Swissindependent Trustees SA v Robert Sofer
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 12 January 2023 |
| Neutral Citation | [2023] EWHC 12 (Ch) |
| Docket Number | Case No: PT-2019-BRS-000015 |
| Court | Chancery Division |
[2023] EWHC 12 (Ch)
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: PT-2019-BRS-000015
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BRISTOL
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
Richard Wilson KC and James Weale (instructed by Weightmans LLP) for the Claimant
Burges Salmon LLP for the First Defendant
The Second to Fifth Defendants were not represented and did not appear
Luke Harris (instructed by Farrer & Co LLP) for the Sixth Defendant
Hearing date: 4 October 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment will be handed down by the Judge remotely by circulation to the parties or representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 am on 12 January 2023.
Introduction
These are the reasons for my decision on the trial of the first part of a Part 8 claim, dealing with an issue of construction of certain trust instruments expressed to be governed by English law. The claimant is the sole trustee of all the trusts from inception, and is a Swiss corporation. The first five defendants are the adult beneficiaries of the trusts concerned (who all live in Australia) and the sixth is a London solicitor appointed to represent the interests of minor and unborn beneficiaries.
The first defendant did not file an acknowledgment of service, but is represented by solicitors, and did file a witness statement, agreeing with the trustee's construction and consenting to the relief sought. The second to fifth defendants filed acknowledgments of service, each indicating no intention to contest the claim. They were not represented, did not make witness statements, and like the first defendant played no part in the hearing.
The claim form was originally issued against the first five defendants only, on 4 March 2019. It made a claim for the construction of the trusts, alternatively for their rectification. It was amended pursuant to my order of 29 September 2022, to add the sixth defendant. That order also provided by paragraph 9 that the hearing in October 2022 be limited to the construction claim, in order to save costs, but, in the event that that claim was determined but no application for directions on the rectification claim were then sought, that the rectification claim should be dismissed. The sixth defendant filed a witness statement on 23 September 2022, in which he stated that he had taken specialist advice, and as a result he had decided not to oppose the claim for construction which he understood the claimant intended to pursue.
The matter was argued before me at an attended hearing by Richard Wilson KC and James Weale, for the claimant, and Luke Harris, for the sixth defendant. At the end of the hearing I announced my decision, which was to construe the trust documents in the sense argued for by the trustee. I said I would give my written reasons in due course. These are those reasons. I am sorry for the delay in preparing them, caused by pressure of other work.
Background
Hyman Sofer was born in South Africa in 1918, though he subsequently settled in Australia, where he died. He had two children, Robert (the first defendant) and Tamara (the second defendant). Robert is married, but has no children. Tamara is also married, and has three adult children (the third to fifth defendants), and (as at March 2019) nine minor grandchildren. On 25 July 2006, when Hyman Sofer was 88 years old, he created a new trust structure to hold his wealth, replacing an existing trust structure that had been set up previously by an Australian law firm, and which pre-dated the involvement of the defendant as trustee.
In the new trust structure, set up by a different Australian law firm, Clayton Utz, there were five trusts in all. These were named the Jordi Unit Trust, the Gabri Trust, the Puyol Trust, the Xavi Trust and the Valdes Trust. I was told that these trusts were named after footballers of the Barcelona Football Club. The defendant was trustee of all four trusts. A BVI company which Hyman Sofer controlled, Cilantro Holdings Ltd (“Cilantro”), acted as formal settlor, settling the sum of US$10 on the trusts of each trust, to which of course further assets would be added in due course.
The Jordi Unit Trust was essentially a holding vehicle, whose function was to hold the investments. The assets from the earlier trust structure were transferred to the new one. Beneficial entitlement to share in the trust fund which the Jordi Unit Trust held was divided into units, which were initially allocated to Cilantro. The other trusts were ultimately to hold the units in the Jordi Unit Trust for the benefit of the intended beneficiaries. I call these other trusts the “beneficiary trusts”.
