Rawlinson & Hunter Trustees SA (in the place of Volaw Trustees Ltd) v Advocate Steven Chiddicks, representing the minor beneficiaries of the Z II Trust

• Jurisdiction: Jersey
• Court: Court of Appeal
• Judge: Logan Martin JA,Martin JA
• Judgment Date: 28 June 2019
• Neutral Citation: [2019] JCA 106
• Date: 28 June 2019

Between

Rawlinson & Hunter Trustees SA (in the place of Volaw Trustees Limited)

Representor

and

Advocate Steven Chiddicks, representing the minor beneficiaries of the Z II Trust

First Respondent

K, adult beneficiary of the Z II Trust

Second Respondent

Equity Trust (Jersey) Limited

Third Respondent and Appellant

Fielden Holdings Limited

Fifth Respondent

Rawlinson & Hunter Trustees SA (as trustee of the Z Trust)

Sixth Respondent

Rawlinson & Hunter Trustees SA (as trustee of the X Trust)

Eight Respondent

E

Ninth Respondent

E in his capacity as Executor of the Estate of the late C

Tenth Respondent and Respondent

[2019] JCA 106

Before:

Sir William Bailhache, Bailiff

John Vandeleur Martin Q.C.

Robert Logan Martin Q.C.

Court of Appeal

Court of Appeal — appeal against 3 judgments — point of law — recoverable costs and adverse costs.

Authorities

Trusts (Jersey) Law 1984

Representation of Rawlinson & Hunter Trustees SA re Z Trusts [2018] JRC 119.

Representation of Rawlinson & Hunter Trustees SA re Z Trusts [2018] JRC 164.

Representation of Rawlinson & Hunter Trustees SA re Z Trusts [2018] JRC 203.

Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2018] UKPC 7, [2018] 2 WLR 1465.

Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd 2014 GLR 371.

Trusts (Amendment No 7) (Jersey) Law 2018.

Re Grimthorpe [1958] Ch 615.

Butterfield v Public Trust [2017] NZCA 36.

Lewin on Trusts, 19th Ed.

re Z Trust [2015] JRC 031.

Snell's Equity, 33rd Ed.

re Pumphrey deceased (1882) 22 Ch D 255.

Octavo Investments Pty Ltd v Knight (1979) 27 ALR 129.

Southern Wine Corporation Pty Ltd v Frankland River Olive Co [2005] WASCA 236.

EC Investment Holdings Pte Ltd v Rideout Residence Pte Ltd and another [2013] SGHC 139.

re Suco Gold Pty Limited (in liquidation) [1983] 33 SASR 99.

Finnigan v Yuan Fu Markets Limited (in liquidation) [2013] NZHC 2899.

re Johnson (1880) 15 Ch D 54.

Richardson v Aileen [2007] VSC 104.

Universal Distributing Company (in liquidation) [1933] 48 CLR 171.

re Berkeley Applegate [1989] Ch 2.

Crill v Alpha Asset Finance Limited (Re Hickman) [2009] JRC 040.

Lemery Holdings v Reliance Financial Services [2008] NSWSC 1344.

Re Amarind Pty Ltd (in liquidation) [2017] VSC 127.

Abigail v Lapin [1934] AC 491 at p 504.

Dimos v Dikeakos Nominees Ltd (1997) 149 ALR 143.

Bruton Holdings Pty Ltd v Commissioner of Taxation [2009] HCA 32.

Underhill & Hayton, Law of Trusts and Trustees, 19th Ed.

ATC (Cayman) Ltd v Rothschild Trust Cayman Ltd (2012) 14 ITELR 523.

Ronori Pty Ltd v ACN 101 071 998 Pty Ltd [2008] NSWSC 246.

Scaffidi v Scaffidi Holdings Pty Ltd [2010] WASC 29.

re Caversham Trustees [2008] JRC 065.

re Carafe Trust [2005] JRC 063.

Governors of St Thomas's Hospital v Richardson [1910] 1 KB 271.

Moffett v Dillon [1999] 2 VR 480, [1999] VSCA 32.

Désastre of Overseas Insurance Brokers Limited 1966 JJ 547.

Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326.

In the matter of the Esteem Settlement [2002] JLR 53.

Re Independent (2016) FLR 222.

Bankruptcy (Désastre) (Jersey) Law 1990.

Abell v Screech [1805] 10 Ves Jun 355.

Pearce v States Treasurer 2016 (1) JLR 435.

Godfray v Godfray (1865) 3 Moo.P.C.C.N.S. 316.

Loi (1851) sur les testaments d'immeubles.

Abdel Rahman v Chase Bank (CI) Trust Company Limited and others [1991] JLR 103.

Radio & Allied Industries Limited v Gordon Bennett Wholesale (Jersey) Limited (1959) 252 EX 43.

Re Désastre G.Lawrence Limited (1963) 254 Ex 509.

Security Interests (Jersey) Law 1983.

Security Interest (Jersey) Law 2012.

Bankruptcy (Désastre)(Jersey) Law 1990.

Advocate E. L. Jordan for the Third Respondent and Appellant.

Advocate J. Harvey-Hills for the Tenth Respondent and Respondent.

