Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd

JurisdictionUK Non-devolved
JudgeLord Hodge,Lord Sumption,Lord Carnwath,Lord Mance,Lord Briggs
Judgment Date23 April 2018
Neutral Citation[2018] UKPC 7
CourtPrivy Council
Docket NumberPrivy Council Appeals: Nos 0016, 0017, 0018, 0035, 0080, 0081, 0083 of 2016 and No 0003 of 2017
(1) Investec Trust (Guernsey) Ltd
(2) Bayeux Trustees Ltd
(Respondents)
and
(1) Glenalla Properties Ltd
(2) Thorson Investments Ltd
(3) Eliza Ltd
(4) Oscatello Investment Ltd
(5) Rawlinson & Hunter Trustees SA
(Appellants) (Guernsey)

[2018] UKPC 7

before

Lord Mance

Lord Sumption

Lord Carnwath

Lord Hodge

Lord Briggs

Privy Council Appeals: Nos 0016, 0017, 0018, 0035, 0080, 0081, 0083 of 2016 and No 0003 of 2017

Privy Council

Easter Term

From the Court of Appeal of Guernsey

Former Trustees

Simon Taube QC

Jeremy Wessels

James Brightwell

Thomas Fletcher

(Instructed by Macfarlanes LLP)

Current Trustees

Guernsey 1 appeals

Lord Goldsmith QC

Charles Hollander QC

Ian Swan

Kathryn Purkis

Nick Robison

John Robb

Georgina Petrova

(Instructed by Debevoise & Plimpton LLP)

Current Trustees

Guernsey 3 appeal

Charles Hollander QC

Nick Robison

John Robb

(Instructed by Debevoise & Plimpton LLP)

The BVI Companies

Ewan McQuater QC

John Greenfield

Daniel Warents

Matthew Watson

(Instructed by Harcus Sinclair LLP)

Former Trustees:

(1) Investec Trust (Guernsey) Ltd

and

(2) Bayeux Trustees Ltd

Rawlinson & Hunter Trustees SA (acting in person)

Current Trustees:

(1) Fort Trustees Ltd

and

(2) Balchan Management Ltd

The BVI Companies:

(1) Glenalla Properties Ltd,

(2) Thorson Investments Ltd,

(3) Eliza Ltd and

(4) Oscatello Investment Ltd

Heard on 27, 28, 29 and 30 November 2017

Table of Contents

The factual background

2

The Court Proceedings

13

The meaning of article 32 of the TJL

17

The characterisation of the issue under the private international law of Guernsey: does article 32 of the TJL apply?

23

Analysis

25

Article 26 of the TJL and the liability of trustees of a Jersey trust for breach of trust

34

The appeals against the Court of Appeal's refusal of interlocutory applications and the application for retrial, and the human rights challenges

39

Oscatello's claim in restitution

44

The appeals in relation to costs

51

The second litigation

53

Factual background

53

The appeal on the second litigation

56

The Somerfield claim

56

The investment claims

58

Conclusions

65

Lord Mance:

65

Lord Briggs:

83

Lord Hodge

( with whomLord SumptionandLord Carnwathagree)

1

This advice, to which each member of the panel of the Board has contributed, is the unanimous view of the Board on all matters except those on which members of the Board have produced separate judgments. On those matters it is the majority judgment of the Board. The advice concerns eight appeals from the Court of Appeal of Guernsey (“the Court of Appeal”). One of the appeals raises two points of general public importance about the interpretation of articles 26 and 32 of the Trusts (Jersey) Law 1984 (as amended) (“the TJL”) and about the relevant rules of private international law of Guernsey. The other appeals do not raise points of general public importance but are appeals as of right under section 16 of the Court of Appeal (Guernsey) Law 1961 (“the 1961 Law”). That section provides that no appeal in civil matters shall lie from the Court of Appeal without the special leave of the Board or the leave of the Court of Appeal “except where the value of the matter in dispute is equal to, or exceeds, the sum of five hundred pounds sterling”.

