee
Limited.
Advocate J. M. G. Renouf for Mrs C.
Advocate PC. J. Swart for Rawlinson &
Hunter Trustees SA.
Advocate E. L. Jordan for Equity Trust
(Jersey) Limited.
judgment
the commissioner:
1.
The Court
sat on 1st October, 2015, to give further directions to the trustees
of two related trusts, namely the Z II Trust of which Volaw Trustee Limited
(“Volaw”) is the trustee and the Z III Trust of which Barclays
Private Bank & Trust Limited (“Barclays”) is the trustee. Both Volaw and Barclays have brought representations
to the Court because of the insolvency of their respective trusts and are
currently administering the assets under the directions of the Court.
2.
A trust is
not, of course, a separate legal entity and cannot, as a matter of law, be
insolvent, but it is a useful form of shorthand and we will continue to use it.
3.
There have
been two published judgments in respect of the Z II Trust dated 12th
February, 2015, (Representation of the Z Trusts [2015] JRC 031) and 23rd
September, 2015, Representation of the Z Trusts [2015] JRC 196C) and in
the latter judgment the Court has expressed the view (at paragraphs 30 and 33)
that where a trust becomes insolvent, it should thereafter be administered for
the benefit of the creditors as a body. It has also expressed the view (at
paragraph 29) that the test for insolvency of a trust is the cash-flow test,
namely the inability of the trustee to meet its debts as trustee as they fall
due out of the trust property.
Background
4.
Mrs C has
established eight Z trusts of which Equity Trust (Jersey) Limited
(“Equity”) was the original trustee. She is a beneficiary of all but one of
the trusts (with other members of the family), all of which are subject to the
proper law of Jersey. She is now 87
and is Syrian by birth. English is
her second language. She has lived
in Syria all of her life until the civil war caused her to leave. She now lives with her son, E, in London
and it is fair to say that he is the driving force behind the activities of the
trusts.
5.
Equity
retired as trustee of all of the trusts between 2006 and 2007 with Volaw Corporate
Trustee Limited becoming trustee of the (first) Z Trust, Volaw becoming trustee
of the Z II Trust and Barclays becoming trustee of the remaining six
trusts. Barclays has now retired as
trustee of all of the remaining trusts, other than the Z III Trust, in favour
of Rawlinson & Hunter Trustees SA (“Rawlinson & Hunter”).
6.
There is a
background of hostility between Mrs C and the family on the one part and Equity
on the other part and there are extant proceedings brought by her and other
beneficiaries of the (First) Z Trust and the Z II Trust together with Volaw in
its capacity as trustee of the Z II Trust alleging breach of trust inter alia. Those proceedings are being defended by
Equity which has raised its own counter-claim.
7.
Mrs C and
the family have been pressing for some time for Rawlinson & Hunter to be
appointed as trustee of all of the trusts (including another connected trust
known as the X Trust) and that has now been achieved with the exception of the Z
II and Z III Trusts. On 9th
June, 2015, frustrated by the delays in bringing that about, Mrs C exercised
her power to appoint Rawlinson & Hunter and another associated company as
additional trustees of the Z II Trust, appointments which the Court felt
constrained to set aside for the reasons set out in its judgment of 23rd
September, 2015, (JRC 196C) and that exercise has delayed the process of the
Court giving directions for ascertaining creditor claims and priorities and
dealing with the realization of the assets of the two trusts for the benefit of
the creditors.
8.
Mrs C and
the family continue to press for Rawlinson & Hunter to take over as
trustees of these two remaining trusts and Rawlinson & Hunter (which has
been convened as a connected creditor of the Z II Trust) is willing to take on
that role.
9.
It is
convenient for the two representations to be heard at the same time because the
two trusts are inter-connected, but we bear in mind the need to consider the
interests of the creditors of each trust separately.
10. The Z Trusts have been very active historically
and there are numerous substantial inter-trust and beneficiary/settlor loans,
but it is possible to distil the current position of the trusts in this way.
The Z II Trust
11. The Z II Trust has one asset (apart from a
small amount of cash), namely a loan due by the Z III Trust in the sum of
£186M bearing interest (“the Z III Loan”). Volaw have taken a view as to the
ability of the Z III Trust to repay the Z III Loan and have written it down,
therefore, to the sum of £6M.
