B v Erinvale PTC Ltd
| Jurisdiction | Jersey |
| Court | Royal Court |
| Judge | J. A. Clyde-Smith OBE. |
| Judgment Date | 25 January 2021 |
| Neutral Citation | [2021] JRC 21 |
| Date | 25 January 2021 |
[2021] JRC 21
ROYAL COURT
(Samedi)
J. A. Clyde-Smith OBE., Commissioner sitting alone.
and
and
Advocate P. C. Sinel for the Representor.
Advocate B. J. Lincoln for the First Respondent.
Advocate P. D. James for the Second Respondent.
Advocate S. A. Franckel for the Intervenors.
B v Erinvale PTC Limited and Ors [2020] JRC 213.
Appleby Trust (Mauritius) Limited v Crociani & Ors. [2018] JCA 136.
Piedmont Trust and Riviera Trust [2016] (1) JLR 14.
In re Buckton [1907] 2 Ch. 406
McDonald v Horn [1995] I.C.R.
In the matter of the JP Morgan (1998) Employee Trust [2013] (2) JLR 239
Trusts (Jersey) Law 1984 Law
Matrimonial Causes Law
Watkins v Egglishaw [2002] JLR 1
MacKinnon v MacKinnon [2010] JLR 508
In re Y Trust [2011] JRC 155A
Lewin on Trusts
Trusts — re costs.
The parties apply for orders for costs arising out of a number of matters in relation to these proceedings which have now been stayed.
The background is set out in the Court's judgment of 15 th October 2020 ( B v Erinvale PTC Limited and Ors [2020] JRC 213) (“the Judgment”), which I will take as read. By way of very brief overview, at its heart are divorce proceedings in the Family Division between C and B in which B is seeking ancillary relief. The divorce proceedings were commenced in May 2017, but the ancillary proceedings have yet to be determined (“the Ancillary Proceedings”).
The unusual feature of this case is that in January 2019, B filed a representation in the Samedi Division (2019/007) invoking the supervisory jurisdiction of the Court over the A Settlement, a discretionary settlement established by C in September 2012 and into which he settled the whole of his free estate (“the Trust Proceedings”). The trustee is the First Respondent (“Erinvale”), a private trust company. The beneficiaries are C, his spouse and his children and remoter issue. There is one child of their marriage, who is therefore a beneficiary, and C has two children by an earlier marriage, the Intervenors, represented by Advocate Franckel, who are also beneficiaries.
Because C has settled all of his free estate into trust, both he and B are financially dependent upon the A Settlement. C, who is Jersey resident, receives distributions but for English tax reasons the modus operandi for payments made to or for the benefit of B in terms of her monthly financial support and her legal fees are accounted for by way of loan to her (see paragraph 40 of the Judgment). Invoices from Sinel's are submitted on a regular (usually monthly) basis and Erinvale discharges those invoices.
In the Trust Proceedings B is seeking, inter alia, the same relief as might be awarded to her in the Ancillary Proceedings. As the Court noted at paragraph 15 of the Judgment, the Trust Proceedings therefore gave rise to a parallel set of proceedings to those in the Family Division.
Following correspondence, B issued a summons on 18 th December 2019 under the Trust Proceedings, seeking inter alia an order that Erinvale appoint her as a beneficiary in her own right, part of the relief sought in the representation (“the Addition Application”). On 10 th January 2020 Erinvale resolved not to add her as a beneficiary in her own right at that time. She was, of course, a beneficiary as C's spouse.
By a consent order of 16th April 2020, Erinvale agreed that B's application to be appointed a beneficiary in her own right should be dealt with as a cause de brièveté. The Act of Court was clear that B's application was made under the representation in proceedings 2019/007 to be dealt with as a stand-alone issue and after a significant amount of correspondence the Bailiff confirmed on 17 th August 2020 that that was the sole matter to be dealt with at the hearing.
As a consequence of delays caused by COVID 19, that matter did not come before the Court until 3 rd and 4 th September 2020, when the Court reserved judgment, and on 15 th October 2020, the Court set aside the decision of Erinvale not to add B as a beneficiary in her own right for the reasons set out in the Judgment. Following the handing down of the Judgment, she has now been added by Erinvale as a beneficiary in her own right.
Advocate Sinel seeks an order that Erinvale should pay B's costs of the Addition Application on the indemnity basis and should be deprived of its right of indemnity against the trust fund so that it would bear those costs personally. He did not make any submissions about Erinvale's indemnity in respect of its own costs.