2

The Court of Appeal refused many of the applications which were made in this case to appeal to the Board, relying on its earlier decisions in Pirito v Curth 2005–06 GLR 34 and Emerald Bay Worldwide Ltd v Barclays Wealth Directors (Guernsey) Ltd (unreported) 9 January 2014, Court of Appeal of Guernsey Judgment 02/2014 by applying a test of whether the appeal raised arguable questions of law of general public importance. The Board granted permission to appeal on those matters because it considers that the test which the Court of Appeal of Guernsey sought to apply is not consistent with the terms of section 16 of the 1961 Law. The Board has set out its reasoning for that view in its advice in A v R [2018] UKPC 4, which was handed down on 5 March 2018. This set of appeals and the appeal in A v R have demonstrated that there is a question for the States of Guernsey whether to amend its legislation, as its sister jurisdiction of Jersey did in 2008 (see article 14 of the Court of Appeal (Jersey) Law 1961 (as substituted by article 7 of the Court of Appeal (Amendment No 8) (Jersey) Law 2008)), to facilitate the introduction of such a test. The Board urges the States of Guernsey to address this matter without undue delay.

The factual background
3

The disputes which are the subject of these appeals concern the administration of the Tchenguiz Discretionary Trust (“the TDT”) in the period between March 2007 and October 2008. The TDT came into existence in the following way. In October 1988 the Tchenguiz Family Trust (“the TFT”) was established as a discretionary trust governed by the law of the British Virgin Islands (“the BVI”). By the time of the matters in issue the trustee of the TFT was Investec Trust (Guernsey) Ltd (“Investec”). The beneficiaries of the TFT included the sons of Victor Tchenguiz, Robert and Vincent. In March 2007 a decision was made to separate the assets of the trust which were held notionally for Mr Robert Tchenguiz from those so held for Mr Vincent Tchenguiz. On 26 March 2007 Investec as trustee of the TFT exercised powers of appointment to establish the TDT, which is a discretionary trust governed by the law of Jersey. The beneficiaries of the TDT are Mr Robert Tchenguiz, his children and remoter issue, and any person or charity that is added to the class of beneficiaries. The initial trust fund of the TDT was £5,000. At the outset, Investec was the sole trustee of the TDT but Bayeux Trustees Ltd (“Bayeux”) was appointed as a co-trustee on 21 August 2007 in the context of the transfer of substantial assets from the TFT to the TDT, which the Board discusses below. In its discussion of the acts of the trustees of the TDT the Board refers to Investec and Bayeux as “I&B”.

4

The TDT, which was signed on 26 March 2007, provides in clause 3.1 that it is established under and governed by the laws of Jersey and the courts of Jersey are the forum for the administration of the trust. Clause 9.1 provides that no trustee is liable for any loss to the trust fund or its income unless the loss shall arise by reason of the trustee's own fraud, wilful misconduct or gross negligence. Clause 10.4 provides that a trustee on ceasing to be trustee has the right to withhold such assets as it in good faith considers necessary in respect of any liability which is properly chargeable against the trust fund.

5

From about October 2004, a company, R20 Ltd (“R20”), acted as investment adviser to the trustees of the TFT in relation to the assets notionally allocated to Mr Robert Tchenguiz. R20's chairman was Mr Robert Tchenguiz. Following the transfer of assets from the TFT to the TDT in August 2007, R20 acted as investment adviser to the TDT. The assets of the TFT which were notionally allocated to Mr Robert Tchenguiz comprised companies which held investments in public equity, private equity and real estate. Those companies, which were transferred to the TDT in August 2007, held many of their investments in public equity through contracts for differences and other margin contracts.

6

The holding of investments in this form, at a time when the banking market deteriorated in the second half of 2007 as the financial crisis developed, exposed the TFT and later the TDT to margin calls, which if not met, would have caused the trusts to lose those investments. As a result of the margin calls, the TFT urgently needed to obtain funding to support those investments.