12. The Z II Trust has loan liabilities to Mrs C, E
and other connected trusts and companies totalling some £211M (“the
connected creditors”). The
only unconnected liabilities are to Volaw for its outstanding fees in the sum
of £1.1M, and, potentially, to Equity in its capacity as former trustee
under the indemnity given to it when it retired on 11th October,
2006, and pursuant to its equitable rights in law to be indemnified out of the
trust fund (see the judgment of the Court dated 12th February, 2015,
at paragraph 13).
13. Equity’s potential claim (which is not
accepted by Volaw) arises out of proceedings brought against it and two of its
former employees by the liquidators of an English company, Angelmist Properties
Limited (“Angelmist”), now in compulsory liquidation. In very brief terms, it is alleged that
the employees, as directors of Angelmist, allowed the sale of a commercial
property to its parent company (both forming part of the Z II Trust trust fund
when it was trustee) at an under value of some £42.5M and that this was
to the detriment of creditors of Angelmist, principally HM Revenue &
Customs.
14. On 30th June, 2015, summary judgment
was given in the High Court against the former employees in a sum effectively
equating to a reasonable proportion of the likely amount of the final judgment,
namely £12M plus legal costs, but the claim continues against Equity on
the basis that it is liable either vicariously for the acts of its employees or
as a shadow director. Equity has
discharged the sums due by its former employees under this summary judgment out
of its own funds. Judgment in the
extant proceedings is not expected until next year. Equity says it has expended some
£2M in costs to date again out of its own funds.
15. At one stage, Equity agreed to cap its claim
against the Z II Trust in relation to the Angelmist proceedings at £2M,
if that sum could be ring-fenced within the Z II Trust. That ring-fencing was not achieved and
Equity says it is no longer bound by that agreement. The position therefore is that Equity
looks to the Z II Trust to meet the whole of its potential liability in the
Angelmist proceedings. Furthermore
it asserts that its equitable rights as former trustee over the trust fund take
priority over those of the current trustee i.e. over all the claims of the
other creditors; an assertion which is not accepted by Volaw or Mrs C (or
Barclays in relation to Equity’s claim against the Z III Trust).
16. Equity accepts that currently no sums are due
to it. Any claim by Equity cannot
be quantified until the Angelmist proceedings are completed next year. Advocate Jordan was reluctant to
describe Equity as a contingent creditor – she preferred to describe it
as a future creditor. We are not
sure whether anything turns on this, but it does seem to us that Equity’s
claim is contingent upon the outcome of the English proceedings, and, if
successfully defended, the extent to which it may have incurred irrecoverable
costs. That is not to deny the
serious position that Equity is in as a consequence of having been trustee of
the Z II Trust--it has already had to pay some £14M of its own funds to
meet the judgment against the former employees and its own costs. That potential liability to Equity must,
in our view, be taken into account in the administration of the assets of the Z
II Trust. For convenience we will
continue to describe Equity as a contingent creditor but accept that we have
not heard full argument as to its precise status.
17. The outstanding fees of Volaw are presently due
and the Z II Trust is therefore insolvent on the cash-flow (as well as balance
sheet) basis. However, Rawlinson
& Hunter, as proposed new trustee, and Volaw have made considerable
progress on the terms of Volaw’s retirement as trustee and are very close
to an agreement over the payment of its outstanding fees and the fees it has
incurred in bringing its representation.
It became clear in discussion that if Volaw were to retire and be
removed as a creditor, the Z II Trust might be restored to solvency in that
there would be no sums presently due to any creditor --none of the connected
creditors are currently pressing any of their claims. As Advocate Jordan pointed out, however,
its solvency would be somewhat precarious (without further support) as it has
precious little cash to meet any claims that might become due in the future. For example, it has an unquantified
liability in relation to a costs order the Court recently made against all
eight trusts arising out of the representation brought by Mrs C and which was
the subject of the Court’s judgment of 12th February, 2015.
The Z III Trust
18. The Z III Trust has assets valued at
£15.9M including cash of just under £4.3M. It is currently engaged in litigation in
England against Ernst & Young LLP in respect of what the parties describe
as the Esporta acquisition. The
final hearing has taken place and judgment has been reserved. This asset only has a positive,
potentially very substantial, value if the proceedings are successful, but a
negative value if they are unsuccessful.
