Trust - compromise agreement - reasons.

[2020]JRC020

Royal Court

(Samedi)

30 January 2020

Crown Advocate M. T. Jowitt for the Attorney General. 

Advocate O. A. Lindop for the Respondent. 

Advocate P. G. Nicholls for the Intervenor. 

judgment

the commissioner:

1.        On 19^th December, 2019, the Court gave judgment approving a compromise of the proceedings commenced by the Attorney General against the Respondent to which the Intervenor had successfully applied to be joined.  Reasons were reserved and this judgment contains those reasons. 

2.        In his representation, the Attorney General asserted that he had reasonable grounds to believe that certain bank accounts held by the Respondent at Standard Bank Jersey Limited with credit balances at the start of the proceedings in the sum of just under US$17 million were tainted property and that the other conditions in Article 10(2) of the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018 (“the Law”) were satisfied.  The application was made by the Attorney under Article 11 of the Law for a forfeiture order in respect of the allegedly tainted property.  The representation was brought on 3^rd May 2019, and duly served on the Respondent (“the Trustee”) in its capacity as trustee of the Truk Settlement (“the Trust”), a discretionary settlement established on 17^th September, 2014. 

3.        The Intervenor successfully applied to be joined to the proceedings on 26^th September, 2019.  He is the settlor, although he is not the economic settlor of the Trust.  He made it plain that he denied that the accounts contained tainted property, and he contended that the property should be distributed to the charitable beneficiaries of that Trust.  Those initial beneficiaries were the Swiss Red Cross and UNICEF. 

4.        The Court was informed that on 26^th November, 2019, the Intervenor, pursuant to his powers contained in the Trust, added the Durrell Wildlife Conservation Trust (“Durrell”) as a beneficiary of the Trust. 

5.        The application made to the Court was for an order approving settlement of the proceedings in accordance with a compromise agreement made in December 2019 between the Attorney General, the Respondent and the Intervenor.  The statutory provision for such approval is to be found in Article 34 of the Law and it is in these terms:-

“Consent to settlement

(1)       On an application made by the Attorney General for the purpose, and if the condition in paragraph (2) is fulfilled, the Court may make an order in any proceedings under Article 11, 12 or 15, on terms agreed between the Attorney General and other parties to the proceedings, for the disposal of the proceedings.

(2)       The condition mentioned in paragraph (1) is that each person to whose property the proceedings and the agreement relate is a party both to the proceedings and to the agreement.

(3)       An order under paragraph (1) may –

(a)       in particular, and without derogation from the Court’s discretion, make provision for any property –

(i)        which may be liable to forfeiture under this Law, to cease to be so liable, or

(ii)       to be returned to a person to whom it belongs; and

(b)       make such further provision as the Court may think fit.”

6.        We note that the condition mentioned in Article 34(1) is met in that each person to whose property the proceedings and the agreement relate is a party both to the proceedings and to the agreement. 

7.        In the present case, no cash detention order has been made.  The monies in the accounts are effectively blocked because the police have refused the Trustee any approval to deal in them.  The fact that there is no existing order of the Court prohibiting dealings in any of the accounts in question has no doubt facilitated the drafting of the compromise agreement in the sense that it is unnecessary for the Court to consider any further mechanical or technical steps that need to be taken before the compromise agreement can be implemented.  

8.        The terms of the agreement which has been reached by the parties to it are essentially these:-

(i)        65% of the funds in the accounts will be paid into the Criminal Offences Confiscation Fund.

(ii)       The balance of 35% shall be divided between the beneficiaries in these proportions – 1/5th to the Swiss Red Cross, 1/5th to UNICEF and 3/5ths to Durrell. 

9.        Article 34 of the Law is permissive – the Court is given a discretion to approve a settlement, but clearly it does not have to do so.  No doubt there will be cases where the parties to an agreement in proceedings of this kind do not ask the Court to approve the agreement – these are, after all, civil proceedings and in the usual way, parties to civil proceedings can choose to compromise them on such terms as they think fit.  At all events, for the reasons which will become apparent, this did not happen in the present case, but the fact that it did not happen has had the result that the Court has considered the principles upon which its discretion should be exercised under this Article. 

10.      It was submitted by Advocate Jowitt, with whom Advocates Lindop and Nicholls agreed, that Article 34(1) of the Law carried the necessary implication that the extent of the Court’s discretion to make an order for the disposal of the proceedings was limited to an order which approved the terms agreed between the Attorney General and the other parties.  It is not necessary to decide that question for the purposes of the present application, and we have not heard any significant argument on it.  It is therefore sufficient to say that we incline to the view, without deciding it, that the submission is well made. 

11.      Next it was submitted by counsel that, because this is a civil case and it is a matter for the parties to determine on what basis they compromise litigation, the Court ought not to prevent the compromise having effect unless it is either unlawful or contrary to public policy.  Although we have not heard argument upon it, we think that submission is well founded.  The Court is not obliged to approve the compromise – the terms of Article 34 provide for a permissive “may” in paragraph 1.  It follows that the Court may decide not to make an order if it feels uncomfortable for any reason in doing so but the fact that the Court has not made an order does not in our judgment prohibit the parties from agreeing a compromise of the proceedings leading to a withdrawal of those proceedings by the Attorney General.  Accordingly, while the Court is not obliged to make the order, the occasions on which it certainly will not do so are those where the compromise is considered to be unlawful or contrary to public policy. 