7

In the narrative which follows, the Board focuses on three events: (i) the loan agreement which Investec as trustee of the TFT and three subsidiary companies of Investec in the TFT entered into with the Icelandic bank, Kaupthing Bank hf (“Kaupthing”) on 20 August 2007, (ii) the transfer of assets and related liabilities from Investec as trustee of the TFT to I&B as trustees of the TDT on 24 August 2007, and (iii) the re-financing of the TDT by a restructuring of the TDT's corporate assets in a framework agreement (“the Framework Agreement”) and an overdraft loan agreement (“the Overdraft Loan Agreement”), both dated 19 December 2007.

8

The 20 August 2007 loan agreement: In order to obtain the needed funding to meet the margin calls Investec as trustee of the TFT and three subsidiaries entered into the loan agreement with Kaupthing which gave them a short-term loan facility of up to £100m. The loan agreement was governed by the laws of England and Wales. By clause 11.1 of the agreement each borrower undertook joint and several liability for the performance of the borrowers' obligations. Repayment of the loan was secured by the pledge of the shares of specified subsidiary companies and also by a personal guarantee to be given by Mr Robert Tchenguiz, which he provided at about the same time.

9

The transfer of assets and liabilities on 24 August 2007: The assets, which on 24 August 2007 were appointed to be held by I&B subject to the trusts declared in the TDT trust instrument, comprised shares in 30 companies registered in the BVI and also loans owed to the TFT by 34 companies. It was also necessary to transfer from Investec as trustee of the TFT to I&B as trustees of the TDT the liabilities which were associated with the transferred assets. Those liabilities included not only the debt incurred to Kaupthing under the 20 August 2007 loan agreement but also debts owed by Investec as trustee of the TFT to subsidiary companies within the TFT structure, the shares of which were being transferred to I&B as trustees of the TDT.

10

I&B as trustees of the TDT assumed the...

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20 cases
4 firm's commentaries
  • Offshore Roundup
    • United Kingdom
    • JD Supra United Kingdom
    • September 23, 2020
    ...Drawing on English law principles and the decision of the Privy Council in Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2018] UKPC 7, the Court considered the general rule that equitable interests rank according to the order of their creation (i.e., the “first in time” rule) and......
  • Equitable Liens And Providing Finance In Respect Of Jersey Trusts
    • Jersey
    • Mondaq Jersey
    • September 18, 2021
    ...legal advice at the times most critical to our clients. Footnotes 1 Investec Trust (Guernsey) Ltd v Glenella Properties [2018] UKPC 7 2 Representation of Rawlinson & Hunter Trustees SA re Z Trusts [2019] JCA 106 The content of this article is intended to provide a general guide to the subje......
  • Equitable Liens And Providing Finance In Respect Of Jersey Trusts
    • Jersey
    • Mondaq Jersey
    • September 18, 2021
    ...legal advice at the times most critical to our clients. Footnotes 1 Investec Trust (Guernsey) Ltd v Glenella Properties [2018] UKPC 7 2 Representation of Rawlinson & Hunter Trustees SA re Z Trusts [2019] JCA 106 The content of this article is intended to provide a general guide to the subje......
  • Principles Applicable To An 'insolvent' Trust In Jersey
    • Jersey
    • Mondaq Jersey
    • May 31, 2021
    ...successor trustees). The starting point was the Privy Council's judgment in Investec Trust (Guernsey) Ltd v Glenella Properties Ltd [2018] UKPC 7, which recognised that (under Jersey law) a trustee has an equitable lien on trust assets to secure its right of indemnity for liabilities proper......
1 books & journal articles
  • Contract formation
    • United Kingdom
    • Construction Law. Volume I - Third Edition
    • April 13, 2020
    ...[2017] SASCFC 2 at [47]–[93], per Blue J (appeal dismissed: [2018] HCA 5). 374 Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2018] UKPC 7 at [59]; Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20 at [24], per Kiefel CJ, Keane and Edelman JJ; Dickie &......

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