This litigation has been conducted under the directions of the Court.
19. The Z III Trust has liabilities of £279M,
the most substantial being a liability to Mrs C in the sum of £86M and
the above mentioned liability to the Z II Trust under the Z III Loan in the sum
of £186M. Again, we would
describe them as “connected creditors”. Of the remaining unconnected creditors:-
(i)
There are
legal and trustee’s fees due to Barclays in the sum of £0.425m.
(ii) £90,820 is claimed by Equity in respect
of unrecovered costs of litigation it had been involved in as former
trustee. Advocate Jordan informed
us that Equity was very close to reaching a compromise in relation to this
relatively small claim.
(iii) Abbey National Treasury Services Plc (part of
the Santander Group –“Santander”) has made a claim under a
guarantee entered into by Barclays in 2007, in respect of a facility granted to
a company within the trust fund in connection with the acquisition of a
property in London in which a business known as “the Buddha Bar”
operated. That company was placed
into administration in 2010 and on 12th September, 2012, a demand
was made by Santander under the guarantee for £9.5M (which stands to be
reduced to some £6M following the sale of the property) which claim was
rejected by Barclays (on advice) as being of no merit. It has not been pursued since, despite
Santander being notified of the application brought by Barclays. Advocate Cushing describes this as a
contingent claim but from our understanding, it is a claim that has been made
and rejected.
(iv) A further creditor has been more recently
identified by Barclays in relation to Queensdale Properties Limited
(“Queensdale”), a company owned by the Z III Trust. It sold a property in 2011, lending the
net proceeds to the Z III Trust.
Queensdale has now been notified by Westminster City Council that there
are unpaid business rates amounting to £197,000. It is anticipated that Queensdale will
seek repayment of its loan from the trust in order to meet that liability.
Insolvency regime
20. Barclays and Volaw have put forward proposals
as to the directions the Court should now give for ascertaining creditor claims
and priorities and for dealing with the realisation of the trusts’
assets. They propose a regime
modelled on that approved by the Court in the case of Re Hickman [2009]
JRC 040, which was concerned with an insolvent estate. That regime had in turn been modelled
upon the Bankruptcy (Désastre)(Jersey) Law 1990 and the Bankruptcy
(Désastre) Rules 2006.
21. The executor in that case was concerned with
debts incurred by the deceased with third parties, but in the case of a trust,
all of the claims of the creditors are against the trustee (save where security
has been taken directly over the trust assets), with their rights being
subrogated to the trustee’s right of indemnity against the trust fund. It might be perceived, therefore, that
there is an inherent conflict in a trustee undertaking the process of
examining, admitting or rejecting claims against itself and for this reason,
Barclays and Volaw proposed the appointment by them as trustees (using existing
powers under their respective trust deeds) of an insolvency practitioner to
undertake the process of examination, admission and rejection of claims.
22. However, where the creditors know that the
trustee is acting as trustee (see Article 32(1)(a) of the Trusts (Jersey)
Law 1984 (“the Trusts Law”)) or where a creditor’s claim
is otherwise limited contractually to the trust fund, the claims will only
extend to the trust property. The
trustee, therefore, will have no personal liability and the conflict is more
perceived than real; the trustee is in essence a cypher through whom the claims
of the creditors are made. That
would not apply, of course to the trustee’s own claim for fees and
expenses, but the payment of fees to itself is a conflict inherent in the
position of a professional trustee and is manageable under the supervision of
the Court.
23. In a helpful email of 20th March,
2015, Advocate Cushing acknowledged that this was the case and made it clear
that Barclays was content to undertake the process of examining, admitting or
rejecting claims, if that was the wish of the creditors, in order to avoid the
additional cost of an insolvency practitioner. We understand Volaw to be of the same
view.
