Trust.
[2021]JRC241
Royal Court
(Samedi)
28 August 2021
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Before :
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J. A. Clyde-Smith OBE, Esq.,
Commissioner, and Jurats Crill and Christensen
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Between
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Erinvale PTC Limited
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Representor
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And
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B via his court-appointed delegate C
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First Respondent
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And
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D
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Second Respondent
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And
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E, F, T and G
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Third Respondents
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And
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J
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Fourth Respondent
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And
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Advocate Damian Evans, as Guardian ad
litem for the minor Y, N, P, Q, R and unborn beneficiaries.
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Fifth Respondents
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IN THE MATTER OF
THE REPRESENTATION OF ERINVALE PTC LIMITED
AND
IN THE MATTER OF
ARTICLES 51 AND 53 OF THE TRUSTS (JERSEY) LAW 1984 (AS
AMENDED)
Advocate B. J. Lincoln for the Representor.
Advocate P. D. James for the First Respondent.
Advocate P. C. Sinel
for the Second Respondent.
Advocate S. A. Franckel
for the Third Respondent.
Advocate D. Evans for the minor beneficiaries
and unborn beneficiaries.
judgment
the commissioner:
1.
By its
representation of 3rd November 2020, the Representor (“Erinvale”), a private trust company, seeks directions
from the Court as to whether it would be in the best interests of the
beneficiaries for it to remain as trustee of the A Settlement or for its
directors to resign.
2.
The Court
heard the representation over three days commencing 12th July 2021
and on 15th July 2021, the Court informed the parties of its
decision, namely that it would direct Erinvale to
remain as trustee and for the directors to remain in office. The Court now gives that decision
formally and sets out its reasons.
Background
3.
Much of
the background is set out in the Court’s judgment of 15th
October 2020 (Erinvale PTC Limited and Ors [2020] JRC 213) in which it set aside a decision of
Erinvale not to add the second respondent (“D”)
as a beneficiary of the A Settlement in her own right. We will refer to this as the
“Addition Judgment”.
4.
At the
centre of this matter are divorce proceedings in Jersey between the first
respondent (“B”) and D, in which she is seeking ancillary
relief. B and D married in 1997 and
have one adult child, namely J. B has
two children by an earlier marriage, namely J and F. E has two
adult children, namely T and G.
There are five minor beneficiaries represented by Advocate Evans, namely
B’s great-granddaughter, Q, the daughter of T, his great-granddaughter Y,
daughter of G, his great-grandson N, son of G, his granddaughter P, daughter of
J and his grandson R, son of J.
5.
B created
the A Settlement on 17th September 2012 at a time when he was
resident in Country 1 and according to his letters of wishes, subsequently
settled into it the whole of his free estate. The assets within the A Settlement are
currently valued by Erinvale at circa
£58 million. The original
trustee was Vivat Trustees Limited (“Vivat”).
6.
The A
Settlement is a discretionary settlement governed by Jersey law, the beneficial
class being described as follows:
“1. The Settlor
2. The
Settlor’s Spouse
3. The
Settlor’s children and remoter issue.”
7.
B, as
settlor, has the right to appoint and dismiss trustees. The power of the trustee to exclude or
add beneficiaries is subject to the trustee first obtaining the consent of B,
as settlor, if alive and of full capacity but in the event of him suffering
from mental incapacity, the consent of the person duly empowered to manage his
affairs.
8.
The
current trustee of the A Settlement is Erinvale, a
private trust company, which was incorporated in Jersey on 15th December
2015, in order to act as trustee in place of Vivat both of the A Settlement and
a number of other family trusts established earlier by B. Erinvale is in
turn owned by a purpose trust established by B known as the H Purpose Trust
(the “Purpose Trust”) Equiom (Jersey)
Limited (“Equiom”), a regulated entity,
is responsible for the administration of Erinvale. The original directors of Erinvale were B, C (a long-term business associate of B and
who was formerly a director of Vivat) and L.
9.
Over the
years, B and D have lived at various addresses in the United Kingdom, the Country
2 and Country 3 and Jersey, to which they moved more recently. Upon their move to Jersey, B was given a
licence to occupy an apartment as a consequence of his employment by (“Company
B”), a Jersey incorporated and regulated finance company, owned as to 90%
by the A Settlement.
10. B executed two letters of wishes to the trustee
of the A Settlement on 17th September 2013 and 11th
November 2013, but in both he expressed this wish in relation to provision for B:
“Provision for [D]
– Please set aside a fund of assets totalling £4 (four million
pounds) for [D]. I would like [D]
to be able to withdraw up to £1m (one million pounds) from this fund to
spend as she wishes. The remainder
should please be invested by you to maximise the income return and provide [D]
with a monthly income which is distributed to her.”
11. He also expressed the wish that D should be
entitled for the rest of her life to use Property 1 owned by another settlement
he had created known as the K Settlement.
12. B’s health was beginning to deteriorate
and by 2017, the marriage had broken down.
On 4th April 2017, Erinvale, as
trustee of the K Settlement, appointed out to D ownership of Company C, which
in turn owned Property 1. D also
jointly owned with B and their son J a family property in County 1 .
13. On 25th April 2017, B’s
English solicitors wrote to D, saying that B had decided to live in Jersey on
his own and that she could no longer therefore have access to the Jersey
apartment. There followed
unsuccessful efforts by Erinvale and D to obtain
consent for her to remain there for the duration of the matrimonial
proceedings.
14. On 30th May 2017, B issued divorce
proceedings in Jersey which were subsequently amended on the 22nd
June 2017 and thereafter were not defended, with the decree nisi being
pronounced on 16th August 2017.
15. B agreed not to apply for the pronouncement of
the decree absolute as it would result in D ceasing to be a beneficiary of the A
Settlement as she would no longer be his spouse. She had not been named as a beneficiary
of the A Settlement in her own right.
The situation that D was in was described by Advocate Sinel as a “black hole” in that, if B
were to die before the decree was made absolute, then under Article 24 of the Matrimonial
Causes (Jersey) Law 1949 the matrimonial proceedings would abate, with the
bulk of the family assets being held within the A Settlement of which she would
cease to be a beneficiary.
Similarly, if B were to die after the making of the decree absolute, but
before orders for ancillary relief were made, the matrimonial proceedings would
continue pursuant to Article 27(1) of the same Law, but again she would cease
to be a beneficiary of the A Settlement, as she would no longer be his spouse.
16. On the 14th December 2018 B was
found by the Court to lack capacity and C was appointed his delegate.
17. The usual procedural steps were taken in the
matrimonial proceedings, including the filing of affidavits of means and the
issuing of schedules of deficiencies. Issues in the matrimonial proceedings
include the validity of the A Settlement, which is being challenged by B, the
extent, if any, that E has contributed to the assets of the A Settlement, and
the extent those assets fall to be discounted as pre-marital property.
18. On 10thJanuary 2019, B applied by
way of representation in the Samedi Division convening Erinvale
and invoking the supervisory jurisdiction of the Court over the A Settlement
(amongst others) and seeking the following orders:
(i)
Disclosure
of information by Erinvale to enable the Court seized
of both her representation and of the divorce proceedings to do justice to the
same.
(ii) The appointment of D as a beneficiary in her
own right.
(iii) That “D’s settlement”
would be paid to D. This would be
calculated by reference to:
“(a) the longevity of [D’s]
relationship with [B].
(b) [D’s] contribution as
partner, mother, and wife;
(c) The nature and size of the
matrimonial assets; and
(d) The
availability both presently and historically of assets held directly or
indirectly for either or both parties both before and after marriage.
