Ptnz v as
| Jurisdiction | England & Wales |
| Judge | Master Shuman |
| Judgment Date | 18 November 2020 |
| Neutral Citation | [2020] EWHC 3114 (Ch) |
| Date | 18 November 2020 |
| Docket Number | Case No: PT 2019 000273 |
| Court | Chancery Division |
[2020] EWHC 3114 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY TRUSTS AND PROBATE LIST (ChD)
Rolls Building, 7 Rolls Buildings
Fetter Lane, London. EC4A 1NL
Master Shuman
Case No: PT 2019 000273
Richard Wilson QC and Zahler Bryan (instructed by Burges Salmon LLP) for the Claimant
Gregory Pipe and Ciar McAndrew (instructed by Cooke, Young & Keidan LLP) for the Second to Fourth Defendants
Clare Stanley QC and William Buck (instructed by RPC LLP) for the Sixth and Seventh Defendants
Elspeth Talbot Rice QC and Elizabeth Weaver (instructed by Stewarts) for the Eighth Defendant took no part in the hearing
Mark Hubbard (instructed by Rosenblatt Limited) for the Tenth Defendant
Hearing dates: 11 to 13 May 2020
HTML VERSION OF JUDGMENT APPROVED
This is the first of two hearings listed to determine issues arising out of the restructuring of four family trusts and subsequent events. The claimant is a corporate trustee seeking the blessing of the court in respect of two momentous decisions made on 10 May 2017 and 29 January 2019. The trusts are governed by English law and administered in Jersey.
The Part 8 claim form was issued on 28 March 2019 pursuant to CPR Part 64, a Public Trustee v Cooper [2001] WTLR 901 category 2 claim. The complexion but not the underlying structure has transmogrified during the course of the proceedings. HL, a director of the claimant and a lawyer, has now filed 10 witness statements. There are 15 files of documents and 2 files of authorities. It is a feature of the number of defendants and the sums involved in this case together with one part of the family appearing to stand odds with other parts of the family that the claimant has had an increasingly tortuous path to navigate.
I have been greatly assisted by all counsel who appeared before me at the remote hearing. In particular Mr Wilson QC and Ms Bryan have had to walk a fine line to remain neutral but also to provide assistance to the court on how to approach the identified issues in a claim that the claimant elected to bring to court to seek directions. A position accentuated by the 8th defendant having engaged hitherto in the proceedings but electing neither to file a substantive skeleton argument nor attend this hearing. Whilst one could readily see why she did not wish to be treated as a hostile beneficiary and therefore lose entitlement under the trusts for herself and for her issue it caused some consternation for the other parties. I heard argument on day 1 as to what the role of the claimant should be and gave an ex tempore judgment at the start of day 2. The effect of the volte-face of the 8th defendant is that although witness statements were filed by her directly and on her behalf together with extensive exhibits and an opinion on Monegasque law she elected not to attend court and argue a positive case. Whilst I did not strike out that evidence it seems to me that that evidence carries little weight before me. Where it departs from the agreed position of the other parties I do not accept the 8th defendant's evidence.
The issues for determination at this hearing are:
(1) whether the appointment of the 10th defendant as protector of the trusts on 9 October 2019 was valid or void (“the validity issue”);
(2) if the 10th defendant was validly appointed as protector:
(a) whether his consent is required in relation to the decisions of the trustee that are the subject of the blessing application
(b) whether there should be any restriction on the role he should play at all in relation to the blessing hearing
(“the protector issues”).
THE PARTIES
The family trusts comprise 4 English law discretionary trusts, which were created on 6 March 2008 (“the trusts”). The claimant is the trustee and based in New Zealand. The beneficiaries of the trusts are the two male children of A, the 1st defendant and E, and their respective children (“the A family”). E died some years ago.
The 1st defendant was the settlor and principal beneficiary of the trusts. He was also protector of the trusts from 11 March 2008 until his death on 13 April 2019.
The 2nd to 4th defendants are the adult children of the 1st defendant and his wife, LS; they are discretionary beneficiaries.