24. Equity put forward a similar regime, but with
important differences. It proposed
that the Court, exercising its supervisory jurisdiction, should directly
appoint an insolvency practitioner (who would thereby become an officer of the
Court) to undertake the winding up of the trusts, including the realization of
the trusts’ assets, reducing the trustees to that of a bare trustee. It recommended that there should be a
different insolvency practitioner for each trust. In addition, it proposed that the
insolvency practitioner should conduct an investigation to determine whether
there had been any actual potential breaches of trust, bearing in mind that
each trust had been reduced to insolvency, reporting his or her findings to the
Court on a confidential basis. Whilst
there is no obligation on a new trustee to conduct such an investigation (see Lewin
on Trusts 19th edition at 23-108), this had been put forward by analogy
with the duty of liquidators of companies appointed by the Court (see In re
3B Holdings Ltd [2012] (1) JLR N 15). Rawlinson & Hunter and Mrs C strongly
resisted the imposition of such a regime and in particular, the incurring of
the no doubt substantial costs involved in the appointment of an insolvency
practitioner; indeed the Z II Trust has virtually no liquid funds to pay the
fees and expenses of any such insolvency practitioner. Such a step, they argued, would be quite
disproportionate and made at the instance, in reality, of Equity, whose claim
in relation to the Z III Trust was very small (and about to be compromised) and
whose claim in relation to the Z II Trust was contingent upon the outcome of
the Angelmist proceedings. Mrs C
feared that such a costly regime would lead to the loss of all of the assets
held within the Z III Trust, many of which are of great sentimental value to
the family.
25. Because of its trusteeship of the other trusts,
Rawlinson & Hunter was in a position to take over as trustee of the Z II
and Z III Trusts on the basis that it would not charge for its fees and
expenses against either trust fund until further order of the Court; its fees
would be discharged from outside the trusts by a party who is not presently a
debtor or creditor of the trusts.
It would take a direct novation of all of the connected creditor claims
and those of Santander and Equity. There
would be an effective release of Barclays and Volaw from all known actual and
asserted liabilities incurred by them as trustees. Furthermore, it would take over as
representor in respect of both representations, which it would not seek to
withdraw without leave of the Court.
It would undertake that no payments would be made from the Z III Trust
other than for the maintenance and upkeep of the trust assets without Court
approval and in respect of the Z II Trust, it would give the following
undertakings:-
(i)
Rawlinson
& Hunter will not take any steps or facilitate or support steps taken by
any other person to compromise or prejudice in any way Rawlinson &
Hunter’s ability as trustee of the Z II Trust to claim or recover under
the Z III Loan.
(ii) Rawlinson & Hunter will not charge any fees
or expenses against the trust fund of Z II (or the Z III Trust), all of which
will be funded from outside the trust by a party that is not presently a debtor
or creditor of Z II or III, until further order.
(iii) Rawlinson & Hunter will obtain agreements
from the connected creditors of the trusts that they will not demand payment of
their loans until the earliest of:-
(a) Equity bringing its claim under the indemnity
contained under the deed of appointment and retirement of trustees dated 11th
October, 2006.
(b) Equity giving notice of its intention not to
pursue its claim under its indemnity.
(c) Equity not pursuing its claim within a time
period that would be specified by the Court.
Rawlinson & Hunter proposed that Equity
should establish its claim to indemnification within six weeks.
(iv) Rawlinson & Hunter will otherwise continue
to administer the Z II trust in accordance with its terms and under the
supervision of the Court.
Decision
26. In our judgment, in the case of an insolvency
or probable insolvency of a trust, the starting point for the Court is to
supervise the administration of the trust in the interests of the creditors as
a body by way of directions given to the incumbent trustee. That is supported by Lewin on Trusts
19th edition at paragraph 22 – 086.
27. It is well established that a trustee cannot be
directed by the Court to do something outside the powers conferred upon it by
the trust deed (see paragraph 65 of In re IMK Family Trust [2008] JLR 250). In the context of these two trusts
however, the trustees would have the power to engage an insolvency practitioner
to assist them in the process of winding up the trusts and, if appropriate, to
delegate powers to that insolvency practitioner.
28. There is precedent for the Court appointing
receivers of a trust (see Re IMK Family Trust at paragraph 106) but it
is a power to be exercised very sparingly.
We believe that is the only case in which the Jersey court has exercised
such a power in relation to a trust.
