Chvetsov v BNP Paribas

JurisdictionJersey
CourtRoyal Court
JudgeThe Deputy Bailiff
Judgment Date22 July 2009
Neutral Citation[2009] JRC 141,[2009] JRC 120
Date22 July 2009

[2009] JRC 120

ROYAL COURT

(Samedi Division)

Before:

M. C. St. J. Birt, Esq., Deputy Bailiff, sitting alone.

Between
Oleg Chvetsov
Plaintiff
and
(1) BNP Paribas Jersey Trust Corporation Limited
(2) Maison Anley Property Nominee LImited
Defendants

Advocate D. M. Cadin for the Plaintiff.

Advocate J. Harvey-Hills for the Defendants.

Authorities

Royal Court Rules.

Re Esteem Settlement [2000] JLR 119 .

Trusts (Jersey) Law 1984.

Lewin on Trusts (18th Edition) at para 43–05.

Freeman v Ansbacher Trustees (Jersey) Limited [2009] JRC 003 .

Alhamrani v Alhamrani [2007] JLR 44 .

Rae v Meek (1889) 14 App Cases 558 .

Caparo Industries Plc v Dickman (1990) 2 AC 605 .

Henderson v Merrett Syndicates Limited (1995) 1 AC 145 .

The Deputy Bailiff
1

This is an appeal against the decision of the Master on 24th February, 2009, when he dismissed the application to strike out the plaintiff's claim against the second defendant.

2

The application was brought under RCR 6/13(1), namely that the order of justice discloses no reasonable cause of action against the second defendant. It follows that no evidence has been filed and the matter must be considered on the basis of the facts pleaded in the order of justice.

3

The test to be applied in such cases is conveniently summarised in Re Esteem Settlement [2000] JLR 119 at 127:-

“It is only where it is plain and obvious that the case cannot succeed that recourse should be had to the summary jurisdiction to strike out. To quote from para 18/19/10 of 1 the Supreme Court Practice 1999, at 349: “so long as the statement of claim or the particulars disclose some cause of action, or raise some question fit to be decided by a Judge or jury, the mere fact that the case is weak, and not likely to succeed, is no ground for striking it out.” This is particularly so in an uncertain and developing field of law.”

Background

4

On 22nd May, 1996, the plaintiff, as settlor, established a discretionary trust, governed by Jersey law, known as the Metric Trust (“the Trust”). The plaintiff is one of the beneficiaries of the Trust. The first defendant (“BNP”) is a trust company carrying on the business of providing trust services in Jersey and it has at all times been the sole trustee of the Trust. The assets of the Trust included a house in north London (“the Property”) which is occupied by the plaintiff and his family. The order of justice pleads at paragraph 2 that the second defendant (“MA”) is a wholly owned subsidiary of BNP which is accustomed to act as BNP's nominee in respect of real property owned by BNP as trustee. Somewhat surprisingly, the order of justice does not specifically plead that the Property was, during the relevant period, registered in MA's name as nominee for BNP as trustee of the Trust, although it is clear by inference from the rest of the order of justice that this is what is alleged; indeed there is no dispute on this and the answer of the defendants confirms that the Property was held by MA as nominee for BNP and that MA executed a declaration of trust to that effect in favour of BNP as trustee of the Trust.

5

In about 2001, the plaintiff decided to renovate the Property. Following consultation with the plaintiff BNP agreed to the proposal and on 9th October, 2001, it passed a resolution authorising MA as nominee on behalf of BNP to execute a contract with a named firm of architects for that firm to design and supervise the project. MA subsequently entered into such a contract. The plaintiff now claims that the renovations carried out were, in the event, more expensive than they should have been and resulted from the failure of the defendants to do what they should have done. The plaintiff says that the defendants failed to exercise requisite skill and care in that they failed to monitor, control or supervise the works of the architect which led to cost and time overruns. Furthermore, it is said that they failed to consult with or otherwise keep the plaintiff informed of the increased costs. As a result the plaintiff and/or the Trust and its beneficiaries have suffered losses, including in excess of £500,000 in unnecessary and additional costs incurred, an overpayment to the contractor of some £139,523, irrecoverable legal costs and the costs of adjudication proceedings against parties involved in the works. The remedy sought is reconstitution of the trust fund.

The claim

6

The claim against BNP is a conventional claim for breach of trust on the basis that BNP, as trustee of the Trust, was in breach of its duties as trustee in relation to the renovation works. BNP denies that this is so but no legal point arises and the matter will fall for adjudication in due course at trial.