The 5th to 8th defendants are the adult children of E and are discretionary beneficiaries. In addition E had 2 illegitimate children, who are not beneficiaries under the trusts but are intended to be beneficiaries under the proposed restructuring.
The claim originally included the 9th defendant as the class of unborn beneficiaries. With the death of the 1st defendant this class is now closed.
On 9 October 2019 the 2nd to 4th defendants and LS appointed the 10th defendant as protector of the trusts. The validity issue concerns his appointment.
THE FACTUAL MATRIX
On 23 January 2008 there was a meeting in London with JLM, a representative of the claimant based in Jersey, during which the wishes of the 1st defendant were set out. The meeting note records that he wishes to,
“… settle four new NZ trusts which in turn will each hold a Bahamian company (BAH) …. settled by [the 1st defendant]. The assets of each BAH will be cash — €300m: €25m: €25m: €25m.
[The 1st defendant] will be the Protector to each trust and appoint his successor.”
The note also records that the class of beneficiaries will cover the entire A family. JLM was to prepare the necessary trust documents to give effect to the 1st defendant's wishes.
On 6 March 2008 the trust deeds were executed (“the trust deeds”). The trusts were formally settled by the claimant, operating under its former name. Ms Stanley QC makes the point that in reality the trusts were settled by the 1st defendant as settlor. The settlement instruments are in materially identical terms. The trusts are discretionary in nature and the trustee has broad dispositive powers. Schedule 3 of the trust deeds sets out matters concerning the appointment of the protector and his powers.
On 7 March 2008 the 1st defendant, giving a residential address in Monaco, provided letters of wishes in relation to the trusts. As principal beneficiary of the trusts his wish was that he would benefit from the income and capital.
On 10 March 2008 deeds of variation were executed in relation to the trusts. There were a number of changes made to the trusts including a revision to clause 13, hostile beneficiaries, which added that the protector may by deed reinstate a hostile beneficiary as a beneficiary of the trust. For present purposes the most significant variation was the expansion of the powers of the protector and the categories of powers and discretions that could not be exercised by the trustees without the written consent of the protector. Unless I state otherwise references hereafter to “the trusts” mean the trust deeds executed on 6 March 2008, as varied on 10 March 2008.
By a deed dated 11 March 2008 made between the claimant and the 1st defendant, the 1st defendant was appointed as protector of the trusts. Recital C records,
“the trustees wish to appoint the original protector as the 1st protector of the trust and the original protector has been joined as a party to this deed to confirm his acceptance of the appointment.”
On 13 March 2008 the 1st defendant transferred shares in Bahamian companies to the trusts. On 25 November 2008 there was the first capital distribution from the trusts to the 1st defendant; the second capital distribution to him took place on 28 November 2008. There have been 3 loans made to the 1st defendant from the trusts: January 2009, April 2009 and December 2011.
The A family had significant business interests. There were separate investigations by the relevant authorities in another jurisdiction (“the investigating country”) into environmental offences and criminal offences alleged to have been committed by some of the beneficiaries of the trusts. This led to the freezing of A family assets in Switzerland and Jersey.
A settlement agreement was entered into providing full and final settlement of all civil claims against the relevant beneficiaries. The criminal investigation was against E, the 1st defendant, the 5th defendant and the 7th defendant. A plea bargain was entered into. The settlement agreement and the plea bargain required the payment of over €1 billion to the authorities of the investigating country. This was funded by the A family trusts, not including the trusts that are the subject matter of the claim before me, and payments to be made by the 1st defendant. There was a need to restructure the A family wealth including the trusts.
In October 2016 Jersey-based lawyers contacted the claimant proposing that the trusts be terminated and the assets distributed to the 1st defendant on the basis that he would resettle €340 million on 6 new trusts for the benefit of certain beneficiaries and their children.
In early 2017 the 1st defendant issued a number of representations in the Jersey Royal Court including one involving the trusts. The representation in respect of the trusts is described by HL as unconventional in that it was made by the 1st defendant as beneficiary and protector and said to be on behalf of the beneficiaries for the blessing of a decision not yet taken by the claimant.
Following further discussion the proposed restructuring was revised and the representation was amended. The 1st defendant, given the pregnant conflicts in his...
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