On 8 September 2006 Cilantro transferred certain of its units in the Jordi Unit Trust to the defendant as trustee of the Puyol Trust (and similarly in relation to the other beneficiary trusts). Subsequently, these units were substituted by other units, but nothing turns on that. It is accepted that ultimately each of the beneficiary trusts was entitled to one third of the value of the Jordi Unit Trust. The Valdes Trust was wound up in January 2009, and need not be mentioned further.
The form of the trusts
The original form of each of the beneficiary trusts was entirely discretionary. No person had a fixed interest. Nevertheless, at the time of creation, the Puyol Trust was apparently intended to benefit Robert and his wife, whereas the Gabri Trust and the Xavi Trust were apparently intended in the longer term to benefit Tamara and her husband on the one hand, and their children on the other. So Tamara's family would have twice as much as Robert's. However, the casual reader of the trust documents at the time of execution would not have thought so.
Beneficiaries
The terms of the three “beneficiary” trusts provided for two classes of beneficiary, “Specified Beneficiaries” and “General Beneficiaries”. When the trusts were executed, the class of “Specified Beneficiaries” consisted of the then youngest partner of each of two law firms, one in London, England, and the other in Calgary, Canada. The “General Beneficiaries” were essentially the closest relatives of the Specified Beneficiaries (although certain other persons connected with those relatives were also General Beneficiaries, and there was also power to appoint further such beneficiaries). It goes without saying that neither Tamara nor Robert had any connection with the youngest partners in the law firms concerned.
However, the trustee of each trust had power, under clause Q1 of the terms of the respective trust instrument, to add further persons to the class of “Specified Beneficiaries”. In relation to the Puyol Trust, that power was exercised by a deed of 23 August 2006 ( ie less than one month after creation of the trust). This added Hyman Sofer as a Specified Beneficiary of the Puyol Trust, and thereby made Robert, Tamara and their respective issue General Beneficiaries of the trust.
I should also mention that, in the event that there are no beneficiaries in the class when the trust comes to an end, the draftsman seeks to avoid a resulting trust for the settlor by providing for the remaining assets to be held on trust for “the Final Repository”. This is the person (not being a member of the Excluded Class or an Excepted Beneficiary) who is the youngest partner at the date of the trust of two other London firms of solicitors. Once again, there is no basis for supposing that either Tamara or Robert had any connection with whoever turned out to be the youngest partner in each of the two law firms. There is also provision limiting any trustee's obligation of disclosure to the Final Repository of his or her interest in the trust until it has become absolutely vested and indefeasible.
The result of this elaborate structure was that neither Hyman Sofer nor his children or remoter issue appeared in the original trust instruments as settlor or beneficiaries (though they all later became beneficiaries), and the persons who did so appear as beneficiaries have never benefitted, and indeed I imagine were never intended to benefit: cf Re TR Technology Investment Trust plc [1988] BCLC 256, 263–64, per Hoffmann J; Re Gea Settlement (1992) 13 Trust Law Intl 188, R Ct Jsy (Tomes DB). Moreover, the assets held on these trusts are not set out or referred to in the original trust instruments. In other words, a person reading the original Puyol Trust instrument alone would learn almost nothing about what it involved.
Powers of variation
In addition, there were certain powers of variation of the trusts. Clause 16 of the Jordi Trusts provides:
“Power to vary
The Trustee may, only with the Consent of the Unitholders who are entitled to vote in accordance with clause 6.2, alter revoke or add to any of the provisions in this deed in any way at all as it sees fit (including, to confer on the Trustee either generally or in a particular instance any power needed to effect any Transaction which the Trustee considers to be desirable) except:
(a) to revoke or vary subclause 11.6 or to do anything which results in any part of the Trust Fund or its income being applied for the benefit of the Trustee or a former Trustee (except in the capacity of trustee of another trust);
(b) to divest or modify the entitlement of any Unitholder to any income or capital, or to any investments...
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