Bridge Trust Company Ltd v Att Gen

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 23 March 2001
• Court: Grand Court (Cayman Islands)
• Date: 23 March 2001

Grand Court

(Smellie, C.J.)

BRIDGE TRUST COMPANY LIMITED and SLATTER

and

ATTORNEY GENERAL, WAHR-HANSEN, COMPASS TRUST COMPANY LIMITED and EIKLAND A.S.

T.M.E.B. Etherton, Q.C. and A.J.E. Foster for the plaintiff trustees;

C.G. Nugee, Q.C. and G.F. Ritchie for Wahr-Hansen;

G.C. Vos, Q.C. and N.R.L. Clifford for Compass Trust Co.;

T.W.G. Lowe and Ms. C.J. Bridges for Eikland A.S.

Cases cited:

(1) Alsop Wilkinson v. Neary, [1996] 1 W.L.R. 1220; [1995] 1 All E.R. 431, applied.

(2) Barclays Bank Ltd. v. Quistclose Invs. Ltd., ELR[1970] A.C. 567; [1968] 3 All E.R. 651.[1970] A.C. 567; [1968] 3 All E.R. 651.

(3) Beddoe, In re, Downes v. Cottam, [1893] 1 Ch. 547; (1892), 62 L.J. Ch. 233; 37 Sol. Jo. 99.

(4) Briggs v. Integritas Trust Management (Cayman) Ltd., 1988–89 CILR 456, applied.

(5) Buckton, In re, Buckton v. Buckton, [1907] 2 Ch. 406; (1907), 76 L.J. Ch. 584.

(6) Butlin”s Settlement Trusts, In re, Butlin v. ButlinELR[1976] Ch. 251; [1976] 2 All E.R. 483, considered.

(7) Dallaway, In re, [1982] 1 W.L.R. 756; [1982] 3 All E.R. 118.

(8) Drammen Byrett”s Request, In re, 2000 CILR 81.

(9) Eaton, In re, Shaw v. Midland Bank Exor. & Trustee Co. Ltd., [1964] 1 W.L.R. 1269; [1964] 3 All E.R. 229n.[1964] 1 W.L.R. 1269; [1964] 3 All E.R. 229n.

(10) Evans, In reWLR, [1986] 1 W.L.R. 101; sub nom. Evans v. Evans, [1985] 3 All E.R. 289.

(11) Hall, In re, 1994–95 CILR 456.1994–95 CILR 456.

(12) India (Govt.) v. Taylor, [1955] A.C. 491; [1955] 1 All E.R. 292.

(13) Lloyds Bank Intl. (Cayman) Ltd. v. Byleven Corp. S.A., 1994–95 CILR 519.

(14) McDonald v. Horn, [1995] 1 All E.R. 961; [1995] I.C.R. 685, applied.

(15) Moritz, In re, [1960] Ch. 251; [1959] 3 All E.R. 767.

(16) Ojjeh Trust, In re, 1992–93 CILR 348.

(17) Spurling”s Will Trusts, In re, Philpot v. Philpot, [1966] 1 W.L.R. 920; [1966] 1 All E.R. 745.

(18) Watt v. Assets Co. Ltd., [1905] A.C. 317.

(19) Yat Tung Inv. Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581; (1975), 119 Sol. Jo. 273.

Trusts-costs-indemnity from trust fund-pre-emptive costs-trustee”s costs of hostile litigation may, exceptionally, be met from trust-strength of case, justice of application and special circumstances relevant-trustee to disclose weaknesses in case and court to choose most economical way of proceeding-may allow further investigation of cause of action/defence subject to limitation on costs

Trusts-costs-indemnity from trust fund-pre-emptive costs-court may order trustee”s costs of representing interests of charity in hostile litigation to be met from trust in interests of justice if charity otherwise unrepresented, arguable case and settlor supports order

Trusts-rectification-discretion of court-remedy available if settlor”s intentions not reflected by trust deed, not if simply failed to appreciate legal effect of words, e.g. if non-charitable trust created because intended objects not charitable in law

The plaintiff trustees applied for directions as to how to proceed on behalf of a trust.

The second defendant, who represented the estate of a Mr. Jahre, brought proceedings in England against the trustees, claiming title to the assets settled on the Aall Foundation (‘AF’), a Cayman Islands trust. The assets, representing company shares, had been settled, ostensibly by a Mr. Monsen, on the Continental Foundation (‘CF’) and were transferred after Mr. Jahre”s death to the AF. Acting in the interests of the Norwegian Government, which claimed against the Jahre estate, the second defend-ant alleged that the assets were in fact held on a resulting trust for Mr. Jahre”s estate and that the CF was established to evade taxation.