12.      It is clear that the purpose of the 2018 Law is to provide a mechanism by which assets can be forfeited where those who claim to be the owner of them are unable to demonstrate that they are not the proceeds or instrumentalities of crime.  That purpose is consistent with the raft of legislation which is intended to ensure that those dealing in financial services in particular, but in some other areas of business as well, know their customer and do not knowingly or recklessly provide their services for the benefit of criminals.  The onus or burden is on the person who claims the assets to demonstrate that they have been legitimately obtained, and where the person concerned is unable to do so, then forfeiture is likely to follow and the property will be regarded as tainted to a civil standard of proof and passed into the Criminal Offences Confiscation Fund. 

13.      It is important to distinguish between the purpose of the legislation and the consequences of an order – in other words, in our judgment it is not the case that the purpose of the Law is to see an increase in the value of the Criminal Offences Confiscation Fund.  The purpose is to remove tainted property from those who have it in their possession and control, and are unable to show a legitimate provenance for it.  In the present case, an appropriation to the Fund will follow from this compromise agreement.  It does not necessarily follow that such an accretion of monies to the Fund is a precondition of the Court’s approval of a compromise agreement, although the public interest undoubtedly includes the desirability of an accretion to that fund. 

14.      It was rightly submitted to us that inevitably in cases of this kind, counsel will be better informed than the Court as to the different factors which might need to be taken into account in considering a compromise.  Indeed, counsel would almost certainly be better placed to make an assessment of litigation risk than is the Court, simply because counsel will have all the information to hand and the Court will not.  The assessment of litigation risk is clearly a material part of the negotiations which lead to a compromise.  Here, if the Attorney failed in his application, the Criminal Offences Confiscation Fund would receive no additional monies and there would be the nagging concern that criminal monies had not been forfeited.  Similarly, as far as Advocate Nicholls’ client is concerned, the assessment of litigation risk there would be that the charities, which he says were always intended to benefit from this Trust, would not in fact benefit at all because if the proceedings were lost, then the whole of the monies in the bank accounts would accrue to the Criminal Offences Confiscation Fund.  An agreement which compromises the claims is in those circumstances a perfectly natural and proper step to take.  It is equally clearly not contrary to the public interest or to public policy not only because the statute provides for a mechanism by which such agreements can be put before the Court for approval, but also because an agreement of the kind put before us is consistent with the purpose of the legislation. 

15.      In the present case, we are satisfied that proper provision has indeed been made against the different risks which are involved.  On behalf of the Intervenor, Advocate Nicholls made a number of points which we think were entirely appropriate.  He pointed to the significant value of the accounts in question, intended to benefit charitable objects, and in his view the condition precedent in the agreement which required the Court to approve the compromise would give the charities in question comfort that they could properly receive their share of the monies in question. 

16.      Secondly, Advocate Nicholls told us that his client was not the economic settlor in the sense that there had been some previous structures with which his client had been involved, but the economic settlor was originally a long deceased US businessman who had died more than 40 years ago.  That led him on to the third point which was that there were limited financial records from which the provenance of the funds could be justified.  The costs of investigation would be great, and as a result of the provisions of the Law, costs could not be recovered from the Attorney even if the intervention was successful. 

17.      Advocate Nicholls reminded us of the recent addition of Durrell as a beneficiary.  The reason given for this was that his client believed that the first structure in 1979 received the proceeds of sale of what he described as a safari club, which was in fact a club from which animals in the wild were likely to suffer.  There was a pleasing irony that the result of this compromise would be that monies which had derived from cruelty to animals would be applied to put right that earlier wrong through the good work of Durrell internationally.  

18.      There is one matter which we also wished to mention expressly in this judgment.  The Respondent is trustee of the Trust made in 2014 in respect of which there are discretionary beneficiaries.  As a result of this compromise agreement, 65% of the Trust fund will in effect be paid outside the beneficial class to the Criminal Offences Confiscation Fund.  As far as the Trustee is concerned, the rationale for that payment lies in its inability to demonstrate the lawful provenance of the monies in question, and of course if neither it nor the Intervenor could do so, then the result of the litigation would be that charities would not benefit at all.  We clarified with Advocate Lindop that this Court was not a Beddoe Court.  We did not endorse the making of the agreement by the Trustee in that sense.  The Court was here acting as a forfeiture court, and if any trust matter should arise at a later date, although that is not anticipated, the Trustees will have to deal with that on its merits, and the Court does not by this judgment give the Trustee any confirmation that in the exercise of its powers as Trustee to make the compromise, it has acted appropriately.  That judgment has been made by the Trustee alone. 

19.      For these reasons, we have approved the compromise agreement which on the information before us seems to reflect a proper assessment of litigation risk for the different parties to the litigation.  Accordingly settlement of the proceedings is approved on the terms of the compromise agreement and there is liberty to apply only as to carrying those terms into effect.  We note that upon payment of the settlement sum and the charitable distribution, the proceedings will be discontinued with no further order as to costs. 

20.      Finally, it is right in this public judgment to make plain that the compromise agreement has been entered into without admission by either the Respondent or the Intervenor that the accounts in question constituted tainted property as defined in Article 2 of the 2018 Law.  The Attorney General accepts that that is the basis upon which the Trustee and the Intervenor have entered into the compromise agreement and furthermore he has agreed that he shall not hold out any future representations that, as a result of this compromise, there has been any admission that the funds in question were tainted property. 

Authorities

Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018.