The Trustee v Principal Beneficiary

JurisdictionJersey
CourtRoyal Court
JudgeDeputy Bailiff
Judgment Date10 August 2020
Neutral Citation[2020] JRC 161
Date10 August 2020

[2020] JRC 161

ROYAL COURT

(Samedi)

Before:

R. J. MacRae Esq, Deputy Bailiff, and Jurats Christensen and Hughes

In the Matter of the Arpettaz Settlement

And in the Matter of Articles 51 & 53 of the Trusts (Jersey) Law 1984 (As Amended)

Between
The Trustee
Representor
and
Principal Beneficiary
First Respondent

and

[the claimants to English High Court proceedings]
Second to Fifth Respondents

Advocate N F Journeaux for the Representor.

Advocate A Kistler for the First Respondent.

The Second to Fifth Respondents were not represented

Authorities

Trust (Jersey) Law 1984.

Public Trustee v Cooper [2001] WTLR 901.

Re S Settlement [2001] JLR Note 37.

The F Charitable Trust [2017](2) JLR 26.

M & L Trust [2003] JRC 002A.

In the matter of the H Trust [2006] JLR 280.

HSBC International Trustee Limited v Poon [2011] JRC 167.

Conflict of Laws (15th Edition).

Alsop v Wilkinson [1996] 1 WLR 1220.

E Trust Company Limited v B [2014] JRC 027.

U Limited v B and 6 others [2011] JLR 452.

Lewin on Trusts, 18th Edition.

The Law of Privilege (Third Edition).

Lewin on Trusts (20th Edition).

Lewis v Tamplin [2018] EWHC 777 (Ch).

Dawson Damer v Taylor Wessing LLP [2020] EWCA Civ 352.

Winterthur Swiss Insurance Company and Another v AG (Manchester) Limited and Others [2006] EWHC 839 (Comm).

M and Other Trusts [2012](2) JLR 51.

Trust — directions in relation to participation in foreign proceedings.

Deputy Bailiff

THE

1

By representation dated 17 th March 2020 the Representor, (“the Trustee”), Trustee of the Arpettaz Settlement (“the Trust”) seeks the directions of the Court in respect of how it should conduct itself in the context of litigation extant before the English High Court.

2

We heard submissions in this matter on 8 th April 2020. We then directed the parties to file additional arguments and authorities which were received from the First Respondent's advocate on 24 th April 2020 and the Representor's advocate on 29 th April 2020.

3

Subsequently the members of the Court met to consider the additional documentation filed and our decision in this matter. We gave our decision on 29 th June 2020 and now give our reasons for that decision.

Background
4

The Trust was established by deed of settlement dated 18 th July 2011 made between the settlor and the original trustee as trustees. The Trust is governed by Jersey law and is irrevocable. The Trust is a discretionary trust. The settlor was the former chairman of an oil exploration company incorporated in the Isle of Man. He ceased to occupy this role in March 2014. The original settled total funds from the settlor were limited to £35,000. From the outset the beneficiaries under the Trust, as listed in Schedule 3, comprised the First Respondent (“the principal beneficiary”) and immediate members of his family – his parents, sister and brother. Clause 23 of the Trust, dealing with “ Disclosure”, prohibits the trustee during the trust period from making disclosure to any person of any information relating to the Trust, except with the authority of all adult beneficiaries or unless ordered to do so by a court of competent jurisdiction.

5

On the same day that the Trust was established the settlor, the original trustee and the principal beneficiary entered into a deed of undertaking which provided that in consideration for the principal beneficiary working as Chief Executive Officer of the oil company and his efforts to increase the price of their shares, of which 48,723,953 were held by companies beneficially owned by the settlor and his family, the settlor would provide the original trustee in its capacity as trustee of the Trust a sum with the anticipated value of $15m within three years from the date of the deed of undertaking.

6

This sum was duly paid into the Trust on 12 th February 2012 by the settlor's wife. This is the only significant settlement that was made into the Trust and it is this payment which is the subject of litigation before the English High Court.

7

The settlor signed a letter of wishes on 18 th July 2011 expressing the wish that the principal beneficiary should be regarded as the principal beneficiary of the Trust and that the trustees should have regard to the principal beneficiary's wishes with regard to adding or removing beneficiaries and to the future administration of the Trust when exercising its powers. The principal beneficiary produced his own letter of wishes dated 20 th August 2011 expressing various wishes including that:

  • (i) the trustee should have regard to his wishes during his lifetime;

  • (ii) on his death the trustee should have regard for the wishes of the remaining beneficiaries; and in particular named godchildren, each in respect of the 10% share of the Trust; and

  • (iii) the remainder of the Trust should not be used for the benefit of the principal beneficiary's family and godchildren but should instead be used to support charities formed to assist British Armed Forces personnel and ex-personnel.

The English Proceedings
8

. The Second to Fifth Respondents (“the English Claimants”) issued proceedings against the settlor in 2013. A worldwide freezing order was made against the settlor in those proceedings. In those proceedings, it is alleged that the settlor defrauded the claimants whilst he was Chief Executive Officer of the Second Respondent. The English Proceedings were resolved in favour of the English Claimants in 2017. During the trial the settlor gave evidence and was cross-examined over the course of four days. The English judge described the settlor as “evasive” and “thoroughly dishonest”.

9

The English High Court ordered that the settlor pay the English Claimants the sum $299 million together with costs. The worldwide freezing order against the settlor was thereafter increased to $315 million.

10

The English Claimants now seek to enforce that judgment against various assets, including the assets of the Trust which they claim are the proceeds of the settlor's fraud. The English Claimants say that they have a proprietary interest in the assets of the Trust. The principal beneficiary was put on notice by the English Claimants in December 2017 that action may be taken against him because he had had dealings with assets originating from the settlor. In December 2019 the Trustee gave an undertaking to the English Claimants to notify them at least fifteen working days in advance of any intention to make a payment out of the Trust to which the English Claimants had not given their prior written consent, save in respect of the Trustee's routine administration fees.

11

The English Claimants have applied to join the principal beneficiary and the Trustee to the English Proceedings pursuant to amended particulars of claim. Those particulars of claim have since been re-amended. Allegations of dishonesty or bad faith on the part of the Trustee and any consequential personal claims made by the English Claimants against the Trustee, which featured in the amended particulars of claim have been abandoned in the re-amended particulars of claim.

12

The re-amended particulars of claim say that the $15 million legally owned by the Trustee as Trustee of a Trust in which the principal beneficiary has an interest represent the traceable proceeds of funds stolen from the English Claimants and misappropriated in breach of fiduciary duty by the settlor and another. The prayers for relief seek orders, inter alia, that the defendants to the English Proceedings do all acts necessary to transfer to the English Claimants the legal title of any assets which they hold on resulting and / or constructive trusts for the English Claimants, and that the said assets be used to satisfy the judgment in favour of the English Claimants. The claims in relation to the Trust are particularised at schedule V to the re-amended particulars of claim. It is said that the deed of undertaking referred to at paragraph 5 above was “a secret agreement” designed to hide and disguise the principal beneficiary's remuneration from his fellow directors and the company's auditors and that, inter alia, the principal beneficiary was not a bona fide purchaser for value without notice in respect of the assets transferred to or payments received from the Trust and that the Trust assets accordingly represent traceable proceeds of sums of which the English Claimants have been defrauded by the settlor. The Trustee is, it is said, a “mere volunteer” which did not give value for its receipt of the payment to the Trust and accordingly the Trustee holds any Trust assets for the English Claimants beneficially.

13

The Trustee, in the affidavit sworn on its behalf, says that until it was notified of the English Proceedings it had understood that the Trust assets were held subject to the terms of the Trust. The Trustee accepts that in the event that the English Claimants succeed in their proprietary claim against the Trust assets, the assets would be held by the Trustee as constructive trustee for the English Claimants. The Trustee says, accordingly that it is “presently unable properly to determine for whom it holds the Trust assets”.

14

The Trustee anticipates that the principal beneficiary, as the principal beneficiary, will defend the legitimacy of the sum settled into Trust in the English Proceedings. The principal beneficiary's advocate confirmed this to us. Indeed the principal beneficiary has made a reverse summary judgment application in the English High Court with the intention of seeking the dismissal of the proceedings issued against him.

The relief sought by the Trustee
15

The Trustee wishes to disclose three pieces of legal advice received by its predecessors in title which are privileged in the hands of the Trustee. Such disclosure will be made with the consent of the principal beneficiary but without consultation with the other beneficiaries. In any event an order from the Court is...

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1 cases
  • The Trustee v Principal Beneficiary
    • Jersey
    • Royal Court
    • 14 September 2020
    ...Advocate N. M. Sanders for the English Claimants (Second to the Fifth Respondents). Authorities In the matter of the Arpettaz Settlement [2020] JRC 161. S Settlement [2001] JLR N37. Kahn v HSBC International Trustee Limited, O Poon, K Poon and Franckel, [2015] (1) Note 31) Representation of......
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    • Mondaq Jersey
    • 29 October 2020
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