Brazzill and Others v Willoughby and Others

JurisdictionEngland & Wales
Judgment Date10 July 2009
Neutral Citation[2009] EWHC 1633 (Ch)
Docket NumberCase No: 8805/2008
CourtChancery Division
Date10 July 2009

[2009] EWHC 1633 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before : Mr Justice Peter Smith

Case No: 8805/2008

Between
(1) Patrick Brazzill
(2) Alan Bloom
(3) Thomas Burton
(4) Margaret Mills (as Administrators of Kaupthing Singer & Friedlander Limited)
Applicants
and
(1) Bernadette Willoughby (in her capacity as representative of the Singer & Friedlander Ltd Pension and Assurance Scheme)
(2) Kaupthing Singer & Friedlander (Isle of Man) Ltd
(3) Transport for London
(4) HM Treasury
(5) Financial Services Compensation Scheme
Respondents

Richard Snowden QC and Ben Shaw (instructed by Freshfields Bruckhaus Deringer LLP) for the Applicants

Stuart Isaacs QC and Marcus Haywood (instructed by Pinsent Mason LLP) for the First Respondent

Lloyd Tamlyn (instructed by Nabarro LLP) for the Second Respondent

Richard Gillis QC and Sam O'Leary (instructed by Herbert Smith LLP) for the Third Respondent

Robin Dicker QC and Andreas Gledhill (instructed by Slaughter and May and Denton Wilde Sapte LLP) for the Fourth and Fifth Respondents

Mary Stokes (instructed by Freshfields Bruckhaus Deringer LLP) for the Sub-Category 8 Creditors

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Hearing dates: 19th, 20th and 21st May 2009

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Peter Smith J :

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INTRODUCTION

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1. This is a trial of an Ordinary Application issued on the 13th February 2009 by the Applicants the Joint Administrators of Kaupthing Singer & Friedlander Limited (“the Administrators” and “KSF” respectively) for directions under paragraph 63 of Schedule B1 of the Insolvency Act 1986.

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2. The purpose of the Ordinary Application is to seek the Court's determinations of questions relating to sums totalling £147,436,226.05 deposited in an account (number GB92BKEN10000050002236) in the name of KSF at the Bank of England (“the Account” and “BoE” respectively) by KSF on 6th and 7th October 2008. KSF was placed into administration on 8th October 2008.

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3. Procedural orders were made by Blackburne J (13th February 2009 and 12th March 2009) and by David Richards J on 29th April 2009.

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4. Paragraph 4 of the Ordinary Application raised 10 substantive issues as follows:—

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CREATION AND OPERATION OF A TRUST

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4.1. Was a valid trust created over some or all of the monies standing to the credit of the Account?

4.2. If the answer to question 4.1 is that a valid trust was created over some but not all of the monies standing to the credit of the Account, over which monies was a valid trust created?

4.3. If a valid trust was created over monies standing to the credit of the Account, who were the beneficiaries of the trust?

4.4. If a valid trust was created over monies standing to the credit of the Account, what were the terms of the trust, and how was the trust to operate in relation to withdrawals made by persons holding accounts with KSF (“KSF Account Holders”)? In particular:-

4.4.1. If a KSF Account Holder had a nil balance on his account with KSF on 1 October 2008 and KSF paid monies into the Account in respect of deposits made by the KSF Account Holder into his account after 1 October 2008, how was the trust to operate in relation to subsequent withdrawals made by the KSF Account Holder from his account?

4.4.2. If a KSF Account Holder had a credit balance on his account with KSF on 1 October 2008 and KSF paid monies into the Account in respect of further deposits made by the KSF Account Holder into his account after 1 October 2008, how was the trust to operate in relation to subsequent withdrawals made by the KSF Account Holder from his account?

4.5. If the answer to question 4.4 is that under the terms of the trust, KSF would become absolutely entitled to the respective proportion of the monies standing to the credit of the Account when KSF Account Holders withdrew money from their accounts after 1 October 2008, what was the consequence (if any) if KSF did not, in fact, withdraw any sums from the Account in accordance with its entitlement?

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4.6. If KSF accepted “deposits” from “customers” within the meaning of paragraph 2 of the First Supervisory Notice dated 3 October 2008 which was served by the Financial Services Authority on KSF, but then failed to make corresponding payments into the Account in respect of such “deposits”, did those “customers” nevertheless obtain any (and if so what) interest in the monies standing to the credit of the Account? In particular how would such interests affect or rank as regards the interests of any other persons (including KSF) in the monies standing to the credit of the Account?

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The ING Transfer Order

4.7. If a valid trust was created over monies standing to the credit of the Account for the benefit of KSF Account Holders, how (if at all), were the interests of KSF Account Holders in such monies affected by the transfer of KSF's rights and liabilities in respect of Kaupthing Edge fixed term deposit accounts and savings accounts to Deposits Management (Edge) Limited and thereafter to ING Direct NV (“ING Direct”) pursuant to the Kaupthing Singer & Friedlander Limited Transfer of Certain Rights and Liabilities Order 2008 (SI 2008 No. 2674) (the “Transfer Order”) on 8 October 2008?

