Lemos v Coutts (Cayman) Ltd

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Henry and Kerr, JJ.A.)
• Judgment Date: 09 August 1993
• Court: Court of Appeal (Cayman Islands)
• Date: 09 August 1993

Court of Appeal

(Zacca, P., Henry and Kerr, JJ.A.)

C. LEMOS, P. LEMOS and M. LEMOS

and

COUTTS AND COMPANY (CAYMAN) LIMITED and EIGHT OTHERS

COUTTS AND COMPANY (CAYMAN) LIMITED and FIVE OTHERS

and

C. LEMOS and G. LEMOS

J. Mowbray, Q.C., J. Stevens and A. Foster for the first appellant;

R.D. Alberga, Q.C. and C. Quin for the other appellant;

R. Walker, Q.C. and O. Watler for the trustees;

G. Ritchie for the seventh, eighth and ninth defendants.

Cases cited:

(1) Australian Comm. Research & Dev. Ltd. v. ANZ McCaughan Merchant Bank Ltd., [1989] 3 All E.R. 65.

(2) Beddoe, In re, Downes v. Cottam, [1893] 1 Ch. 547; (1893), 37 Sol. Jo. 99, dicta of Lindley, L.J. applied.

(3) Birmingham Estates Co. v. Smith(1880), 13 Ch. 506.

(4) British Airways Bd. v. Laker Airways Ltd., [1985] A.C. 58; [1984] 3 All E.R. 39, dicta of Lords Diplock and Scarman applied.

(5) Butt v. Kelson, [1952] Ch. 197.

(6) Castanho v. Brown & Root (U.K.) Ltd., [1981] A.C. 557; [1981] 1 All E.R. 143.

(7) Codrington v. CodringtonELR(1875), L.R. 7 H.L. 854, dicta of Lord Cairns applied.

(8) Cowin, In re, Cowin v. GravettELR(1886), 33 Ch. D. 179; 56 L.J. Ch. 78, dictum of North J. applied.

(9) Douglas-Menzies v. Umphelby, [1908] A.C. 224, considered, dicta of Lord Robertson applied.

(10) Express Newspapers PLC v. News (U.K.) Ltd., [1990] 1 W.L.R. 1320; [1990] 3 All E.R. 376, dicta of Browne-Wilkinson, V.-C. applied.

(11) House of Spring Gardens Ltd. v. Waite, [1991] 1 Q.B. 241; [1990] 2 All E.R. 990.

(12) Johnson v. Agnew, [1980] A.C. 367; [1979] 1 All E.R. 883, dicta of Lord Wilberforce applied.

(13) Ker v. WauchopeENR(1819), 1 Bligh P.C. 1; 4 E.R. 1.

(14) Londonderry”s Settlement, In re, Peat v. Walsh, [1965] Ch. 918; [1964] 3 All E.R. 855, dicta of Harman, Danckwerts and Salmon, L.JJ. applied.

(15) McHenry v. LewisELR(1882), 22 Ch. D. 397, dicta of Bowen, L.J. applied.

(16) Mengel”s Will Trusts, In re, Westminster Bank Ltd. v. Mengel, [1962] Ch. 791; [1962] 2 All E.R. 490.

(17) Morel Bros. & Co. Ltd. v. Earl of Westmorland, [1904] A.C. 11; [1900–3] All E.R. Rep. 397.

(18) Morice v. Bishop of Durham(1804), 9 Ves. Jun. 399; 32 E.R. 656; [1803–13] All E.R. Rep. 451.

(19) Nana Ofori Atta II v. Nana Abu Bonsra II, [1958] A.C. 95; [1957] 3 All E.R. 559.

(20) National Anti-Vivisection Socy. Ltd. v. Duddington, The Times, November 23rd, 1989, unreported, dicta of Mummery J. applied.

(21) O”Rourke v. Darbishire, [1920] A.C. 581; [1920] All E.R. Rep. 1.

(22) Pitman v. Crum Ewing, [1911] A.C. 217, observations of Lord Atkinson applied.

(23) Scarf v. JardineELR(1882), 7 App. Cas. 345; [1881–5] All E.R. Rep. 651, dicta of Lord Blackburn applied.

(24) Spurling”s Will Trusts, In re, Philpot v. Philpot, [1966] 1 W.L.R. 920; [1966] 1 All E.R. 745, dicta of Ungoed-Thomas J. applied.

(25) Turner v. HancockELR(1882), 20 Ch. D. 303; 51 L.J. Ch. 517.

