Novatrust Ltd v Eric John Watson

JurisdictionJersey
CourtRoyal Court
JudgeBailiff
Judgment Date23 October 2020
Neutral Citation[2020] JRC 224
Date23 October 2020

[2020] JRC 224

ROYAL COURT

(Samedi)

Before:

T. J. Le Cocq, Esq., Bailiff, and Jurats Thomas and Averty

Between
Novatrust Limited
Plaintiff
and
Eric John Watson
Defendant

and

Novatrust Limited (in its capacity as Trustee of the Summit Trust)
Party Cited

Advocate J. Harvey-Hills for the Plaintiff.

The Defendant appeared in person.

Authorities

FG Hemisphere Associates LLC v. Democratic Republic Of Congo and La Generale des Carrieres et des Mines [2010] JLR 524.

FG Hemisphere Associates LLC v. Democratic Republic of Congo and La Generale des Carrieres et des Mines (Groupment pour le Traitement du Terril de Lubumbashi Limited as party cited) [2011] JLR 486.

Tepe Insaat Sanayii AS v. Boru Hatlari Ile Petrol Tasima AS (also known as Botas Petroleum Pipeline Corporation), Turkish Petroleum International Company Limited and Botas International Limited [2016] (1) JLR 218.

Roberts Petroleum Ltd v Bernard Kenny Ltd [1982] 1 WLR 301

Roberts Petroleum Ltd v Bernard Kenny Ltd [1983] 2 WLR 305.

Roberts Petroleum Limited v Bernard Kenny Ltd [1983] 2 WLR 305.

BSC Corporate Acceptances Limited BCS Offshore Funding Limited v Daniel Terry [2018] EWHC 2349 (QB).

State Bank of India and Others v Dr Vijay Mallya and Others [2019] EWHC 995 (QB).

Trusts (Jersey) Law 1984

Trust — reasons for granting an arrét entre mains

Bailiff

THE

1

By an Order of Justice dated 10 th January 2020, Novatrust Limited (“the Plaintiff”) obtained an interim arrét entre mains with regard to sums owed by itself (in its capacity as trustee of the Summit Trust (“the Trust”)) (the party cited) to Eric John Watson (“the Defendant”). By this application, the Plaintiff sought to have the interim order made final. On the 21 st May, 2020, we granted that application with reasons to follow. These are those reasons.

Background
2

The background facts are taken from the affidavit of Sheena Huggett of the 6 th January, 2020.

3

The Plaintiff is a trust company incorporated in Jersey and is part of the Stonehage Fleming Group (“the SF Group”).

4

The Defendant is a New Zealand national who was the economic settlor of certain trusts. The Plaintiff and the party cited are the same entity, but Novatrust Limited is joined as party cited in its capacity as trustee of the Trust (“the Summit Trustee”).

5

The Plaintiff was the trustee of a number of Jersey law governed trusts, of which the Defendant was economic settlor. Those trusts include the Trust.

6

The Plaintiff is a judgment creditor of the Defendant. It is not necessary to set out the detail of the way in which that indebtedness arose, but proceedings were started by the Plaintiff against the Defendant in July of 2017 by reason of the Defendant's failure to make a payment due under an indemnity. By consent order, dated the 26 th September, 2018, the Defendant submitted to judgment in those proceedings. The Act of Court reflecting that consent order provides that the Defendant owes the Plaintiff:-

  • (i) the sum of £10,107,747.54;

  • (ii) simple interest at the court rate on the sum in paragraph (a) above from the 14th June 2017 until payment;

  • (iii) simple interest at the court rate on certain administrative costs from the 20 th August 2018 until payment;

  • (iv) the Plaintiff's costs payable on the standard basis.

7

We are informed that as at the 26 th September 2018 simple interest in the sum of £230,164.70 had accrued, and as at the date of the current application, the interest was in the sum of £585,803.88 accruing at £761.54 per day.

8

By Act of Court on the 14 th January 2019, following assessment of the Plaintiff's costs, the Defendant was ordered to pay a further sum of £294,075.00.

9

At the date of the application before us, the Plaintiff had succeeded in making a modest recovery in connection with the debts owed by the Defendant, having recovered sums of approximately CHF37,000 and £35,000. The balance of the debts significantly exceeds £10.5 million, and remains due and payable by the Defendant to the Plaintiff.