7

MA, on the other hand, argues that there is no reasonable cause of action pleaded against it. So how is the case put in the order of justice? The sole factual allegations are that MA was acting as BNP's nominee in entering into the contract with the architect (para 14) and with the contractor (para 21). Subsequently it is pleaded that MA, or solicitors on its behalf, entered into correspondence concerning the defects, extensions etc. This would of course follow on from the fact that it was the contracting party. In essence therefore, the sole allegation is that MA had legal title to the Property, which it held as nominee for BNP as trustee of the Trust, and, on BNP's authority, entered into the relevant contracts as nominee for BNP and took steps consequent upon those contracts. There is no allegation that MA was at any time anything other than a nominee for BNP.

(i) The trust claim

8

The order of justice alleges that MA owed duties both as a matter of trust law and in tort. The trust duties are pleaded at para 10 of the order of justice as follows:-

  • “10 BNP and MA, as BNP's nominee, were under the following duties in its management of the Trust and in particular of the Works, namely:-

  • (1) pursuant to Article 21(1) of the Trusts (Jersey) Law 1984 to act in its administration of the Trust with due diligence, as would a prudent person, and to the best of its ability and skill, and at all times to observe the utmost good faith.

  • (2) pursuant to Article 21(3) thereof to take all reasonable steps for the preservation and enhancement of the trust estate (being in this case primarily the Property) ,

  • (3) generally to exercise such care and skill as was reasonable in the circumstances, having regard in particular:-

  • (a) to any special knowledge or experience that it had or held itself out as having ,

  • (b) by reason of acting as Trustee of the Trust in the course of its business, to any special knowledge or experience that it was reasonable to expect of a person acting in the course of that kind of business and

  • (c) to the special care and skill to be expected of a specialist trust corporation carrying on the business of trust management, including the ownership of real property in England.”

9

I have to say that I do not see how, as a matter of law, MA could possibly owe such duties to the plaintiff or other beneficiaries of the Trust. The duties pleaded are taken from the Trusts (Jersey) Law 1984 (“the 1984 Law”). That Law sets out the duties owed by a trustee of a trust. There is however no suggestion that MA was trustee of the Trust; on the contrary it is expressly pleaded in the order of justice that BNP was at all material times the sole trustee of the Trust. The references to the 1984 Law are therefore irrelevant in the case of MA.

10

The legal position is that MA was simply an agent or delegate appointed by BNP in its capacity as trustee of the Trust. If MA were to act negligently or beyond its authority in connection with that agency or delegation, the remedy would lie with BNP as trustee of the Trust. Any duties owed by MA in connection with its appointment were owed to BNP as trustee of the Trust, not to the beneficiaries. It would be similar in the case of an investment manager appointed by a trustee to manage the investments of a trust. If that investment manager were to be negligent in the performance of his duties, the cause of action would lie with the trustee, not with any beneficiaries.

11

It is true that MA was in one sense a trustee because it held the Property as nominee (i.e. on bare trust) for BNP as trustee of the Trust. However this was a completely separate matter from acting as trustee of the Trust. MA held the Property on bare trust for BNP as trustee of the Trust and the remedy for any breach of that bare trust lies only with BNP, which, in its capacity as trustee of the Trust, was the sole beneficiary of the bare trust. The fact that MA was acting as nominee for BNP cannot possibly mean that, simply as a result of so acting, MA thereby assumed the obligations of a trustee towards the beneficiaries of the Trust.

12

I pressed Mr Cadin on whether his researches had disclosed any case which established that an agent appointed by a trustee of a trust owed duties under trust law to the beneficiaries of the trust, merely by reason of such appointment, but he said that he had not found any such case. I further asked him whether there was any suggestion in any of the text books that such a duty might exist but he accepted that he had not found anything to this effect.

13

Mr Cadin raised three arguments as to why I should hold that, despite the absence of precedent, the claim against MA was arguable.

14

Firstly, he pointed out that the boards of BNP and MA were the same. There was complete commonality of personnel between the two companies. He submitted that, even if, in the case of an independent agent, no duties in trust law were owed by an agent to the beneficiaries, an exception should be made where the agent was a close associate of the trustee. I can see no grounds for introducing such a concept, nor any purpose in doing...

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1 firm's commentaries
  • Jersey Courts unwilling to impute trustee duties to agents
    • Jersey
    • Mondaq Jersey
    • 30 March 2010
    ...with the affairs of a trust. In Chvetsov -v- BNP Paribas Jersey Trust Corporation Limited and Maison Anley Property Nominee Limited [2009] JLR 217 a Jersey law trust held a flat located in London, which was occupied by the claimant beneficiary (the "Beneficiary") and his family. BNP Paribas......

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