The Bird Trust

JurisdictionJersey
CourtRoyal Court
JudgeThe Deputy Bailiff
Judgment Date28 January 2008
Neutral Citation[2008] JRC 13
Date28 January 2008

[2008] JRC 13

ROYAL COURT

(Samedi Division)

Before:

M. C. St. J. Birt, Esq., Deputy Bailiff, and Jurats Bullen and Liddiard.

In the Matter of the Bird Charitable Trust and the Bird Purpose Trust

Between
Basel Trust Corporation (Channel Islands) Limited
Representor
and
Ghirlandina Anstalt
First Respondent
Larona Trust Reg
Second Respondent
Roenne Corporation
Third Respondent
Gary Kaplan
Fourth Respondent
Advocate P. D. James as representor of the beneficiaries of the Bird Charitable Trust
Fifth Respondent

Advocate M. J. Thompson for the Representor.

Advocate L. J. L. Buckley for the First, Second and Third Respondents.

Advocate M. St. J. O'Connell for the Fourth Respondent.

Advocate P. D. James appeared in person.

Authorities

Proceeds of Crime (Jersey) Law 1999.

The Law of Trusts — Thomas & Hudson (2004).

Vatcher v Paull [1915] AC 372.

Law of Trusts and Trustees — Underhill & Hayton (17th Edition) (2006).

Re Skeat's Settlement (1889) 42 Ch D 522.

Re Osiris Trustees 2 ITELR 404.

von Knierem v Bermuda Trust Co Limited [1994] Butterworth Offshore Cases Vol 1, 116.

IRC v Schroder [1983] STC 480.

Re Freiburg Trust [2004] JRC 056.

Alhamrani v Russa Management [2005] JLR 236.

Rawcliffe v Steele [1993-95] MLR 426.

Re the Circle Trust, HSBC International Trustee Limited v Wong [2007] 9 ITELR 676.

Re the Z Trust [1997] CLR 248.

The Deputy Bailiff
1

This is an application by the representor ("Basel or the Trustee") for directions as to whether the first respondent ("Ghirlandina") has been validly appointed as protector of the Bird Charitable Trust ("the Charitable Trust") and the Bird Purpose Trust ("the Purpose Trust") and whether the second and third respondents ("Larona" and "Roenne" respectively and together "the Additional Trustees") have been validly appointed as additional trustees of both trusts.

2

The concerns expressed by Basel fall into two distinct categories. The first relates to certain alleged technical deficiencies in the appointment of Ghirlandina and the Additional Trustees. The second relates to a suggestion that the exercise by the fourth respondent ("Mr Kaplan") and Ghirlandina of their respective powers amounted to a fraud on a power and that the appointments of Ghirlandina and the Additional Trustees respectively are therefore invalid on that ground. We propose to deal with these two categories of objection separately.

TECHNICAL OBJECTIONS
(i) The Purpose Trust
(a) The background
3

The Purpose Trust was created by a declaration of trust dated 19 th April, 2004 made by Basel as trustee. It is governed by the law of Jersey. The purpose of the Trust is expressed in clause 4 of the deed as being to facilitate the study of the effects of e-commerce on the world's economy. Mr Kaplan was named as the protector and the protector is also the enforcer. Under clause 13 the protector has the power to appoint new or additional trustees and also the power to remove any trustee.

4

For present purposes, the critical provision is that contained in clause 14 which deals with the appointment, removal and resignation of protectors. The relevant provisions are as follows:-

"(1)(a) The protector shall have the power to nominate a person to act as the successor of the protector by instrument in writing revocable by the protector and delivered to the Trustees and to the successor named therein and if the protector so nominating shall for any reason cease to be the protector then the person who is the subject of such a nomination that has not been revoked shall forthwith become and be the protector.

(b) .......

(c) In the event that there is no protector in office and no successor protector shall have been nominated by the protector previously in office the Trustees shall forthwith upon receiving notice of the same by deed appoint any person who is not a trustee hereof to be the protector.

(d) Any protector hereof may resign as a protector hereof by giving notice thereof in writing to the Trustees and any successor who is the subject of any nomination under sub-clause (1)(a) of this Clause (that has not been revoked) and to any other protector hereof then in office and after the expiration of thirty days from the date of so giving such notice (or such shorter period as may be agreed in writing between the protector so resigning and the Trustees and all other, if any, protectors hereof then in office) the protector who has so given such notice shall thereafter cease to be a protector thereof.