In proceedings commenced here by the trustees to determine the validity of the trusts, the Attorney General and the third defendant were joined as the Protector of Charity on behalf of the Crown and the administrator of Mr. Monsen”s estate respectively. The Grand Court upheld the validity of the CF as a charitable trust (the validity of the AF as a charitable trust having been conceded), but the Court of Appeal overturned that finding and the Privy Council dismissed the Attorney

General”s appeal. The assets were declared to be held on a resulting trust for the true settlor of the CF, whomever that might be. The Attorney General then declined to act further on behalf of charity as a potential beneficiary, but offered to act as amicus curiae in the future trial in the Grand Court, the English action having been discontinued.

The trustees sought directions on whether they could continue to press the cause of charity in the ongoing proceedings to identify the beneficial owner, and to claim their costs of doing so from the trust. Three other potential beneficiaries were contended for by the parties, namely, the Monsen estate, the Jahre estate and the fourth defendant, Eikland A.S., the successor to the original owner of the company shares.

The trustees and the third defendant submitted that (a) the court had a duty in the present circumstances, analogous to that owed to a minor, impecunious beneficiary, to protect the interests of charity; (b) although this was hostile trust litigation, the strength of the trustees” case and the absence of any other person willing to represent charity constituted exceptional circumstances in which the court should make a pre-emptive order for the payment of the trustees” costs; (c) since the settlor had attempted but failed to create a charitable trust, the trust should now be rectified to reflect his true intentions; (d) the assets, previously bene-ficially owned by Mr. Monsen or, alternatively, held on trust by him for charitable purposes on Mr. Jahre”s instructions, had been re-settled on the validly constituted charitable trusts of the AF; and (e) there were a number of arguable defences against the claim by Mr. Jahre”s estate, including estoppel, laches, non-enforcement of foreign revenue laws, breach of Cayman confidentiality laws and champerty.

The second and fourth defendants submitted in reply that (a) the trustees” duty in the context of hostile litigation was to remain neutral; (b) charity had no prima facie claim to beneficial ownership of the assets; in particular, (i) rectification was unavailable on the ground of res judicata, as the Privy Council had found that the settlor had intended to benefit non-charitable objects, and there had been ample opportunity during six years of litigation to seek rectification, and (ii) no valid re-settlement of the assets by Mr. Monsen could have taken place to benefit charity, since he had held them for Mr. Jahre alone, and in any event the Privy Council had ruled that any purported vesting of assets in the AF would have been void due to the invalidity of the CF; and (c) accordingly, the trustees” costs of representing charity should not be met from the trust.

Held, making an order for costs:

(1) The court had a discretion, exceptionally, to order that a party”s costs of participating in hostile litigation be met from the trust in any event, taking into account the strength of the party”s case, the justice of its application and any special circumstances. Since costs would normally follow the event, a pre-emptive order would only be made if the court were satisfied that the trial judge would ultimately award the trustees their costs. Without conducting a trial of the issues to be argued, the court had

to assess whether the trustees had shown a sufficient case for further investigation and, if so, it had to choose the most economical way of proceeding, limiting, if necessary, the scope and costs of such investigation. Trustees were ordinarily obliged to remain neutral and were not obliged by the Attorney General”s withdrawal from the case to act on behalf of charity. They were required to give full disclosure of the strengths and weaknesses of their case. Furthermore, the court had to bear in mind that they were seeking to defend assets which, as a result of the Privy Council”s declaration, they held as trustees for an unknown beneficiary rather than for charity (paras. 34–44).

(2) The trustees would not be allowed their costs of arguing for or investigating the remedy of rectification, since they had not shown strong and convincing evidence that the settlor”s intentions were contrary to the trust deed. Rectification would be available if the words used did not mean what the settlor intended or believed them to mean, but not if he simply failed to appreciate their legal effect. The rectification argument ran contrary to the available evidence and to Mr. Jahre”s repeated assertions whilst alive that Mr. Monsen was the settlor, from which it could be in-ferred (as his estate contended) that some fiscal advantage was to be gained from concealing his ownership of the assets. Moreover, the trustees might be estopped from asserting a charitable intention by the Privy Council”s specific finding that the trust was intended to benefit non-charitable objects. In any event, the wider doctrine of res judicata would preclude the issue of rectification being raised at this stage in the litigation, when it had never been sought before (paras. 48–63).

(3) However, in the exercise of the court”s overriding duty to see that justice was done, the trustees would be allowed their costs of presenting the re-settlement argument and the various equitable defences to the Jahre estate claims. Those points were arguable, and without such an order the interests of charity would be unrepresented on them. The resulting costs would have no significant impact on the assets, and the estate of the prima facie settlor, Mr. Monsen, was strongly in favour of the order. Although it was possible for his estate to present the case for re-settle-ment, the alternative scenario that Mr. Monsen had fulfilled Mr. Jahre”s intended charitable trust by resettling the assets on the AF was best argued by charity itself. The trial judge would have to decide whether...