The calculation referred to above to be unaffected by gratuitous
dispositions made before or during the marriage.”
19. “Matrimonial assets” was defined as follows:
““Matrimonial
assets” means assets presently available to the parties, whether held
directly or indirectly (in a trust or similar vehicle|) and assets historically
available to the parties before during and after the inception of their
relationship, likewise including assets held directly or indirectly (in a trust
or similar vehicle)”.
20. Thus, there are parallel sets of proceedings in
the Samedi and Family Divisions in which D is seeking the same ultimate
relief. The ancillary relief
proceedings were referred up to the Royal Court by the Registrar and a hearing
of both matters took place before the Master on 2nd April 2019, in
which he identified the need for the Royal Court to determine whether it was
appropriate for D to proceed in the Samedi Division, pursuant to her
representation, or in the Family Division, pursuant to the ancillary relief
proceedings. A number of questions
designed to address that issue were therefore referred to the Royal Court. The Royal Court sat on 11th July
2019, and on 21st November 2019, the Bailiff issued a draft
judgment. Without going into the
answers given to the questions posed, he ruled that the determination of D’s
entitlement should be pursued before the Family Division.
21. By a consent order of 16th April
2020, it was ordered, inter alia, that D’s application in her
representation to be appointed as a beneficiary of the A Settlement in her own
right should be dealt with as a cause de brièveté. At the same time, Erinvale
was convened as a party to the matrimonial proceedings.
22. On the 19thJune 2017, B and C
resigned from the board of Erinvale, and were
replaced by V, a director of Equiom, and M. The current directors are therefore L, V
and M.
23. L is a long-term business associate of B and
heads up Country 3 side of the group of companies which are ultimately owned by
the A Settlement (“Company A”). M is currently an employee of Company B
and owns the remaining 10% of it. M
was formerly employed within the Vivat group, but did not as part of his role
there work on any of the H structures.
There is an agreement by which L receives 15% of the net proceeds of
sale of any disposal of Company A, but neither he nor M receive separate
remuneration for their role as directors of Erinvale.
24. D’s application to be appointed a
beneficiary of the A Settlement was heard on the 3rd and 4th
September 2020 and on 15th October 2020, for the reasons set out in
the Addition Judgment, the Court did intervene in the administration of the A
Settlement, by setting aside the decision of Erinvale
not to add D as a beneficiary in her own right, because the Court found that
the only reasonable decision would have been to appoint her as a beneficiary. Following that decision, Erinvale did appoint D as a beneficiary in her own right on
23rd October 2020 and the decree was made absolute on 23rd
November 2020.
25. The interlocutory proceedings in the
Matrimonial Causes Division and the Samedi Division had been heard at the same
time, and combined Acts of Court issued in respect of both matters. On 11th September 2020, for
reasons set out in an unpublished judgment, Commissioner Clyde-Smith directed
that henceforth, the two sets of proceedings should be dealt with separately
before differently constituted courts.
At that time, there were listed to be heard in the Samedi Division
proceedings a general discovery summons issued by D and an application by B seeking
a stay of her representation, pending the outcome of the matrimonial
proceedings.
26. By letter dated 8th October 2020,
Advocate Sinel gave notice that D would be amending
her representation so as to include a prayer for the removal of Erinvale as trustee, and/or to remove its powers under the A
Settlement. By letter of 9th
October 2020, he requested that the directors resign in favour of replacement
directors. Erinvale
proceeded to consult with the other adult beneficiaries regarding these matters
and some of the views received were vehemently opposed to a change of trustee
or a change of directors.
27. On 3rd November 2020, Erinvale filed this representation, seeking the
Court’s directions as to whether or not it should retire as trustee and
whether or not it would be in the best interests of the beneficiaries of the A
Settlement for the present directors to resign.
28. On 11th November 2020, E and F (who
we will refer to as “the Intervenors”) were given leave to
intervene in the matrimonial proceedings. On 16th November 2020 and by
consent, D's representation was stayed, save in relation to the issue of costs
arising out of the Addition Judgment and an application by D to appeal the
decision of the Bailiff, an application which was subsequently refused.
29. On 30th November 2020, the
Matrimonial Court issued directions for inter alia the filing of
pleadings by D, B, Erinvale and the Intervenors and
for a case management hearing before the judge appointed to preside over the
matrimonial proceedings.
30. That case management hearing took place on 18th
May 2021 before Sir William Bailhache, Commissioner, and directions were issued
to progress the matrimonial proceedings.
For the reasons set out in an unpublished judgment of Sir William
Bailhache of 21st May 2020, the dates for the final hearing of the
matrimonial proceedings had to be vacated and it is thought that it will take
place in the early part of 2022.
Position of the parties
31. By seeking the directions of the Court on the
issue of its trusteeship, Erinvale surrendered its
discretion to the Court (which the Court accepted) and whilst not accepting
that there had been anything wanting in its or the directors’ respective
stewardships of the A Settlement, it was neutral on the issue of whether it
should be directed to resign. The
directors, although not parties to the proceedings, said through Advocate Lincoln
that they felt able to continue in office, although they helpfully indicated
that they would resign if the Court said it was appropriate for them to do so.
32. D’s position was that Erinvale
should be removed as trustee of the A Settlement and a new trustee
appointed. Tentative discussions
had taken place between Advocate Sinel’s firm
and Affinity Private Wealth in Jersey, whose group provide trust and company
services. All of the other
beneficiaries, including notably, D’s son J, were opposed to any
alteration in the status quo, save that C, as delegate for B, was
prepared to countenance a change in the directors of Erinvale
in an attempt to find a tolerable compromise which left no scope for further
procedural disruption and which left a clear path to resolve B’s claims
in the matrimonial proceedings.
The Law
33. There was no dispute that the Court had
jurisdiction to remove and appoint trustees, both under its inherent
jurisdiction and pursuant to Article 51(2)(ii) of the Trusts (Jersey) Law
1984 (“the Trusts Law”).
The guiding principle in exercising such a power is the welfare on the
beneficiaries as a whole and the competent administration of the trust in their
favour. Quoting from the oft cited
judgment of Lord Blackburn in the Privy Council case of Letterstedt
v Broers [1884] 9 App. Cas. 371 at 386-387:
“It seems to their Lordships
that the jurisdiction which a Court of Equity has no difficulty in exercising
… is merely ancillary to its principal duty, to see that the trusts
are properly executed … And therefore, though it should appear that
the charges of misconduct were either not made out, or were greatly
exaggerated, so that the trustee was justified in resisting them, and the Court
might consider that in awarding costs, yet if satisfied that the continuance
of the trustee would prevent the trusts being properly executed, the trustee
might be removed …
…. As soon as all questions
of character are as far settled as the nature of the case admits, it appears
clear that the continuance of the trustee would be detrimental to the execution
of the trusts, even if for no other reason than that human infirmity would
prevent those beneficially interested, or those who act for them, from working
in harmony with the trustee, and if there is no reason to the contrary from the
intentions of the framer of the trust to give this trustee a benefit or
otherwise, the trustee is always advised by his own counsel to resign, and does
so. If, without any reasonable
ground, he refused to do so, it seems to their Lordships that the Court
might think it proper to remove him; ….
In exercising so delicate a
jurisdiction as that of removing trustees, their Lordships do not venture to
lay down any general rule beyond the very broad principle above enunciated,
that their main guide must be the welfare of the beneficiaries. Probably it is not
possible to lay down any more definite rule in a matter so essentially
dependent on details often of great nicety. But they proceed to look carefully into
the circumstances of the case.