Background
10

In 2012, the Defendant and the Summit Trustee entered into a loan arrangement pursuant to which the Defendant agreed to provide a loan facility to the Summit Trustee. In the period following the loan agreement, the Summit Trustee repaid the principal loaned to it by the Defendant, but the Defendant had advanced additional funds which were undocumented at that time. There was an amendment to the original loan agreement in 2017 to reflect these additional sums, and the cumulative effect of the 2012 loan arrangements and the 2017 amendment agreement is that with regard to the loans, the Summit Trustee is indebted to the Defendant in the sum of CHF308,466, £824,606, £155,133.34 and NZD680,150 (collectively referred to as “the Defendant's advances”).

11

The trusts administered by the Plaintiff, of which the Defendant was the economic settlor are, we are informed, insolvent. There is no prospect of any distribution being made by any of the trusts to the beneficiaries, and consequently it is the concern of the Summit Trustee, amongst others, to realise the Trust's assets and administer them in the interests of the creditors.

12

There are a number of external creditors which are:-

  • (i) the Summit Trustee, in respect of fees and disbursements;

  • (ii) the SF Group, in relation to its fees and disbursements;

  • (iii) a company called Ivory Castle Limited (which is a creditor of Cottian Limited, a wholly owned asset of the Trust);

  • (iv) Miss Rosanna Von Zweigbergk (Miss Von Zweigbergk) who is a creditor of Cremona Limited, itself a wholly owned subsidiary of one of the trusts; and

  • (v) the Defendant, with regard to the Defendant's advances and other loans he may have made to other parts of the structure.

13

In 2019, the Summit Trustee sought to enter into an agreement with the creditors set out above for the realisation and distribution of the various assets of the Trust. Amongst the terms suggested were:-

  • (i) that the fees and disbursements of the Summit Trustee and the SF Group be paid in priority to other claims;

  • (ii) the claims of Ivory Castle Limited and Miss Von Zweigbergk be subordinated to that debt, but would rank in priority to any claims by the Defendant, and that the Defendant would receive any surplus after the various interested parties had received their money in connection with the satisfaction of the Defendant's advances, only after the prior payments had been made.

14

The Defendant agreed to the terms suggested, as did Miss Von Zweigbergk and Ivory Castle Limited.

15

In the context of the agreement reached, the terms of which we have not set out in full, the Summit Trustee has a contractual obligation to pay to the Defendant the Defendant's share. That will depend upon the amount that is available after the payment of the amounts payable to creditors who rank ahead of the Defendant, but it is anticipated, so we are informed, that the available share will be in the order of £172,000.

16

The Plaintiff maintains that it is entitled to the confirmation of the interim arrét entre mains, and therefore to seize the Defendant's share in the hands of the Summit Trustee.

17

We also note that by Order of Justice dated 18 th March, 2020, Kea Investments Limited (“Kea”) sued the Defendant and others also seeking an arrét entre mains in support of a judgment debt of in excess of £25m. We are not informed as to the state of those proceedings although are advised that Kea's UK legal advisers have been notified of this application. In any event, it appears that the arrét entre mains obtained by Kea is over different assets than those covered by the arrét entre mains in this case.

The Law
18

The central authority on arrét entre mains is FG Hemisphere Associates LLC v. Democratic Republic Of Congo and La Generale des Carrieres et des Mines [2010] JLR 524 in which the Court said:-

“148 Miss Lawrence submits that the principal features of the arrêt entre mains so far as relevant to the present case, and the key questions that arise here, can accordingly be summarized as follows (as expressed, with minor textual adaptations, in her skeleton argument):

(i) The effect of an interim arrêt entre mains is to arrest or seize the named assets in the hands of the third party. This is more than just a bar from dealing. It is an appropriation of the asset by the court giving the judgment creditor immediate security in relation to the debt owed .

(ii) It is clear that the extent of what is seized and owed is determined “at the time of the arrest.” The purpose of bringing the third party before the court is, simply and naturally (when considering the plain and obvious meaning of the language used), to “confirm” whether the interim order was properly made. Whether the interim order was properly made can only be assessed by reference to the facts and position existing at the time of the interim arrest. In this case, the material question is: was Gécamines an organ of the state of the DRC at the time of the seizure? If it was and the order was therefore properly made, the interim order is simply made confirmée. The arrest itself is in fact made at the time of the first order. Its effect is simply suspended pending the third party being summonsed to court to have it considered and, where appropriate, confirmed .

(iii) That this is the correct approach is lent further weight by the fact that steps taken by the judgment debtor after the imposition of the interim order which seek to change the landscape as between himself and his third party debtor are to be ignored. Pothier states (op. cit., at 343):

“Par la même raison, le créancier pour le fait duquel l'arrêt est fait ne peut pas, au préjudice des arrêtants, décharger son débiteur arrêté de son obligation; d'où il suit que, si un créancier a arrêté les loyers échus et à échoir, sur les locataires de son débiteur, ce débiteur ne peut...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT