Trilogy Management Ltd v Yt Charitable Foundation (International) Ltd and Seven Others

CourtCourt of Appeal
JudgeMcNeill, Montgomery and Nugee, JJ.A.
Judgment Date09 November 2012
Date09 November 2012
McNeill, Montgomery and Nugee, JJ.A.

S.M. Baker for the representor;

J.P. Speck for the first respondent;

N.F. Journeaux for the eighth respondent;

The other respondents did not appear and were not represented.

Cases cited:

(1) Abdel Rahman v. Chase Bank (C.I.) Trust Co. Ltd., 1990 JLR 136, referred to.

(2) Alhamrani v. J.P. Morgan Trust Co. (Jersey) Ltd., 2007 JLR 527;

further proceedings, [2007]JCA198, C.A., October 16th, 2007, unreported, applied.

(3) Bamford, In re, 2003 JLR N [13]; [2003]JCA048, considered.

(4) Buckton, In re, [1907] 2 Ch. 406, applied.

(5) Daily Telegraph Newsp. Co. Ltd. v. Mclaughain, [1904] A.C. 776, considered.

(6) Esteem Settlement, In re, 2000 JLR N 67, considered.

(7) FG Hemisphere Assocs. LLC v. Congo (Dem. Rep.), 2011 JLR 486, considered.

(8) Singapore Airlines Ltd. v. Buck Consultants Ltd., [2012] Pens. L.R. 1; [2011] EWCA Civ 1542, referred to.

Legislation construed:

Civil Proceedings (Jersey) Law 1956 (Revised Edition, ch.04.200), art. 2(1):

".?.?. [T]he costs of and incidental to all proceedings in the Royal Court shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid."

Court of Appeal (Jersey) Law 1961 (Revised Edition, ch.07.245, 2010 ed.), art. 14(1):

"No appeal shall lie from a decision of the Court of Appeal under this Part without the leave of the Court or the special leave of Her Majesty in Council."

Trusts (Jersey) Law 1984 (Revised Edition, ch.13.875, 2007 ed.), art. 53: The relevant terms of this article are set out at para. 34.

Text cited:

Lewin on Trusts, 18th ed., para. 21 84, at 726 727 (2008).

Trusts — costs — indemnity — in non-adversarial proceedings for proper construction and administration of trust, neutral trustee entitled to full indemnity out of trust for all reasonable costs and expenses — no express order required — court may award other parties costs on indemnity basis out of trust under Trusts (Jersey) Law 1984, art. 53 and Civil Proceedings (Jersey) Law 1956, art. 2, but subject to taxation

The representor brought proceedings in the Royal Court concerning the proper construction of a company's articles of association.

A businessman had set up a charitable foundation which held shares in an investment company ("JY"), which had been established as a means of providing funds for the foundation. After his death, eight charitable sub-trusts were created, of each of which one of his children was appointed guardian. JY's articles of association required it to distribute a minimum proportion of its annual profits by way of dividend, which the foundation distributed to the sub-trusts. Following a change in JY's accounting procedure, disagreement arose as to the correct identification of its profits to which the mandatory minimum dividend provision applied.

The representor, as the trustee of three of the sub-trusts, brought proceedings in the Royal Court alleging, inter alia, that the mandatory minimum dividend provision had been incorrectly applied and that far greater dividends should have been declared. The trustee of the foundation ("YT") adopted a neutral position before the Royal Court because it was required by its articles to act unanimously and its board was split on the issues. The counter-argument was provided by the eighth respondent, the widow of the businessman who had established the foundation. (She had inherited certain of her husband's interests but did not stand to gain from the litigation.) The Royal Court (Birt, Bailiff and Jurats Tibbo and Nicolle) found in favour of the representor but the Court of Appeal subsequently allowed the eighth respondent's appeal.

The eighth respondent and the representor sought their costs of the appeal from the assets of the foundation on the indemnity basis, which YT did not oppose. YT also sought to recover its own costs, although it had been unable to participate in the appeal and had been granted leave to withdraw. The representor sought an order that the costs should be paid out of JY's retained profit, rather than out of the mandatory dividend for 2012.

The representor also sought leave to appeal to the Judicial Committee of the Privy Council.

Held, ruling as follows:

(1) In non-adversarial proceedings concerning the proper construction and administration of a trust, a neutral trustee (i.e. a trustee acting in his capacity as trustee, not defending himself or advancing his own personal interests) was entitled to an indemnity from the trust fund for all costs and expenses reasonably incurred. That arose from statute ("reimburse" in art. 26(2) of the Trusts (Jersey) Law 1984 meant full reimbursement or indemnity), contract and the court's inherent jurisdiction, and an express order to that effect was unnecessary. Where, however, costs or expenses were not reasonably incurred or the trustee acted in breach of trust or duty, the court might in an appropriate case override that principle by ordering that the neutral trustee was not entitled to recover its costs. A trustee did not have carte blanche to use the trust fund for the payment of legal, professional or other fees, costs or expenses in an unreasonable, improper, immoderate or disproportionate way. The position of beneficiaries and other parties was different from that of trustees. The court could make an award of costs in their favour pursuant to its discretionary powers under art. 53 of the Trusts (Jersey) Law 1984 and art. 2 of the Civil Proceedings (Jersey) Law 1956. Costs could thus be ordered on the indemnity basis provided for in Part 12 of the Royal Court Rules 2004, but taxation on that basis would not necessarily result in full reimbursement. Although the costs of first instance proceedings concerning the proper construction and administration of a trust might be considered to be incurred for the benefit of the trust, the costs of appellate proceedings would not necessarily be so considered. A trustee or other party who appealed against a determination concerning the construction or administration of a trust did so at his own risk as to costs. If the appeal were unsuccessful, the appellant might well not recover his costs from the estate and might indeed be ordered to pay costs. If, on the other hand, the appeal succeeded, the appellant's costs could be seen to have been necessarily incurred to obtain the correct administration of the trust and the appellant, whether a trustee or other party, would normally recover his costs from the estate. In such a case, the costs of the other parties to the appeal, even if they were unsuccessful, might also be regarded as incurred for the benefit of the estate, although it should not be assumed that that would always be appropriate ( paras. 8 16).

(2) The proceedings concerning the proper construction of the articles of association of JY, being a matter of considerable significance to the operation of the foundation and the sub-trusts, were properly characterized as non-adversarial proceedings relating to the administration of the trust. The eighth respondent's position was not adversarial, as she stood to gain no material benefit. As the successful appellant, she was therefore entitled to her reasonable costs of and incidental to the appeal, on the indemnity basis, from the foundation. Although the representor had been unsuccessful on appeal, it was reasonable for it to have...

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