4.8. If the answer to 4.7 above is that the interest of any KSF Account Holder in the monies standing to the credit of the Account was extinguished if the rights and liabilities in respect of his account were transferred to ING Direct pursuant to the Transfer Order, did KSF or some other person(s) become entitled to the respective proportions of the monies standing to the credit of the Account?

4.9. In any case found to result under 4.7 and 4.8 above, does any person(s) who provided finance in connection with the Transfer Order have any (and if so, what) equitable or restitutionary remedy in respect of monies standing to the credit of the Account?

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FSCS payments

4.10. If a valid trust was created over monies standing to the credit of the Account for the benefit of KSF Account Holders, how (if at all), were the interests of KSF Account Holders in such monies affected by any compensation paid to such KSF Account Holders by the Financial Services Compensation Scheme, and in particular, did the FSCS become entitled to the interests of such payees?

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DIRECTIONS

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5. In her first witness statement dated 12th February 2009 Margaret Elizabeth Mills (“Ms Mills”), one of the Administrators identified (paragraph 71) 8 separate categories of persons who might be potentially interested in the determination of the legal issues relating to the Account as follows:—

Category 1: Trade creditors of KSF and any KSF Account Holders who did not make deposits during the period 2–8 October 2008 (the “Relevant Period”) and in respect of whom KSF did not transfer monies to the Account;

Category 2: KSF Account Holders in respect of whom monies were transferred to the Account corresponding to the deposits made by those KSF Account Holders and whose accounts were not transferred to ING Direct pursuant to the Transfer Order and who are not eligible to make a claim for compensation from the FSCS;

Category 3: KSF Account Holders in respect of whom monies were transferred to the Account corresponding to the deposits made by those KSF Account Holders during the Relevant Period and whose accounts were not transferred to ING Direct but who are eligible to make a claim for compensation from the FSCS (regardless of whether or not, at the date of the Application, such KSF Account Holders have, in fact, exercised their right to claim compensation and have assigned claims to the FSCS);

Category 4: KSF Account Holders with Edge Savings Accounts in respect of whom monies were transferred to the Account corresponding to the deposits made by those KSF Account Holders into their Edge Savings Accounts during the Relevant Period and whose Edge Savings Accounts were then transferred to ING Direct;

Category 5: KSF Account Holders with Edge Deposit Accounts in respect of whom monies were transferred to the Account corresponding to the deposits made by those KSF Account Holders into their Edge Deposit Accounts during the Relevant Period and whose Edge Deposit Accounts were then transferred to ING Direct;

Category 6: KSF Account Holders in respect of whom monies were transferred to the Account corresponding to the deposits made by those KSF Account Holders during the Relevant Period, although on an alternative interpretation of the Notice, it may be arguable that the accounts held by those KSF Account Holders should not have been treated as “customer” accounts or, alternatively, the deposits to those accounts should not have been treated as “deposits” under the terms of the Notice 1;

Category 7: KSF Account Holders with overdrawn accounts who deposited monies with KSF during the Relevant Period for the purposes of reducing or eliminating such overdrafts or discharging obligations under linked loan accounts but in respect of whom KSF transferred monies to the Account corresponding to the deposits made by those KSF Account Holders;

Category 8: KSF Account Holders in respect of whom KSF ought, on a true construction of paragraph 2 of the Notice, to have transferred monies to the Account corresponding to deposits made by such KSF Account Holders in the Relevant Period but in respect of whom KSF did not in fact transfer monies to the Account corresponding to deposits made by such KSF Account Holders in the Relevant Period.

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6. At the adjourned hearing before Blackburne J on 12th March 2009 the following orders were made as to representation:—

a) Bruce McNess (a representative of the Trustees of the Singer & Friedlander Limited Pensions Assurance Scheme), Kaupthing Singer Friedlander (Isle of Man) Limited (“KSFIoM”), Transport for London (“TFL”), Her Majesty's Treasury (“HMT”), and the Financial Services Compensation Scheme...

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2 cases
  • Brazzill and Others v Willoughby and Others
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 27 May 2010
    ...COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT MR JUSTICE PETER SMITH [2009] EWHC 1633 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL Lord Justice Sedley Lord Justice Thomas and Lord Justice Lloyd In the Matter of Kaupthing......
  • Bestrustees Plc v Kaupthing Singer & Friedlander Ltd ((in Administration))
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    ...persons beneficially entitled to those funds. Mr Justice Peter Smith delivered his judgment on 15 July 2009 ( Brazzill v Willoughby [2009] EWHC 1633 (Ch)), in which he held that all the money in the trust account was held on trust. He also specified who were the persons beneficially entitle......
1 books & journal articles
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    • Singapore Academy of Law Journal No. 2017, December 2017
    • 1 December 2017
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