29. There is no example of this Court (or as we
understand it the English Court) directly appointing an insolvency practitioner
to conduct the winding up of an insolvent trust including the realisation of
the trust assets; a proposal which in our view is tantamount to appointing the
insolvency practitioner as receiver of the trust assets. We are inclined to agree with Advocate
Jordan, however, that whether the trust assets remain in the legal ownership of
the trustee or the insolvency practitioner is appointed receiver, the Court
would have the power to do so in an appropriate case. As Bailhache, then Deputy Bailiff, said
in Re WW and XX [2011] JRC 231 at paragraph 13:-
“13 Article 51 confers a general discretion on
the Court to make orders in relation to a trust if it thinks fit. This gives statutory recognition of the
Court’s equitable jurisdiction in relation to trusts. It is a wide and vibrant
jurisdiction.”
30. If, for example, there were lay trustees of an
insolvent trust, ill-equipped to wind that trust up under the directions of the
Court, then the imposition of a receiver to conduct that winding up might well
be justified as being in the interests of the creditors. The views of the creditors would, of
course, carry great weight.
Equally, such a step might be justified where a professional trustee has
a real conflict which makes it impractical for it to conduct the winding up,
even under the supervision of the Court.
31. Where, however, as here, there are professional
trustees in office with no unmanageable conflict, then it would ordinarily be
much more cost effective, and therefore in the interest of the creditors, for
those trustees to remain in office and to conduct the winding up process under
the supervision of the Court.
32. We do not think it should follow that in the
case of an insolvent trust a regime of the kind adopted in Re Hickman
should always be adopted. The Court
should be flexible in its approach, having regard always to the best interests
of the creditors as a body. This is
not a case where the trustees are facing numerous claims from third party
creditors all pressing for their claims to be paid and the trust assets
realised. The vast majority of the
creditors both in number and value are connected and (leaving aside the Z III
Loan) are not pressing for their claims to be paid or the assets realised; on
the contrary and as we understand it they oppose the imposition of a Hickman
type regime, which they say will simply destroy what value there is left in the
only trust that has assets namely the Z III Trust. Such a regime is in reality, they say,
only being pressed by Equity, whose claim is contingent. Their views should be taken into account
but it is to the interests of the body of the creditors that the Court must
look and that includes Equity which is entitled to be treated fairly.
The Z II Trust
33. Taking the Z II Trust first, Volaw have already
accepted the loans due to the connected creditors which are all set out in the
trust accounts approved by it. There
seems little point in going to the cost of the connected creditors (the only
present creditors) having to go through a claims assessment process, when in
reality it is only the (disputed) contingent claim of Equity that is
contentious.
34. Volaw, perhaps understandably, would like to
retire as trustee and it is close to agreeing a compromise of its claim for
fees with Rawlinson & Hunter. The
connected creditors support the appointment of Rawlinson & Hunter, but is
it in the interests of the creditors as a body for it to be appointed in
Volaw’s place?
35. Equity’s initial objection to the
appointment of Rawlinson & Hunter as trustee was that it is resident out of
the jurisdiction, but that has been addressed (see paragraphs 53 and 54 of the
judgment of 23rd September, 2015). By becoming trustee, Rawlinson &
Hunter will, pursuant to the terms of the trust deed, submit to the non-exclusive
jurisdiction of the Court, and furthermore, it will undertake to take over
Volaw’s representation and to administer the trust under the supervision
of the Court.
36. Advocate Jordan agreed that to have a
professional trustee firstly willing to take on the trusteeship and secondly to
do so at no cost to the trust fund was clearly in the interests of all of the
creditors, including Equity. She
maintained her objection, however, to the appointment of Rawlinson & Hunter
on the grounds of its potential conflict, in that it is a creditor of the Z II
Trust in its capacity as trustee of other connected trusts. As we said above there would appear to
be no contention in relation to any of these connected loans, all of which are
clearly set out in the relevant accounts.
The only area of contention relates to Equity, both in relation to its
contingent claim and its claim for priority. The question of priority is an issue of
law which only the Court can determine.
Indeed, it is agreed between the parties that it should determine this
issue in early course. As to its
contingent claim, we do not see how this can be determined until the Angelmist
proceedings are completed and the basis upon which it may be found liable under
those proceedings may well have a bearing upon whether it is able to seek to be
indemnified out of the trust assets. If it seeks an indemnity, it will either
be accepted by Rawlinson & Hunter on advice or rejected, in which event, it
will be referred to the Court for its determination.