Advocate Lincoln, for Erinvale, seeks an order that its costs should be paid out of the trust fund, pursuant to its indemnity, a position supported by Advocate James for C and Advocate Franckel. Advocate Lincoln also sought an order that the costs of C and the Intervenors, as convened parties, should be paid out of the trust fund on the indemnity basis.
In so far as B's costs were concerned, Advocate Lincoln sought an order that the costs in respect of the arguments in which she was successful, namely the setting aside of the decision, should be paid out of the trust fund on the indemnity basis, but the costs in respect of the arguments in which she was not successful, whilst being paid out of the trust fund, should be borne by her personally by being added to the loan account due by her to Erinvale, a position essentially supported by Advocate James and Advocate Franckel.
Advocate Sinel's position was straightforward in that he said B has succeeded in the Addition Application. The Court had found the decision of Erinvale not to appoint her as a beneficiary in her own right was one which no reasonable trustee could have made. That justified an order in her favour on the indemnity basis (citing the Court of Appeal decision in Appleby Trust (Mauritius) Limited v Crociani & Ors. [2018] JCA 136 at paragraphs 21, 57 and 58) and furthermore, it justified Erinvale being deprived of its indemnity from the trust fund in order to meet those costs as a consequence of its unreasonable conduct as trustee (citing In re the Piedmont Trust and Riviera Trust [2016] (1) JLR 14).
Advocate Lincoln submitted that a number of plainly bad arguments had been made by Advocate Sinel, the costs of which should be borne by B and not by the trust estate, through those costs being added to her loan account with the A Settlement, and thus deducted from whatever distributions would ultimately be made to her following a final order in the Ancillary Proceedings.
It is necessary to consider first the nature of the Addition Application. Advocate Sinel makes reference in paragraph 24 of his skeleton argument to the categories set out in the case of In re Buckton [1907] 2 Ch. 406, which were summarised by Hoffmann LJ in McDonald v Horn [1995] I.C.R. 685 at 696:
“First, proceedings brought by trustees to have the guidance of the court as to the construction of the trust instrument or some question arising in the course of administration. In such cases, the costs of all parties are usually treated as necessarily incurred for the benefit of the estate and ordered to be paid out of the fund. Secondly, there are cases in which the application is made by someone other than the trustees, that raises the same kind of point as in the first class and would have justified an application by the trustees. The second class is treated in the same way as the first. Thirdly, there are cases in which a beneficiary is making a hostile claim against the trustees or other beneficiary. This is treated in the same way as ordinary, common law litigation and costs usually follow the event.”
As the Court of Appeal said in the case of In the matter of the JP Morgan (1998) Employee Trust [2013] (2) JLR 239 at paragraph 30:
“The principles laid down in Re Buckton are …principles as to the costs of beneficiaries; and in particular, as to when they can have their costs out of the estate, despite not succeeding in their arguments…in describing hostile litigation as a category 3 case Kekewich J had in mind claims between rival claimants to the fund or part of it. He was not dealing at all with hostile claims against trustees.”
Having referred to the categories in Re Buckton, Advocate Sinel did not indicate in which category the Addition Application came. Advocate Lincoln did not address the Re Buckton categories but having regard to the orders he sought, by implication his position was that this came within category 2.
The distinction between categories 2 and 3 is not always easy to make, but I am prepared to accept that the Addition Application comes within category 2 as it involved a question that arose in the administration of the A Settlement, namely whether in the light of the divorce proceedings B should have her status as a beneficiary confirmed independently of her marriage to C by being named as a beneficiary in her own right. The Trust Proceedings ostensibly invoked the supervisory jurisdiction of the Court over trusts through Article 51 of the Trusts (Jersey) Law 1984 Law (“the Trusts Law”) or its inherent jurisdiction over trusts.
Whilst B was motivated in her application by her own interests, it is arguable, and I am prepared to accept, that clarification of this issue was for the benefit of the trust estate. That being the case, the costs of the beneficiaries should be paid out of the trust fund on the indemnity basis in the usual way. Such an order is fair in the case of C and the Intervenors as their conduct as convened parties in this application was reasonable and proportionate.
In my view, there is substance in Advocate Lincoln's contention that B's conduct was not reasonable and proportionate. He has set out in...
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Erinvale PTC Ltd v B via his court-appointed delegate C
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