Gany Holdings (PTC) SA v Khan and Others
| Jurisdiction | UK Non-devolved |
| Judge | Lord Briggs |
| Judgment Date | 30 July 2018 |
| Neutral Citation | [2018] UKPC 21 |
| Court | Privy Council |
| Docket Number | Privy Council Appeals No 0005 and 0006 of 2017 |
| Date | 30 July 2018 |
[2018] UKPC 21
Lord Reed
Lord Sumption
Lord Hodge
Lord Lloyd-Jones
Lord Briggs
Privy Council Appeals No 0005 and 0006 of 2017
Trinity Term
From the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands)
Civil Appeal - Administration of estates — Trusts — What constituted the property of the Trust at the death of the deceased — Whether the 1998 appointment was void as a result of misconception on the part of the trustee as to the identity and value of the trust property — Whether an account of the trust property received pursuant to the 1998 appointment should be made — RE Curteis' Trust (1872) LR 14 Eq 217 — Whitelock v. Moree [2017] UKPC 44.
Appellant
( Gany Holdings (PTC) SA
Jonathan Crow QC
Donald Lilly
(Instructed by Bircham Dyson Bell LLP)
Appellant
( Asif Rangoonwala)
Sue Prevezer QC
Ted Greeno
Andrew Willins
(Instructed by Bircham Dyson Bell LLP)
Respondents
( Khan and others)
Alan Boyle QC
Richard Wilson QC
Zahler Bryan
Nicholas Brookes
(Instructed by Stephenson Harwood LLP)
Heard on 14 June 2018
Mohamed Aly Rangoonwala (“MAR”) died intestate on 12 June 1998, aged 74, after a long and, despite vicissitudes, successful business career in Pakistan, London, Hong Kong, Malaysia and elsewhere. He left behind him his second wife Banu, four sons, (in age order) Salim (now deceased), Tariq, Asif and Khalid (born between 1948 and 1960), and one daughter Zorin, born in 1952.
In September 1982 MAR caused to be established a discretionary trust, with himself, his wife, children and their spouses as the main beneficiaries, called the ZVM Trust (“the Trust”). In November 1993 MAR, as appointor under the Trust, caused the first appellant Gany Holdings (PTC) SA (“Gany”), a company he had incorporated in the British Virgin Islands, to become the sole trustee of the Trust. Gany remained in office as sole trustee until March 2017 when it was removed by order of the British Virgin Islands Commercial Court, pursuant to an order of the Court of Appeal in March 2016.
On MAR's death Asif succeeded him as appointor under the Trust. By an instrument in writing executed pursuant to a resolution of the directors of Gany on 22 December 1998 (“the 1998 Appointment”) Gany as trustee purported to appoint the whole of the trust fund, as then constituted, to Asif beneficially.
There are two main issues in the litigation which have led to this appeal, instituted by Zorin, her husband and daughter Sasheen in January 2012. They are, first, what constituted the property of the Trust when MAR died and, secondly, whether the 1998 Appointment was voidable, because of a misconception on the part of Gany as trustee as to the identity and value of the trust property. A third issue, the resolution of which turns on the outcome of the first two, was whether Asif should be ordered to account in relation to trust property received by him from Gany pursuant to the 1998 Appointment, if avoided. Gany and (later) Asif were therefore both joined as defendants to the claim, and are the appellants on this appeal.
Central to an understanding of the development of this dispute is the undoubted fact that (as the judge found), beginning in the 1980s and accelerating in and after 1992, MAR delegated the management and then the control of increasing proportions of his business interests and affairs to Asif to the extent that, by the time of MAR's death in 1998, Asif was in de facto control of substantially all of them, to the exclusion of his siblings, save to the extent that, thereafter, he chose to involve them. Importantly for present purposes, Asif was, immediately following MAR's death, the sole appointor under the Trust, the sole surviving director of Gany and claimed to be in possession of Gany's single bearer share. As appointor Asif had power under the terms of the Trust to appoint and remove trustees, and to appoint successor appointors. As sole shareholder and director of Gany he was in a position to control (subject to its fiduciary obligations) the exercise of the wide discretions and other powers conferred by the terms of the Trust upon its trustee.