37. In all, we do not think that there are issues
of conflict which prevent Rawlinson & Hunter being appointed as trustee
which cannot be managed under the supervision of the Court. It follows that in our judgment,
Rawlinson & Hunter should now replace Volaw as trustee on the basis of the
undertakings it has put forward and in the expectation that Volaw’s costs
can be settled, removing it as a creditor.
As previously indicated, that may have the consequence of restoring the Z
II Trust to solvency.
38. Advocate Swart’s draft directions
envisaged the appointment and retirement of trustees being undertaken with the
sanction of the Court, but consensually between Mrs C (who has the power to
appoint new trustees), Volaw and Rawlinson & Hunter, using the draft deeds
that have been substantially agreed.
That will have to proceed without Equity being a party, as Advocate Jordan
has made it clear that it will not agree to be a party, and we do not think we
have the power to direct it, as a former trustee, to enter into a contractual
document of that kind.
39. It was accepted by counsel that the Court had
the power to remove Volaw and appoint Rawlinson & Hunter under Article 51
of the Trusts Law (and see again Re WW and XX at paragraph 14), but we
propose to give Mrs C, Volaw and Rawlinson & Hunter 21 days to bring this
retirement and appointment about consensually, failing which we will be minded
to exercise our powers to do so.
40. That leaves the question of the Z III Loan, in
respect of which demand has been made by Volaw because of the insolvency of the
Z II Trust. The Z III Loan is the
only means by which Equity, if it has a claim against the Z II Trust, can
expect to receive any kind of recovery as it is the sole asset of the Z II
Trust. The connected creditors of
the Z II Trust, who, following any settlement with Volaw, will be the only
present creditors of the Z II Trust (Equity’s claim being contingent),
will seek we anticipate through Rawlinson & Hunter the withdrawal of that
demand. Equity alone is likely to
oppose such a withdrawal. If the
demand is not withdrawn, then there may be no alternative to the realization of
the Z III assets and this at the instance of a contingent creditor of the Z II
Trust whose claim has yet to be established. In the light of the undertakings
Rawlinson & Hunter are prepared to give in relation to the Z II Trust and
(as we indicate below) Barclays’ continued trusteeship of the Z III Trust
under the supervision of the Court, we would consider such an outcome to be
disproportionate and unfair.
41. We must first await the appointment of
Rawlinson & Hunter as trustee of the Z II Trust and its own application in
relation to the withdrawal of that demand.
That application may turn out to be made in the context of the Z II
Trust having been restored to solvency.
It may be fair for the withdrawal of that demand to be on terms which
allow Equity to have some oversight of the ongoing administration of the Z III
Trust in respect of which it is likely to have no interest as a potential
creditor, assuming its claim is compromised as anticipated. We would have hoped, however, that these
matters could be the subject of an agreement between Equity and Rawlinson &
Hunter so as to avoid the cost of a further contested application on this
issue.
Z III Trust
42. Turning to the Z III Trust, Barclays is not
prepared to resign without security for its potential liabilities in relation
to the Esporta litigation (in which it is a plaintiff in English proceedings)
and the Santander guarantee.
Article 34(2) of the Trusts Law provides that a trustee who retires or
is removed may require to be provided with reasonable security for liabilities
whether existing future contingent or otherwise before surrendering the trust
property and it is clear that if Barclays were to retire or were to be removed
by the Court, it would not surrender the trust property. Whether it would be reasonable for it to
retain the entire trust fund by way of security could be open to argument but
it is clear that little would be gained by Barclays’ immediate retirement
or removal. Notwithstanding the
benefit of having Rawlinson & Hunter as trustee at no cost to the trust
fund, we accept that Barclays will remain as trustee for the time being, and in
the light of the Z III Loan, we think there is some advantage in it doing so.
43. Equity’s claim will, as we understand it,
soon be settled, which leaves the Z III Trust with two issues which, in the
good administration of the trust, should we feel be resolved. The first relates to the Queensdale loan
in respect of which there seems little doubt that it should be repaid to the
extent necessary to meet the unpaid business rates levied by Westminster City
Council in the sum of £197,797, but in order to avoid any issue as to a
possible preference, that payment should be delayed until the question of the
withdrawal of the demand by the Z II Trust for the repayment of the Z III Loan
is considered.