Logan Martin JA

Introduction

1 This is an appeal against three judgments given after hearings in the Royal Court before the Commissioner (J A Clyde-Smith) sitting alone. The Commissioner sat principally to consider a point of law which is in dispute between Equity Trust (Jersey) Limited, the third respondent and the appellant in this appeal (hereafter “Equity Trust”), and E as the Executor of the Estate of the late C, the tenth respondent and the respondent in this appeal (hereafter “the Executor”). The point of law relates to the equitable rights of a former trustee and whether those rights take priority over the rights of other claimants to the assets of a trust whose liabilities exceed its assets.

2 The first of the judgments was given by the learned Commissioner on 3 ^rd July, 2018, [2018] JRC 119 and it addressed the substantive issues raised by the point of law in question (and that substantive judgment has been referred to by the parties to this appeal as “the Priority Judgment”). The second judgment was given on 10 ^th September, 2018, [2018] JRC 164 and it concerned the related issue of whether Equity Trust is entitled to claim for its costs in proving a claim against a trust in a situation where the liabilities of that trust exceed its assets (and that judgment has been referred to as “the Recoverable Costs Judgment”). The third judgment was given on 2 ^nd November, 2018, [2018] JRC 203 and it concerned the costs of the hearings which led to the first two judgments which costs the Commissioner ordered Equity Trust to pay to the Executor (and that judgment has been referred to as “the Adverse Costs Judgment”).

3 None of the other parties to these proceedings participated in the hearings before the Royal Court nor in the appeal before this Court.

Background

4 The background circumstances are set out by the Commissioner in the Priority Judgment for the purpose of determining the point of law raised. They are also referred to in the Contentions by Equity Trust for this appeal. I summarise them as follows from these sources bearing in mind that all matters of fact are yet to be established formally in these proceedings.

5 The circumstances relate to eight trusts of which the late C was the settlor and all of which bear the title “Z”. C was a beneficiary of seven of those trusts and her son, who as an individual is the ninth respondent, is a beneficiary of all of them. C died subsequently and E is her Executor and as such is the tenth respondent and the respondent in this appeal.

6 Only two of these trusts have any material bearing on the matters before this Court. One of those trusts is entitled “Z II” and it was established as a Jersey discretionary trust on 10 ^th December, 2004 (“the Z II Trust”). Equity Trust was the original trustee of the Z II Trust. At the request of E acting on behalf of C, Equity Trust retired as trustee on 11 ^th October, 2006, and was replaced as trustee by Volaw Trustees Limited (“Volaw”). A Deed of appointment and resignation of trustees was entered into on that date which included an indemnity in favour of Equity Trust (“the Volaw Indemnity”). The Commissioner has observed that documents attached to this Deed demonstrate that there were numerous companies within the trust structure which he believed were predominantly involved in property development in the United Kingdom.

7 The other of the Z trusts which is relevant is entitled “Z III” and it was established as a Jersey discretionary trust on 23 ^rd December, 2005 (“the Z III Trust”). Equity Trust was also the original trustee of the Z III Trust and it was similarly replaced as trustee on 26 ^th October, 2006, by Barclays Private Bank & Trust Limited. Equity Trust was provided with an equivalent indemnity by Deed of appointment and resignation of trustees.

8 On 31 ^st July, 2012, Angelmist Properties Limited, a company in compulsory liquidation (“Angelmist”) instituted through its joint liquidators a claim in the High Court of England and Wales against two of its former directors and against Equity Trust (“the Angelmist proceedings”). Angelmist was one of the companies within the Z II Trust structure and was registered in England. The claim alleged a breach of duty against the two directors who were employees of Equity Trust, and claimed against Equity Trust for vicarious liability and upon the basis that it acted as a de facto or shadow director of Angelmist. The amount of the claims made by Angelmist totalled some £42 million together with interest and costs. On 22 ^nd April 2013, Equity Trust notified Volaw of its intention to rely upon the Volaw Indemnity and sought confirmation that its rights were not prejudiced.

9 On 11 ^th March, 2015, Volaw issued the Representation before the Royal Court which is the basis of these proceedings. Volaw sought directions in relation to a scheme for the winding-up of the Z II Trust. On 29 ^th April, 2015, Volaw was authorised by the Royal Court to continue administering the assets of the Z II Trust and to be paid from those assets in priority to all other claims. On 20 ^th October, 2015, Volaw was given leave by the Royal Court to retire as trustee of the Z II Trust and on 13 ^th November, 2015, Rawlinson & Hunter Trustees SA (“R&H”) was appointed as trustee in succession to Volaw. No fees or expenses are to be charged against the trust find by R&H as these are being funded separately. This means that R&H, both for itself and as successor trustee to Volaw, has no claim against the assets of the Z II Trust for reimbursement of any liabilities which it has incurred, but rather the claims that it has are the claims of creditors with whom Volaw and R&H have transacted.

10 Following a summary judgment given against the two directors on 30 ^th June, 2015, the Angelmist proceedings were brought to a conclusion by a Settlement Agreement dated 22 ^nd December, 2015. The Commissioner has stated that this agreement is confidential but he was advised that the settlement terms involved Equity Trust making a payment of £16.5 million to the joint liquidators of Angelmist and accepting liability for their own costs in those proceedings amounting to...