It is quite true that friction
or hostility between trustees and the immediate possessor of the trust estate
is not of itself a reason for the removal of the trustees …” (emphasis
added)
34. Lewin on Trusts
20th Edition states (at 14-076 – 14-077):
“The general principle
guiding the court in the exercise of its inherent jurisdiction is the welfare
of the beneficiaries and the competent administration of the trust in their
favour. In cases of positive
misconduct the court will, without hesitation, remove the trustee who has
abused his trust; but it is not every mistake or neglect of duty or inaccuracy
of conduct on the part of a trustee that will induce the court to adopt such a course. Subject to the above general guiding
principle, the act or omission must be such as to endanger the trust property
or to show a want of honesty or a want of proper capacity to execute the
duties, or a want of reasonable fidelity.
The views of the beneficiaries may
be relevant to an exercise of the court’s inherent jurisdiction, though
it rarely suffices to say that a beneficiary has fallen out with a
trustee. Friction or hostility
between trustees and beneficiaries, or between a trustee and his co-trustees,
is not of itself a reason for the removal of a trustee. But where hostility is grounded on the
mode in which the trust has been administered, where it is caused wholly or
partially by overcharges against the trust estate, or where it is likely to
obstruct or hinder the due performance of the trustee’s duties, the court
may come to the conclusion that it is necessary, for the welfare of the
beneficiaries, that a trustee should be removed. In assessing the significance of
friction or hostility between original trustees or executors and a beneficiary,
it is relevant to have regard to the fact that they were chosen by the settlor
or testator and evidence as to his reasons for that choice …” (emphasis added)
35. Thus the existence of friction or hostility
between the beneficiaries and the trustee is not enough to justify removal (per
Lord Blackburn). In Re Wrightson [1908] 1 Ch. 789, Warrington J
stated (at 803):-
“…disagreement
between the cestuis que trust and the trustees, or the disinclination on the
part of the cestuis que trust to have the trust property remain in the hands of
a particular individual is not a sufficient ground for the removal of the
trustees. You must find something
which induces the Court to think either that the trust property will not be
safe, or that the trust will not be properly executed in the interests of the
beneficiaries.” (emphasis added)
36. The views of the beneficiaries as a whole are
obviously relevant to the Court’s discretion. In the case of In
the matter of the A and B Trusts [2012] (2) JLR 253, the Court had been
influenced by the fact that the Representor beneficiaries and the “overwhelming
majority of the other adult beneficiaries” supported removal (at
paras 3 and 8).
37. As Commissioner Page said in Trilogy Management
Limited v YT Charitable Foundation (International) Limited [2014] JRC 214 at
paragraph 143:
“143 The well-known authority of Letterstedt
v Broers (1884) 9 App Cas 271 (a decision of the
Privy Council on appeal from the Supreme Court of the Cape of Good Hope) shows
that the Court has jurisdiction to replace a trustee if the beneficiaries of
the trust have lost confidence in the trustee by reason of its administration
and management of the trust. Loss of
confidence alone is not, however, without more, enough. Lord Blackburn observed in Letterstedt itself (at page 389) that:-
‘…friction or hostility
between trustees and the immediate possessor of the trust estate is not of
itself a reason for the removal of the trustees.’
On the other hand, a breakdown in
relations between an executor and a beneficiary will be a factor to be taken
into account, in the exercise of the court’s discretion, if it is
obstructing the administration of the estate, or even sometimes if it is merely
capable of doing so. This was
explicitly apparent in a more recent application of the Letterstedt
authority: Kershaw v Micklethwaite [2010] EWHC
506, a decision of Newey J.
translated into the context of the foundation itself, this means that a
breakdown in relations between YT and the trustees of the sub-trusts is a
factor if it obstructs the carrying into effect of the charitable objects of
the foundation (meaning, after the 2004 compromise, the charitable objects of
the sub-trusts.)
38. The private trust structure with a private trust
company acting as trustee of the A Settlement was established in accordance
with the wishes of B, but as Commissioner Page said at paragraph 144:
“144 We are naturally aware that removing YT from the
trusteeship would have the effect of removing control of the foundation from
the four individuals who were chosen as executors by OM. That too is a factor which it is right
to take into account, along with the other aspects of OM’s wishes to
which we are enjoined to have regard.
But in the end the dominant consideration is whether the trusts are
being properly executed, and ultimately OM’s selection of executors
should not be determinative.”
39. Whether the Court exercising its supervisory
jurisdiction over trusts has jurisdiction over the directors of Erinvale is a novel issue in Jersey, but it was considered
recently by the Supreme Court of Bermuda in the case of In the matter of the
X Trusts [2018] SC (Bda) 56 Civ,
where the trustees, private trust companies, sought the directions of the court
as to whether they should remain in office or retire, on which they adopted a
neutral position, or whether the directors should resign. The directors had offered to resign if
the Court thought it appropriate.
In that case, the following points were ultimately agreed:
“(a) the
Court has no jurisdiction to direct the removal of the directors from
the relevant corporate boards. That
power lies with the relevant shareholders.
(b) the
Court has jurisdiction to indicate that it would be in the best
interests of the Trusts if the directors were to resign in circumstances where
they have agreed to be bound by any such indication by this Court in deciding
the present application.” (emphasis added in the judgment)
40. However, in his judgment, Ian Kawaley CJ made these helpful observations at paragraphs 34
– 37:
“34 Mrs Talbot Rice QC in opening and in reply
submitted that it would be jurisprudentially unsound for the Court to direct
the removal of a director from one or more of the Trustees’ boards. Mr Green QC described the removal claim
referred to in Mr Brownbill QC’s Skeleton as
analogous to a ‘dog-leg claim’ as a non-point, not pursued in oral
argument. These arguments did not
do justice to the subtlety of the point advanced by Mr Brownbill
QC in oral argument. He submitted
that the Court ‘can take any step to secure the proper administration of
a trust. And this …
supervisory jurisdiction when it comes to a trust is regularly exercised in
completely new and novel situations’. This point was buttressed by a reference
to, inter alia, Crociani v Crociani [2014] 17 ITELR 624 (Privy Council) and the
following pronouncements by Lord Neuberger:
‘36 In the case of a clause in a trust,
the court is not faced with the argument that it should hold a contracting
party to her contractual bargain. It is, of course, true that a beneficiary,
who wishes to take advantage of a trust can be expected to accept that she is
bound by the terms of the trust, but it is not a commitment of the same order
as a contracting party being bound by the terms of a commercial contract.
Where, as here, (and as presumably would usually be the case), it is a
beneficiary who wishes to avoid the clause and the trustees who wish to enforce
it, one would normally expect the trustees to come up with a good reason for
adhering to the clause, albeit that their failure to do so would not prevent
them from invoking the presumption the court has an inherent jurisdiction to
supervise the administration of the trust – see e.g. Schmidt v
Rosewood Trust Ltd [2003] UKPC 26, [204] 1 AC 709 para 51, where Lord
Walker of Gestingthorpe referred to ‘the
court’s inherent jurisdiction to supervise, and if necessary to intervene
in, the administration of trusts’.
This is not to suggest that a court has some freewheeling unfettered discretion
to do whatever seems fair when it comes to trusts. However, what is clear is that the court
does have a power to supervise the administration of trusts, primarily to
protect the interests of beneficiaries, which represents a clear and, for the
present purposes, significant distinction between trusts and contracts.”
35. The
breadth and flexibility of the Court’s supervisory jurisdiction over
trusts is confirmed rather than undermined by the concession made in the
instant case. The directors of corporate
Trustees, whom the Court has no power to formally remove, have expressly
conceded that the Court may validly decide whether or not it is desirable for
them to resign, if a case for removing the Trustees is made out.
36 It
would be surprising if the Court could not validly make similar findings in
circumstances where the directors did not expressly agree to any directions the
Court might give as to the desirability of a resignation. It is also difficult to conceive that
the Court could not, in circumstances where (a) a corporate trustee’s
directors served multiple clients, and (b) a prima facie case for removal of
the corporate trustee was made out, direct (or signify) that a director’s
continued deployment in the administration of a particular trust would be
inconsistent with the due administration of the relevant trust. There is no
need to resolve these questions in the present case but in general terms the
oral submissions of Mr Brownbill QWC on the
flexibility of this Court’s supervisory jurisdiction over trusts were
fundamentally sound.
37 In
summary, I find that the Court has no jurisdiction to direct the removal of one
or more of the directors. The Court
does possess the inherent jurisdiction in supervising a Bermudian trust to
signify that rather than removing the corporate trustees it would be desirable
if one or more of the directors resign.
The existence of this jurisdiction was implicitly conceded by the
Trustees in the present case.”
41. In the case before us, the issue of whether the
Court has the power to order directly the removal of directors of a private
trust company does not arise, because the directors of Erinvale,
although not convened before the Court, have agreed to resign if the Court
signifies that they should. The
power to remove the directors of Erinvale vests in
the shareholders, in this case, the trustee of the Purpose Trust established by
B, which is not before the Court.
In an appropriate case, the Court would arguably have jurisdiction to
direct the trustee of the Purpose Trust, assuming it was before the Court, to
exercise its powers as shareholders of Erinvale to
remove the directors, but for present purposes, and for the same reasons as put
forward by Kawaley CJ, we find, as conceded by
counsel, that this Court does have the inherent jurisdiction in supervising
this trust to signify that it would be desirable if one or more of the
directors of Erinvale were to resign.
The evidence
42. There were some ten affidavits with exhibits
before the Court, one by D, one by E, one by C, three by V, two by M and two by
L. Those affidavits were not tested
by cross examination and given the extent of the issues raised by D, cross
examination would not have been feasible in the time allotted for the
application. It was common ground
that in these circumstances, it was not open to the Court to make formal
findings of fact, such as whether Erinvale had acted
in breach of trust or that Erinvale be exonerated
from all and any allegations made against it by D. The Court had to look at the position
that exists in the present day and make a pragmatic decision as to what was in
the interests of the beneficiaries as a whole. The Court was generally bound to accept
that each deponent believed the truth of their sworn assertions, and the Court
could only resolve actual contentions or draw disputed inferences where a
controversial contention was either clearly right or clearly wrong.
D’s contentions
43. By way of overview, D contended that the A
Settlement had been established with the intention, or at least a motive, of
defeating her claims in divorce proceedings. She asserted that Erinvale
was controlled by B, through the directors he appointed, who were hopelessly
conflicted and partial to B. Erinvale, which was unregulated, uninsured and with no
assets, had interfered in and controlled the matrimonial proceedings, acting as
a hostile partial gatekeeper, with whom D could no longer deal. Erinvale had
to be taken out of the equation, playing no part in the proceedings other than
the provision of information. As
Advocate Sinel put it, they wanted Erinvale out of the way.
44. Referring to Erinvale’s
DNA and its raison d’être, Advocate Sinel
said it was apparent that the prime driver behind the formation of the A
Settlement and the appointment of Erinvale as trustee
was to minimise D’s access to trust assets in the event of widowship or divorce.
The trust instrument was bespoke, with B keeping as much control as he
could. Documents discovered showed
that B, with the knowledge and assistance of Vivat, V (who had been involved
with H trusts at a high level for nearly a decade), C, B’s English
solicitor Ms Palmer, L, Collas Crill
and Carey Olsen, had structured his affairs in anticipation of a claim for
ancillary relief. B and his
advisers were contemplating divorce since 2012 and Erinvale
came into existence with that in mind.
45. The decision not to appoint D as a beneficiary
in her own right had been found by the Royal Court in the Addition Judgment to
be one which no reasonable trustee could have made, showing that Erinvale was not truly impartial, but was in form and in
practice doing B’s bidding in the context of the matrimonial proceedings
and acting in accordance with its raison d’être and its DNA.
46. A serious tax issue had arisen within the
context of the matrimonial proceedings and referred to by Sir William Bailhache
at paragraph 8 of his unpublished judgment, namely whether at the time assets
were settled into the A Settlement, B had lost his domicile of choice in Country
1, which would have revived his domicile of origin in the United Kingdom, the
tax implications of which were significant, affecting all of the
beneficiaries. Erinvale
was not, of course, trustee when the A Settlement was established and funded,
but D was highly critical of Erinvale for not taking
tax advice on this issue at the earliest opportunity and resolving it. Advocate Sinel
devoted a substantial amount of time to this issue.
47. There appeared to be no signed agreement with L
over his asserted entitlement of 15% of the net proceeds of sale of Company A,
an arrangement apparently agreed with B before Company A was settled into the A
Settlement, an arrangement subsequently honoured by Erinvale,
notwithstanding the absence of a signed agreement. A competent, regulated, impartial
trustee, Advocate Sinel said, is not one run by
people who have shares in the underlying assets.
48. There were a number of inaccuracies in the
schedules produced showing distributions to E, J and B, and in particular, a
distribution of £1.5 million incorrectly recorded as being made to B. There were also variations in valuations
produced for the trust assets. All
of this showed a lack of competence.
49. Whilst Erinvale
stated in paragraph 4 of its Answer that it was taking a neutral stance
overall, in relation to the substance of D’s claim to ancillary relief,
this was “unless and until the Invalidity Contention has been
determined”. Erinvale went on to raise procedural concerns and made
certain denials in relation to B’s alleged control of Erinvale
and was not truly adopting a neutral stance. Erinvale had
furthermore made no application to the Court for directions and had no mandate
from the beneficiaries or from the Court for its stance, or activities within
the matrimonial proceedings. As Erinvale had no assets or insurance, in essence D faced
another well heeled, risk free opponent.
50. E has his own claims to assets within the A Settlement, as reflected
in the Answer filed by the Intervenors and in a letter of wishes signed by B,
which Erinvale had failed to clarify, let alone
document.
51. Advocate Sinel gave
this summary of Erinvale’s partiality in his
skeleton argument:
“(i) It
participated in [D’s] eviction from the trusts without demur.
(ii) When asked to appoint [D] as a
beneficiary in her own right, it:
(a) deliberately
sat on the application and did not make a decision for many months;
(b) threatened
to defend the application;
(c) insisted
on, in effect, writing directly to [D];
(d) made
a decision that no reasonable Trustee would have made and was reversed by the
Royal Court.
(iii) It
is and always will be hopelessly conflicted and partial in favour of [B] and [E],
it cannot be otherwise given its history.
(iv) It does not know what is in the Trust
fund by reference to [E’s] claims.
(v) Its
record keeping on major issues including [E’s] entitlement is dangerous.
(vi) It
has and continues to mishandle the tax and domicile equations which represent a
multi-million pound actual or prospective liability.
(vii) Its
actions and inactions have impeded the Matrimonial Proceedings and any prospect
of early settlement.
(viii) It
has adopted what is, in effect, both a hostile and obstructive stance to [D] in
the Matrimonial Proceedings.
(ix) It
has approached the Court without clean hands – one could go so far as to
say by attempting to suppress material facts.
(x) It
has until now failed to seek directions when any competent, let alone a
competent and impartial trustee would have done so years ago; even now it seeks
not to surrender its discretions but give the parties effectively a stay or go
option.
(xi) It
continually puts impediments in the way of a free flow of information, not only
in relation to its aetiology but also the distribution of trust funds.
(xii) It is uninsured.
(xiii) It has no assets of its own
(xiv) It has no competent or competent and
unconflicted personnel.
(xv) It
engenders mistrust and conflict in a fashion which no neutral third-party
trustee would.
(xvi) It brings nothing to the table.
(vii) It
has failed to gather together material and salient records relevant to its
trusteeship.
(xviii) It shows no
sign of getting better despite the elapse of years and much poignant criticism
not just from [D].”
52. The informal arrangements between B, L, M and E
were exacerbating factors and it was D’s contention that in all these
circumstances, the inescapable picture is of a trustee which she cannot
reasonably be expected to trust.
Quite apart from ordinary notions of human decency, Erinvale
was wrong at every level and as a matter of public policy, the Court should say
“enough is enough”.
53. D recognised that Erinvale
acted as trustee of other earlier family settlements created by B of which she
was not a beneficiary and that the knock-on effect of changing its directors
would be felt beyond the A Settlement.
That side effect was easily obviated, she said, by simply replacing Erinvale as trustee of the A Settlement.
Discussion and decision
54. In the view of the Court, a view shared by
counsel for all of the beneficiaries other than D, there were powerful
practical reasons for maintaining the status quo, pending the
finalisation of the matrimonial proceedings.
55. It was not just a question of removing Erinvale as trustee.
That would leave the A Settlement without any trustee at all. A new trustee would have to be appointed
in its place, and the selection of that new trustee would of itself be
problematical, bearing in mind the opposing camps comprising D on the one hand
and all of the remaining beneficiaries (“the Remaining
Beneficiaries”) on the other hand.
56. Those difficulties were illustrated by D’s
unilateral approach to Affinity as a prospective trustee. According to Sinels’
letter to Mourant Ozannes of 8th June
2021, Affinity had been approached initially to act as a trustee of a new trust
for D to hold the settlement she anticipated achieving in the matrimonial proceedings,
but subsequently it was approached to act as trustee of the A Settlement in the
place of Erinvale. No note was kept of what was said in
meetings between Sinels and Affinity, but this email
from Affinity on 25th November 2020 showed that it regarded D as “the
client” and expressed the need to make good the wrongs felt by her:
“Clearly this trustee
will carry a lot of challenges. I
have discussed this with Justin and in principle we are interested in the role,
in fact we naturally relish these opportunities not because of the agitating
factor of them but more to try to make good the wrong felt by the client and
restore some faith in our sector.
That said, the challenge here is that one client will likely hold those
views while the other will believe the trustee is doing a marvellous job!
I think the next steps could be
a follow up call but certainly some information about expectations of a
trustee, maybe the accounts and the way your client would wish the conflict of
interest be dealt with between her and the deputy of her husband should the
trusteeship alter.
It may be that a move by you to
alter the trustees and confirmation you have another trustee interested could
be the key to a settlement and therefore the desire/need to alter trustee vanishes.”
It could be anticipated from this that the
Remaining Beneficiaries might well object to Affinity’s appointment.
57. The process of identifying and appointing a new
trustee would need to be supervised by the Court, with the background briefing
to potential trustees being prepared on a joint and impartial basis. The Court could envisage this process
taking some time, with the potential for the issue of which new trustee should
be appointed having to be resolved at a further hearing before the Court.
58. Once a new trustee had been identified and had
agreed in principle to act as trustee, it would have to undertake due
diligence. This would not be a
straightforward exercise. In
addition to having divided camps within the beneficial class, the A Settlement is
involved in litigation in which, inter alia, the validity of the A Settlement
itself is being challenged. The new
trustee would be required to become a party to the matrimonial proceedings,
where pleadings have already been filed by the current trustee. It is inevitable that any prospective
trustee in this situation would need to obtain legal advice adding to the
number of lawyers already engaged in the matter.
59. Assuming a new trustee completed its due
diligence and was prepared to be appointed, the issue of security for Erinvale would need to be addressed. Even if removed as trustee, Erinvale is entitled under Article 43A(1) of the Trusts Law
to be provided with reasonable security for liabilities that are existing,
future, contingent or otherwise before surrendering the trust property, and
again there is the potential for this issue to be resolved by the Court.
60. Assuming all of these hurdles were overcome,
any appointed new trustee may well wish to revisit pleadings filed by the
previous trustee and the real possibility arises of the new trustee applying
for an adjournment of the matrimonial proceedings for that purpose. Advocate Sinel
stated that Erinvale’s Answer in the
matrimonial proceedings was untrue and would need to be redrafted.
61. The priority of all concerned is to get the
matrimonial proceedings completed as soon as possible, and all in all, any
change in the trusteeship of the A Settlement at this stage had the potential
of being prejudicial to that objective and adding to the already substantial
legal costs of some £5.5 million that have been funded out of the A
Settlement to date. As Advocate
Evans submitted, costs involved in a transfer of administration to a new trust
are always a factor weighing against removal. As Warrington J said in Re Wrightson
at 802 and 803:
“At the present moment nothing
remains for the trustees to do except to wind up the estate: the
testator’s widow is dead; the whole of the estate is divisible amongst a
number of persons who are sui juris …
… is it for the welfare of
the trust generally and not merely the plaintiffs, that these trustees should
be removed? I think it is not. The trustees were undoubtedly guilty of
a breach of trust, and they undoubtedly in the statement to which I have
referred expressed views which have occasioned the blame which has been
attached to the trustees both by Buckley J and myself, but having regard to the
fact that a large proportion of the beneficiaries do not require the trustees
to be the Court has now the power of seeing that the trust is properly
executed, to the fact that a large proportion of the beneficiaries do not
require the trustees to be removed and further (and this is of great
importance), to the extra expense and loss to the trust estate which must be
occasioned by the change of trustees, I think it would not be for the welfare
of the cestuis que trust generally, or necessary for the protection of the
trust estate, that these trustees should be removed. I must therefore
refuse the application ….. (emphasis added)
In the case before us, only one beneficiary
requires the removal of Erinvale as trustee.
62. We cannot cover in this judgment every aspect
of D’s criticisms of Erinvale and its
directors, but we address the substance of her concerns under the headings
which follow.
The Addition Judgment
63. This represents the high point of D’s
case for removal in that the Court made a finding that the decision by Erinvale not to add D as a beneficiary in her own right was
not one which a reasonable trustee would make. Advocate Sinel
relied on this finding as showing that Erinvale was
not wholly impartial but in form and in practice doing B’s bidding in the
context of the matrimonial proceedings, acting in accordance with its raison
d’être and its DNA.
64. The directors of Erinvale
accept that they took a wrong turning in making this decision, but once the
Addition Judgment was handed down, it was not appealed, and D was promptly
added as a beneficiary in her own right.
65. It is noteworthy that the Court subsequently
declined to deprive Erinvale of its costs as D contended
it should be, for the reasons set out in its judgment of 25th January 2021
([2021] JRC 021). Quoting from
paragraphs 33-35 of that judgment:
“33 In the case of In the matter of the
Piedmont Trust and the Riviera Trust, Commissioner Birt, after considering
the abovementioned cases, provided the following clarification at paragraph 37:
‘Although there is a
similarity of language in describing one of the tests for finding the exercise
of a power of appointment invalid (‘irrational’ or ‘outside
the band of reasonable decisions’) and the ground for depriving a
fiduciary of his indemnity (‘misconduct’ or ‘acting
unreasonably’, it is a mistake to consider the tests as being the
same. They are not. As the cases referred to above make
clear, the mere fact that a trustee has been found to be in breach of trust
does not necessarily mean that he should be deprived of his indemnity. As Beloff JA
said in MacKinnon in the passage cited at para 18(2) above, it is a
matter of fact and degree in every case.