(e) Any person serving as the protector shall immediately cease to be the protector of this Trust if such person dies (or being a company is dissolved or passes a resolution for its winding-up or liquidation or is struck from the register or a petition for relief is filed by or against the company which is not dismissed, discharged, stayed or restrained within sixty (60) days of being filed or the doing or suffering of any comparable act in any competent jurisdiction), becomes of unsound mind or otherwise becomes unable to fulfil the office of protector hereunder."

5

On 6 th September 2006, Mr Kaplan, in his capacity as protector, executed a document in the following terms:-

"APPOINTMENT OF SUCCESSORS

The undersigned Gary Kaplan, being the protector of the Bird Purpose Trust, on the basis of Article 14 of the trust deed dated 16th January 2004 establishing the Bird Purpose Trust herewith appoints Ghirlandina Anstalt to be his successor as protector of the Bird Purpose Trust with immediate effect."

Mr Kaplan holds all the founder's rights in Ghirlandina.

6

On 8 th September, 2006 Ghirlandina executed a deed whereby it purported as protector to exercise the powers under clause 13 so as to appoint Larona and Roenne as trustees of the Purpose Trust and remove Basel as the trustee thereof. On 20 th September Larona, Roenne and Ghirlandina executed a deed purporting to change the proper law of the Purpose Trust to that of Liechtenstein. Larona and Ghirlandina are Liechtenstein entities; Roenne is incorporated in the British Virgin Islands.

7

On 31 st October, 2006 Basel was informed by fax of the fact that it had been removed as trustee and that Larona and Roenne had been appointed in its place. A copy of the document of 6 th September was supplied to it on 3 rd November. Following a meeting in Geneva on 16 thNovember at which Basel's representatives expressed the view that the document of 6 th September did not constitute a resignation by Mr Kaplan as protector, Mr Kaplan sent a letter dated 21 st November 2006 to Basel in the following terms:-

"Reference is made to the written Appointment of Successors dated 6th September 2006 executed by me by which I have appointed Ghirlandina Anstalt as my successor as protector of the Bird Purpose Trust with immediate effect.

For the avoidance of doubt I hereby confirm that by appointing a successor protector it was my intention at the same time also to retire as protector of the Bird Purpose Trust and therefore wish to record that I retired as protector of the Bird Purpose Trust by executing the said Appointment of Successors on 6th September 2006."

8

As can be seen from the provisions of clause 14(1)(d) of the trust deed, a protector can only cease to be the protector on the expiry of 30 days notice to, inter alia, the trustees for the time being. It is therefore now accepted by Ghirlandina that it was not the protector on either 8 th September or 20 th September, 2006 because Mr Kaplan had not given notice at that stage to Basel of his retirement and accordingly he was still the protector. It is therefore further accepted that the deeds of those dates purporting to appoint Larona and Roenne as trustees, to remove Basel as a trustee and to change the proper law were invalid. However, on 13 th April, 2007 Ghirlandina executed a further deed appointing Larona and Roenne as additional trustees (to act with Basel) and it is submitted that they have both been trustees since that date.

(b) Submissions
9

On behalf of Ghirlandina and the Additional Trustees Mr Buckley submits that the document of 6 th September is effective not only to appoint Ghirlandina as successor protector to Mr Kaplan under clause 14(1)(a) but also as a resignation under clause 14(1)(d); and that accordingly it took effect 30 days after delivery of the document to Basel on 3 rd November, 2006 (i.e. on 3 rd December). He points in particular to the words 'with immediate effect' and argues that they are meaningless unless they are construed as a clear intention on Mr Kaplan's part to resign as protector by means of his execution of the document.

10

He is supported in his submissions by Mr O'Connell who further submits that there is no requirement for any particular formality for resignation as a protector as compared with appointment of protector. He draws an analogy with the strict requirements concerning the execution of a will as compared with the lack of any particular formality required for the revocation of a will. He argues that Mr Kaplan clearly intended to resign as protector by means of the document of 6 th September and he draws support from the fact that Ghirlandina began to act as protector within two days by purporting to appoint new trustees and remove Basel as trustee.

11

Both counsel further submit that, even if the document of 6 th September did not amount to a resignation by Mr Kaplan, the letter of 21 st November certainly did so. That was delivered to Basel and Ghirlandina the same day and accordingly, at the very latest, Mr Kaplan had ceased to be protector 30 days later, namely on 21 st December, 2006. Thus Ghirlandina became the new protector on that date and could accordingly validly appoint the Additional Trustees on 13 th April, 2007.

(iii) Decision
12

In our judgment Mr Kaplan has not effectively resigned as protector. Accordingly Ghirlandina is not the protector at present and its purported...

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