Shortly after his father's death, Asif did appoint members of his family to formal roles in connection with Gany and the Trust. Thus, in July 1998 he appointed his brother Khalid and a Mr Mohamed Salim as successor appointors in the event of his death. He appointed his mother Banu, Salim and a Ms D'Cruz as directors of Gany.
Thereafter, and in two distinct phases, Asif went out of his way to make it appear to his siblings, and to Zorin in particular, that there was substantial property held by Gany on the terms of the Trust amounting in value to many millions of dollars. The first phase (shortly before the 1998 Appointment), consisted of Asif telling Zorin, Khalid and Tariq at a family meeting in London that they would each receive US$2m from the Trust in return for letters from them waiving any further claims against the Trust or against MAR's estate. Those payments were in due course made (although not, as the judge held, from property of the Trust) and the waiver letters signed. Asif also arranged for payment of US$1m to his half-brother Salim.
The second phase consisted of an extended series of negotiations between 2005 and 2011 during which Asif and Khalid proposed to their siblings that the Trust would be reconstituted by the establishment of sub-trusts for each sibling. The clear implication conveyed by those discussions, and documents presented during them, was that the Trust was possessed of property with an aggregate value in excess of EUR90m, consisting of interests in a lengthy list of specified companies.
Following the breakdown of those negotiations, Gany informed solicitors acting for Zorin, for the first time, that the whole of the Trust's property had been distributed by 2000 following the payments to each of the siblings in 1998. In February 2012 Gany, through solicitors, informed Zorin's solicitors that, to the best of its then director's knowledge, no companies had ever been held by the Trust.
In its original form, the respondents' claim sought (against Gany only) disclosure of information and documents about the Trust and its property, including interests in companies. Gany's initial response (in the form of an affidavit sworn by its director Khalid on its behalf) in April 2012, was that the Trust had never held any property other than an initial settlement sum of US$100, that it had never had any interest in any corporate entities, and that the payments made in 1998 to the children had not come from the Trust. This case was repeated in Gany's original defence, served in February 2013. In short, Gany's case was that the Trust was, and always had been, an empty shell.
By the time of trial both Gany and (after his joinder) Asif had conceded that the shareholding in one company, namely European Commodities Hong Kong Ltd (“ECL HK”) had been vested in Gany on the terms of the Trust, but it was said that ECL HK owned no assets of its own of significant value, although it had, purely as nominee, held shares in another company, Valson International Limited (“Valson”), initially for MAR and later for Asif.
In the witness statement which constituted his evidence in chief at the trial, Asif said that in the early 1990s MAR had agreed to transfer all his business assets to him (Asif). This was to be (and was) achieved in around 1994 and 1995. He said “the mechanism we used to transfer these assets to me was to place them all in the name of Gany and then to give me control of Gany both at shareholder and board level”. Among the assets thus transferred to Gany Asif listed the following: ECL HK and the following three companies (“the three companies”): European Commodities BVI Limited (“ECL BVI”), Schweizer Holdings SA (“Schweizer”) and Cedilla Investments SA (“Cedilla”). All three companies were incorporated in the British Virgin Islands.
The judge's conclusion as to the identity of the property of the Trust as at MAR's death, after a four-day trial which included cross-examination of Asif, was that no evidence had been adduced by the respondents to falsify Gany's account, which limited the Trust's property to the initial settlement sum and the shares in ECL HK. At para 65 of his reserved judgment he said:
“In this case there is no evidence that any property, other than the ECL HK shares, was the subject of a gratuitous transfer to any of Schweizerisch Finance Ltd, Maly International SA or Gany while each was Trustee of the Trust.”
Accordingly, Gany and Asif succeeded at trial on the first issue.
The Court of Appeal held that the conclusion of the judge, quoted above, had clearly been wrong, since there had been evidence from Asif, which the Board has summarised above, that the shareholdings in each of the three companies had been transferred to or otherwise vested in Gany while it was a trustee of the Trust. Basing its reasoning on In re Curteis' Trusts (1872) LR 14 Eq 217, the Court of Appeal concluded that there was a rebuttable presumption in law that property gratuitously transferred to a person or persons who were, at the time of the transfer, trustees of a trust previously established by the transferor, was to be regarded as transferred subject to the terms of that trust. Since the judge had rejected Asif's case that MAR had intended thereby to transfer beneficial ownership of those companies to Asif, and since there was no evidence that MAR intended to retain beneficial ownership of those companies for himself, it followed that the three companies were...
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