The Court must have regard to the overall circumstances of the case and
decide whether the nature and gravity of his misconduct is such that he should
lose his indemnity and/or be ordered to pay the costs of the parties. It is very much a matter of discretion
for the Court having regard to the particular facts of the case.
34 In
this case, there are a number of reasons why, in my judgment, Erinvale should not be deprived of its indemnity, namely:-
(i) Erinvale had consulted all the beneficiaries on [D’s]
request and the decision reflected the views of some of them.
(ii) [D] was already a beneficiary in
her capacity as [B’s] spouse.
(iii) The
decision was carefully considered, as reflected in the detailed minute.
(iv) It
is clear that the directors (two of whom were de facto lay trustees) were
guided in the process by legal advice.
(v) Erinvale’s conduct in general towards [D] was
reasonable, in that it was supporting her financially and paying her legal fees
(fees that at the time of the judgment had amounted to some £1
million). The allegation that they
were motivated by malice was rejected by the Court.
(vi) Erinvale’s conduct of the proceedings had been
reasonable and having reached a considered decision, it was reasonable for Erinvale to defend that decision supported by some of the
beneficiaries.
(vii) The directors had not been affected by any
conflict of interest.
35 In
essence, there had been no finding that Erinvale
acted in bad faith or for any improper purpose or with disregard, let alone
reckless regard, of its fiduciary duties.
There was no finding that it had adopted an excessive role or acted in a
partisan manner. The nature and gravity
of Erinvale’s conduct has not reached the point
where it should be deprived of its indemnity. It can, therefore, have recourse to its
indemnity to discharge its own costs and will not be ordered to pay the costs
of [D] or any of the other convened parties.”
66. D herself was only awarded 60% of her costs in
making her application, as a consequence of her own conduct of the proceedings
(paragraph 23 of the judgment).
67. As to the support given by Erinvale
to D throughout these proceedings, it is worth reiterating that she receives
£3,000 per month directly from the A Settlement and another £2,000
from another settlement via B; a total of £5,000 per month. In addition to this, Erinvale
pays her legal fees, the running costs of her apartment in the UK, her flights
and travel and her medical expenses.
As of 7th January 2021, the date of V’s second
affidavit, she had received around £1.6 million from the A Settlement,
accounted for by way of loan for English tax reasons.
B’s alleged control of Erinvale
as trustee
68. This allegation has been addressed by the
directors in their affidavits, and in particular, the affidavits of V, who
confirms that there was as might be expected, an ongoing dialogue between Vivat
and B, as settlor, in respect of the A Settlement and its assets and
investments. When Erinvale was first appointed, B was a director and was therefore
involved in decisions taken at trustee level, although since he retired as a
director, in June 2017, she deposed that Erinvale
ensured that B has not been involved in decision making in respect of the A
Settlement and its assets. The
minutes we have seen show that the meetings of the directors since his
retirement were not attended by C, as B’s delegate, or as one might
expect bearing in mind his incapacity, by B himself.
69. The Court has not seen any support for the
allegation that B’s retirement as a director was only in form and not in
substance, and in any event, it is counter intuitive to suggest that B could be
exercising control of Erinvale, bearing in mind his
incapacity, age and failing health. Advocate James informed the Court that it
was not possible to communicate in any meaningful way with B.
Alleged conflict of the directors
70. The issue of the conflict of L as an employee
of Company A, and M as a shareholder in and employee of Company B, was
addressed in the Addition Judgment, which made reference to the leading case of
Public Trustee v Cooper & Others [1999] WL 1425717, a case in which
one of the trustees personally owned shares in the same brewery company in
which the trust had invested.
Quoting from paragraphs 75 – 78 Addition Judgment:
“75 Turning to the issue of conflict, the Court
was concerned that [L] and [M] did have a personal interest in their respective
capacities as employees of, and in the case of [L], a shareholder in companies
within the trust fund, and that there could be circumstances in which that
personal interest could conflict with their duties as directors of Erinvale. As
Hart J said in Public Trustee v Cooper in the context of the facts of
that case:
‘There is no rule that a
trustee who owns shares in a company in which the trust also invests is
absolutely debarred from taking part in decisions about the trust
investment. This is, however,
clearly an area in which great caution needs to be exercised. Often the existence of the personal
shareholding will be recognised as immaterial. On other occasions, it may be actually
or potentially significant or be capable of being viewed as such.’
76 Advocate
Sinel submitted that [D] represented an existential
threat to the [A] Settlement, and we could appreciate that an application for a
substantial payment to be made to her directly or indirectly out of the trust
fund could have implications for the companies within the trust fund in which
they are interested. They did not
see that personal interest as creating a material conflict as no mention is
made of it in the minute, and we are satisfied that it was not a significant
factor which influenced the decision for the following reasons:
(i) [D]
was already a beneficiary as [B’s] spouse and her appointment as a
beneficiary in her own right had no financial implications to the trust fund.
(ii) There
was a clear recognition that it was [B’s] wish that she should receive
substantial support from the [A] Settlement in the event of his death.
(iii) The
issue was seen by them as one of timing, in that they did not agree to her
appointment in her own right ‘at this time’.
(iv) The
third director, [V], who it would be fair to regard as the professional trustee
amongst them, had no conflict of interest and agreed with the decision.
77 In
relation to this last point, paragraph 49 of the representation asserted that [V]
was also conflicted because of the fees charged by Equiom
for the administration of the [A] Settlement and she regarded [B] as ‘the
client’. This was not pursued
at the hearing, and in our view, is not sustainable. In this context, Hart J
said again in the context of the case of Public Trustee v Cooper
‘Had the whole body of trustees been exposed to individual
conflicts of a similar nature. I think I might have been inclined to at least a
provisional view that the proper course would be for them to have surrendered
their discretion to the court, and the mere fact that the settlement
contemplated or must have contemplated the possibility that the trustees might
have such personal shareholdings would not by itself have dissuaded me from
that provisional view. That is not,
however, this case.’
78 We
conclude, however, that on the evidence, the decision of the directors not to appoint
[D] a beneficiary in her own right was not influenced by the personal interest
of [L] and [M] in companies within the trust fund and was made independently
of that private interest.”
71. There can be no objection, therefore, in
principle to L and M having an interest in the trust assets and the Court can
appreciate the value to the beneficiaries of the A Settlement of having as
directors of the corporate trustee persons who are involved in the underlying
trading entities in respect of which they are intimately involved and who are a
source no doubt of valuable information and expertise. It is clear from the affidavits of L,
which go into detail as to the history of his involvement with B, the key role
he has played in Company A, which comprises trading entities the majority of
which have now been sold with L receiving or due to receive 15% of the net
proceeds. M plays a similarly
important role in the other trading entity in which the A Settlement has an
interest, namely Company 2.
72. The Court accepts that L and M have a long
connection with B, as indeed does V, but that does not mean that they will
exercise Erinvale’s powers as trustee in an
improper manner. It is often the
case that a settlor will wish to appoint persons who he knows and in whom he has
confidence to act as trustee or in this case as directors of the corporate
trustee, and the evidence we have seen does not indicate any animus on their
part towards D, as exemplified by the substantial financial support she has
been given and continues to receive.
73. Advocate Sinel placed
great emphasis on the duty of Erinvale to act
impartially, citing in support Article 23 of the Trusts Law, which is in these
terms:
“23 Impartiality of trustee
Subject to the terms of the trust, where there is more than one
beneficiary, or more than one purpose, or at least one beneficiary and at least
one purpose, a trustee shall be impartial and shall not execute the trust for
the advantage of one at the expense of another.”