44. As to Santander, it has shown no interest in
pursuing its claim and as that claim will not be proscribed until 14th
May, 2022, its continued existence is hindering the good administration of the
trust. Santander should, therefore,
be given, we suggest six weeks, in which to issue and serve proceedings in
relation to its claim, failing which Barclays will be directed to administer
the trust on the basis that Santander has no claim.
45. Barclays will be in the hands of Rawlinson
& Hunter as to whether the demand for the repayment of the Z III Loan is
withdrawn, but if it is then the Z III Trust may well be restored to solvency.
Summary
46. To summarise:-
The Z II Trust
(i)
Subject as
hereinafter set out, Volaw is granted leave to retire as trustee of the Z II
Trust.
(ii) Subject as hereinafter set out, Mrs C’s
proposed exercise of her power of appointment of trustees to appoint Rawlinson
& Hunter as trustee of the Z II Trust in place of Volaw is sanctioned and
blessed.
(iii) The retirement of Volaw and the appointment of
Rawlinson & Hunter is subject to it first giving to the Court the following
undertakings (subject to such amendment as counsel may put forward for
consideration):-
(a) Rawlinson & Hunter will not take any steps
to facilitate or support steps taken by any other person to compromise or
prejudice in any way Rawlinson & Hunter’s ability as trustee of Z II
Trust to claim or recover the Z III Loan.
(b) Rawlinson & Hunter will not charge any fees
or expenses against the trust fund of the Z II Trust, all of which will be
funded from outside the Z II Trust by a party that is not presently a debtor or
creditor of the Z II Trust or the Z III Trust until further order.
(c) Rawlinson & Hunter will obtain agreements
from the connected creditors of the Z II Trust which confirm that they will not
demand repayment of their loans until the earliest of:-
(1) Equity proving its claim against the Z II Trust
in relation to the Angelmist proceedings.
(2) Equity giving notice of its intention not to
pursue its claim against the Z II Trust in relation to the Angelmist
proceedings.
(3) A time period that the Court may hereafter
determine.
(d) No payments will be made from the Z II Trust
other than for the maintenance and upkeep of the trust assets without Court
approval.
(e) Rawlinson & Hunter will otherwise continue
to administer the Z II Trust in accordance with its terms and under the
supervision of the Court.
(iv) If Rawlinson & Hunter is not appointed
trustee of the Z II Trust within 21 days, then Volaw shall bring this matter
back to the Court for it to consider exercising its own powers to bring that
about.
(v) The issue of whether Equity has priority in
relation to its contingent claim will be determined by the Court on a date to
be fixed by counsel (time estimate 1 day).
In order to contain costs, that issue will be argued as between Equity,
Rawlinson & Hunter (as new trustee of the Z II Trust) and Mrs C. The parties are invited to agree
directions for the filing of sequential skeleton arguments and authorities.
The Z III Trust
(vi) Barclays will continue as trustee of the Z III
Trust under the supervision of the Court and on the basis of the existing
directions.
(vii) Barclays will resolve the Queensdale loan claim
if and when the demand for the repayment of the Z III Loan is withdrawn.
(viii) Barclays will give Santander notice in writing
that if it does not issue and serve upon Barclays legal proceedings in relation
to its claim under the guarantee within six weeks, then this Court will direct
Barclays to administer the Z III Trust on the basis that it has no claim. For that purpose, Santander can be
provided by Barclays with a redacted copy of the Act of Court so ordering and
of this judgment (redacting that part which relates to the Z II Trust).
(ix) In the event that Santander does issue and
serve proceedings, Barclays shall be permitted to pay out of the assets of the Z
III Trust the cost of retaining English solicitors to file a defence and to
obtain further advice on the merits. Barclays shall then bring the matter back
before the Court for further directions to be given.
47. There will be liberty to apply.
Authorities
Representation
of the Z Trusts [2015] JRC 031.
Representation
of the Z Trusts [2015] JRC 196C.
Re
Hickman [2009] JRC 040.
Bankruptcy (Désastre)(Jersey)
Law 1990.
Bankruptcy (Désastre) Rules
2006.
Trusts (Jersey) Law 1984.
Lewin on Trusts 19th edition.
In
re 3B Holdings Ltd [2012] (1) JLR N 15.
In
re IMK Family Trust [2008] JLR 250.
Re
WW and XX [2011] JRC 231.