74. As can be seen, this duty is subject to the terms
of the trust, and in the context of a discretionary settlement such as the A
Settlement, as opposed to a fixed trust, it is inherent that the trustees will
exercise their powers partially for the advantage of some beneficiaries and at
the expense of others. Indeed,
Clause 12.1 of the A Settlement provides:
“12 Exercise of Powers
12.1 The
Trustees shall exercise the powers and discretions vested in them as they shall
think most expedient for the benefit of all or any one or more to the exclusion
of the other or others of the Beneficiaries and may exercise (or refrain from
exercising) any power or discretion for the benefit of any one or more them
without being obliged to be impartial and the Trustees may execute the trusts,
powers and provisions hereof for the advantage of one Beneficiary at the
expense of another or for the benefit of any one or more of them without being
obliged to consider the other or others.”
75. Accordingly, by the very nature of a
discretionary settlement, a trustee is not under a duty to act impartially as
between beneficiaries, but it must exercise its powers for the purpose for
which they were created, taking into account relevant considerations and
ignoring irrelevant considerations, and acting with due diligence, as would a
prudent person, to the best of the trustee’s ability and skill and
observing the utmost good faith (Article 21 of the Trusts Law) and not in
circumstances where its interests and duty conflict.
76. In respect of conflict, the classic statement
is that of Lindsay J in In re Drexel Burnham Lambert Pension Plan [1993]
1 WLR 32:
“It is an inflexible rule of a court of equity that a person
in a fiduciary position … is not, unless otherwise expressly provided
… allowed to put himself in a position where his interest and duty
conflict. … I regard it
[that is this rule] rather as based on the consideration that, human nature
being what it is, there is danger, in such circumstances, of the person holding
a fiduciary position being swayed by interest rather than by duty, and thus
prejudicing those whom he was bound to protect.”
77. It was a concern to the Court, appreciated we
believe by the directors, that at the point at which the Court in the
matrimonial proceedings makes an award in favour of D and she then applies to
the trustee of the A Settlement for a distribution to meet it, a conflict could
arise for L and M because of the impact a distribution to her could have on the
assets in which they may have an interest. In this respect, the directors helpfully
confirmed to the Court that without fettering the future exercise of Erinvale’s discretions, when B applies for a
distribution following a final order in the matrimonial proceedings it would be
the intention of Erinvale to apply to the Court for
directions as to whether or not to make the distribution requested, and in that
application, it would intend to surrender its discretion.
78. In the meantime, it is not anticipated that the
directors will have any personal interests which will conflict with their
duties as directors of the corporate trustee of the A Settlement.
The nature of a PTC
79. Advocate Sinel was
very critical of the nature of the private trust company structure employed in
this case. It is true that Erinvale has no material assets in its own name, and it is
the only material asset of the S Trust which owns it. It is uninsured and neither L nor M are
professional trustees. V is a
professional trustee and alone of the directors has Directors and Officers
insurance cover. Advocate Sinel said this entitled Erinvale
to “free hits without risk”. That is not accurate in that to the
extent that Erinvale is found liable in breach of
trust, it may well be entitled to seek an indemnity from the directors involved
in that breach and this for breaches of their own fiduciary duties as directors
to Erinvale, one of whom, V, is insured and the
others of whom would be personally liable.
80. Leaving that aside, it is the case that private
trust companies are a well-established mechanism for the provision of trustee
services in the Island, exempt from the prohibition on carrying on unauthorised
financial service business under the Financial Services (Trust Company
Business) (Exemptions)) (Jersey) Order 2000, Article 4 of the Schedule
being in these terms:
“4 Private trust company business
A person being a company –
(a) the
purpose of which is -
(i) solely
to provide trust company business services in respect of a specific trust or
trusts, or
(ii) to
act for that purpose and to act as a member of the council of a foundation or
of foundations (otherwise than as a qualified member, as that term is defined
by the Foundations (Jersey) Law 2009);
(b) that
does not solicit from or provide trust company business services to the public;
and
(c) the
administration of which is carried out by a registered person registered to
carry out trust company business,
when providing a service specified in Article 2(4) of the Law where
the name of the company is notified to the Commission.”
It was not in question that Erinvale meets the criteria required to operate as a
private trust company, with the administration being carried on by Equiom, which is a registered person.
Disclosure issues
81. D accuses Erinvale of
providing incomplete, not up to date or at the height of her allegations,
false, information in relation to the matrimonial proceedings. Erinvale, on
the other hand, maintains that it has discharged all information requests
appropriately made by D in relation to the A Settlement, recognising that she
is, and has always been, a beneficiary of the A Settlement as B’s
spouse. Advocate Lincoln says the
information disclosed has been extensive and went beyond information to which a
beneficiary would ordinarily be entitled.
82. Sir William Bailhache addressed the disclosure
issues in paragraph 25 of his unpublished judgment of 21st May 2021,
where he said this at paragraph 25:
“25 It is fair to say that all the parties
before me complain about the disclosure arrangements so far. The Petitioner, Third Party and
Intervenors complain that the Respondent has in colloquial terms thrown the
kitchen sink at the claims which she wishes to bring and that she has had
disclosure of an inordinate amount of material as a result of which the costs
of the litigation have been very substantially increased. The Respondent, on the other hand,
asserts that the other parties have failed in their disclosure obligations time
and again, resulting in a serious lack of trust on her part in the ability or
desire of the other parties to deal fairly with her. I can readily identify with the
sentiments advanced by all the parties, and at the same time I do not feel that
I am able to adjudicate upon them without a very intensive exercise in studying
all requests for disclosure and the manner in which they had been dealt with. It does not seem to me that this is a
profitable way forward, whether for me or for the parties who would obviously
have to address me in detail on those matters.”
83. This Court is in the same position, recognising
that disclosure in the matrimonial proceedings is a matter for the matrimonial
Court. However, this Court is not
aware of any judicial criticism of Erinvale of the
disclosure it has made to D or of its conduct generally in either set of
proceedings, save as set out in the Addition Judgment.
Tax Issues
84. Erinvale had no involvement in the establishment of the A Settlement in 2012
and the subsequent transfer of assets to that settlement which took place
between 2012 and 2014. According to
the briefing note prepared by Mourant Ozannes in May
2021, it had always been Erinvale’s
understanding that B was domiciled by choice in Country 1 during the material
period and that had been supported by two opinions of English tax counsel.
85. The issue was raised in the matrimonial
proceedings and has been the subject of further and conflicting advice procured
by Mourant Ozannes on behalf of Erinvale. This is a significant issue for everyone
involved in the A Settlement and is a key issue in the matrimonial proceedings
(see paragraphs 8, 9 and 10 of Sir William Bailhache’s
unpublished judgment), but even if there has been delay in Erinvale
grappling with this issue, as asserted by D, it is manifestly not an issue of Erinvale’s making and will be a very difficult and
complex issue to resolve, bearing in mind that it centres on the intentions of B,
who was first diagnosed with a brain disease in 2012 with his health
deteriorating to the point that in December 2018, he was found to lack
capacity. Advocate Sinel’s accusation that Erinvale
on its own could have put this issue “to bed” in 2015 seems
unrealistic. Again, this Court has
not seen any judicial criticism of the role Erinvale
is playing in addressing this difficult issue with the other parties.
Poor accounting
86. V addressed the allegations of poor accounting
in her third affidavit from which it would seem that there have been some minor
bookkeeping errors as a consequence of human error, but she says that Erinvale has responded to queries raised by D’s
accountant directly and in a cooperative manner.
87. Particular criticism was made by Advocate Sinel in relation to the recording of the distribution of
£1.5 million made on 14th March 2018, and which led to this
explanation from Advocate Lincoln on 15th June 2020:
The Trustees would, however,
like to take this opportunity to correct certain inaccuracies in the schedule
of distributions and loans enclosed with your letter (the Schedule) which, in
turn, it appears arise from inaccuracies in the 2018 Trust Accounts (for which
the Trustee apologises). In
particular, you will note that a distribution of £1.5 million on 14 March
201 has been wrongly designated as a distribution to [B], when in fact that
distribution was to [E]. Enclosed
with this letter are the updated 2019 financial statements for the Trust, which
include the restated 2018 comparatives.
For ease, we have also included a table detailing the correct
figures. Please note that the
schedule of distributions that was provided to you on 24 March 2020 also notes
the correct position in respect of the distribution from the Trust.”
88. It would seem, therefore that there had been an
error in the way this distribution was recorded in the accounts, which was
corrected, but that the original information given to Advocate Sinel was accurate.
89. None of this leads the Court to be concerned as
to the competent administration of the A Settlement and of its assets.
D’s occupation of the Jersey apartment
90. Advocate Sinel
described the way D was evicted from the Jersey apartment as a bizarre way of
treating a beneficiary, humiliating and destabilising for D and showing an
absence of any form of impartiality by Erinvale.
91. In fact, D’s occupation of this apartment
was dependent on her continuing to reside with B, who was the holder of the
relevant housing licence, and because B was no longer living at the property,
it would have been unlawful for D to remain there in the absence of a consent
from the Population Office. Erinvale made a joint application with D to the Housing
Minister for such consent, without success. It would seem from Sinels’
letter of 30th October 2017 to the Housing Minister that D only
wished to continue occupying the Jersey apartment for a short time to allow for
the conclusion of the matrimonial proceedings, and that it was her intention to
move back to the UK to be close to her adult children (in addition to J, she
has two other children from an earlier marriage) and her grandchildren. As of the 4th April 2017 she
owned [Property 1] where she has lived ever since.
Erinvale’s stance in the matrimonial proceedings
92. D is critical of the stance taken by Erinvale in the matrimonial proceedings, which Advocate Sinel says is not truly neutral. Whilst the merits of Erinvale’s
answer as filed in the matrimonial proceedings is a matter for the Matrimonial
Court, this Court can see no reason to be concerned as to the propriety of the
position it has taken in its pleaded Answer. Its role is neutral on the substance of D’s
claim, but it understandably wishes to be heard on the allegation that the A
Settlement is invalid and otherwise seeks to give assistance to the Matrimonial
Court where it is in a position to do so. It has been advised by Mourant Ozannes throughout the process.
93. There is little, if any, support for D’s
allegation that Erinvale has interfered in and
controlled the matrimonial proceedings. Indeed, it was convened to the
matrimonial proceedings at the instance of D and by consent.
Conclusion
94. The issue of the directors resigning and the
impact of that upon the other family settlements of which Erinvale
is trustee does not arise, as D seeks only Erinvale’s
removal as trustee.
95. D’s approach is to regard the A
Settlement as invalid, created to defeat her claims in the matrimonial
proceedings, and she therefore sees everything that Erinvale
does as an obstruction, and wants it out of the equation. However, until such time, if ever, that
the Court declares the A Settlement invalid, Erinvale
is bound to discharge its duties on the basis that it is a valid trust and to
conduct itself accordingly. To do
so is not to be obstructive and that should be understood by D.
96. This Court is not in a position to make
findings as to the validity of the A Settlement, and the motives for its
creation and the creation of the private trust structure. It takes into account the allegations
made by B but at the same time notes the evidence, in particular, of C, a close
adviser to both B and D, and of B himself (before he lacked capacity) as to its
purpose, but these are matters for another day.
97. In the meantime, the A Settlement and the
private trust structure have to be respected and no public policy issues arise.
This Court is simply concerned with
whether it should remove Erinvale as trustee of what
is, certainly for now, a valid trust and to appoint a new trustee and this at
the instance of D.
98. It is anticipated that B will be given a clean
break settlement in the matrimonial proceedings, to be funded out of the A
Settlement. Assuming that is the
case, then on receipt of a distribution in the amount of that settlement, it is
the expectation that D will be excluded as a beneficiary. This was noted in the minute of the
directors of Erinvale of 22nd October
2020, which resolved to add D as a beneficiary in her own right:
“6.3 Those present further
noted that, in view of the temporary vulnerability identified by the Judgment
and which [D’s] addition at this time would remedy, and [D’s]
express confirmation that she wishes to be added as a beneficiary only until
the conclusion of the Matrimonial Proceedings, the Trustee, without fettering
its discretion to consider its position afresh at the conclusion of the
Matrimonial Proceedings, presently expects to reconsider [D’s] status as
a beneficiary and to exclude [D] as a beneficiary of the Trust after the
financial aspects of the Matrimonial Proceedings are concluded and [D] has
received her payment in respect of the same from the Trust. This is on the basis that [D’s]
addition now is intended to address the temporarily limited vulnerability
discussed in the Judgment and summarised above If and when the rationale for the
addition has passed because [D] has received such award as may be made in her
favour in any final resolution of the Matrimonial Proceedings, it will likely
then be an appropriate juncture for the Trustee to consider [D’s] removal
as a beneficiary in her own name.”
99. It is likely, therefore, that D will only be a
beneficiary of the A Settlement for the relatively short period between now and
the conclusion of the matrimonial proceedings, which is a factor weighing
against a change in trusteeship against the wishes of the Remaining
Beneficiaries. This adds to the
practical reasons set out above, all of which militate heavily against a change
of trustee now. Furthermore, a change of trustee now will add materially to the
already substantial costs incurred, and this for no discernible benefit, and it
would not assist, indeed would be likely to complicate, the task of the
Matrimonial Court.
100. Despite the criticisms raised, we are satisfied
that Erinvale is competent to administer the A
Settlement and its assets and in discussion it was not anticipated that there
will be any significant trust related issues that are likely to arise between
now and the conclusion of the matrimonial proceedings, but in any event Erinvale helpfully confirmed to the Court that pending the
outcome of the matrimonial proceedings, the assets of the A Settlement will be
retained within the trust fund, save in the ordinary course of business and in
relation to payments made to B and D for their maintenance and their legal
costs.
101. For all these reasons and noting the
confirmations given to the Court by Erinvale, we find
that the welfare of the beneficiaries as a whole and the competent
administration of the A Settlement in their favour dictates that the status quo
should be maintained and we therefore direct Erinvale
to remain in office as trustee and signify that it would not be desirable for
the directors to resign.
Authorities
Trusts (Jersey) Law 1984.
Erinvale PTC Limited and Ors [2020] JRC 213.
Matrimonial Causes (Jersey) Law 1949.
Letterstedt v Broers [1884] 9 App. Cas. 371.
Lewin on Trusts 20th Edition.
In Re Wrightson [1908] 1 Ch. 789.
In
the matter of the A and B Trusts [2012] (2)
JLR 253.
Trilogy
Management Limited v YT Charitable Foundation (International) Limited [2014] JRC 214.
In the matter of the X Trusts [2018]
SC (Bda) 56 Civ.
Public Trustee v Cooper & Others
[1999] WL 1425717.
In re Drexel Burnham Lambert Pension
Plan [1993] 1 WLR 32.
Financial Services (Trust Company
Business) (Exemptions)) (Jersey) Order 2000.