(26) Vitkovice Horni a Hutni Tezirstvo v. Korner, [1951] A.C. 869; [1951] 2 All E.R. 334.

Legislation construed:

Grand Court (Civil Procedure) Rules, r.21: The relevant terms of this rule are set out at page, 481, lines 25–30.

r.26: The relevant terms of this rule are set out at page 502, lines 6–7.

r.62(2), as added by Grand Court (Civil Procedure) (Amendment) Rules, 1980, s.3: The relevant terms of this rule are set out at page 486, line 37 – page 487, line 6.

Grand Court Law (Law 8 of 1975), s.13(1): The relevant terms of this sub-section are set out at page 486, lines 18–29.

s.20(2): The relevant terms of this sub-section are set out at page 486, lines 30–35.

Trusts (Foreign Element) Law, 1987 (Law 17 of 1987), s.6: The relevant terms of this section are set out at page 506, lines 17–32.

Rules of the Supreme Court, O.15, r.13A:

‘(6) At any stage in an action to which this rule applies, the Court may, on the application of any party or of its own motion, direct that notice of the action be served on any person who is not a party thereto but who will or may be affected by any judgment given therein.

. . .

(b) This rule applies to any action relating to:

(a) the estate of a deceased person, or

(b) property subject to a trust.’

Civil Procedure-judgments and orders-power to bind stranger to cause-Rules of Supreme Court, O.15, r.13A inapplicable in Cayman Islands to allow Grand Court judgments to be binding on stranger to cause

Trusts-rights of trustees-reimbursement and indemnity-costs-trustee entitled as of right to full indemnity out of trust against all proper costs, charges and expenses-entitled to costs of defending trust

Trusts-powers and duties of trustees-application for directions-trustee granted permission to defend proceedings on behalf of trust to make new application for order to bring proceedings

Trusts-beneficiaries-rights-right to costs-no pre-emptive order for costs of action challenging bona fides of trustee if (a) beneficiary not acting on behalf of all beneficiaries; (b) not suing for disinterested reasons; (c) order not necessary to ensure proper representation of all interests, or because beneficiary lacks funds-order for costs made after event if proceedings later shown to be for benefit of trust

Civil Procedure-election between causes of action-factors to be considered-litigant to elect between two causes of action if apparent that setting out to obtain unfair advantage by adopting inconsistent attitudes towards another-court to consider whether parallel foreign proceedings vexatious or oppressive-may refuse to order election if unfair to litigant

Trusts-powers and duties of trustees-duty to act in best interests of trust-trustee permitted to serve beneficiary out of jurisdiction to make defendant to counterclaim in Cayman proceedings likely to affect rights and benefits-just and convenient if beneficiary already benefiting from orders in Cayman proceedings involving other beneficiaries

Civil Procedure-set-off and counterclaim-striking out counterclaim-discretion not to strike out counterclaim on ground of improper procedure if no injustice and proper reinstitution of same cause by original process means greater expense, inconvenience and delay

Trusts-beneficiaries-rights-right to examine trust documents not absolute-just and proper not to permit disclosure if not relevant or evidentially essential to beneficiary”s case, or probative value outweighed by prejudice to other beneficiaries and to administration of trust-if serious allegations against trustee, absolute refusal of application for accounts rarely justified

The first appellant brought proceedings in the Grand Court against the trustees of his father”s estate alleging breaches of trust and seeking their removal as administrators of the trust. In an ancillary action the trustees by originating summons sought Beddoe orders and other directions relating to the main cause.

The settlor, a Greek shipowner, established a trust expressly to be governed by Cayman law. The trustees were given unusually wide powers to administer the trust after his death and by its terms were requested to remove any discretionary beneficiary who instituted proceedings against them or the trust. They were also given an absolute discretion with respect to the production or inspection of accounts.

The settlor”s sons, who were discretionary beneficiaries, independently brought proceedings in Greece against the first six defendants (past and present trustees) challenging the validity of the trust and the dispositions thereunder in reliance on the Greek law relating to the movable property of an intestate dying domiciled in Greece. At the same time the elder son (the first appellant) began proceedings against the defendants in the Cayman Islands and while neither challenging nor admitting the validity of the trust, alleged serious breaches of trust by the trustees and sought, inter alia, their removal. The settlor”s wife and daughters, on their own volition, were added as defendants in both actions and consistently supported the trustees in every important aspect of the litigation.

Subsequent to the filing of these proceedings several interlocutory matters arose. The first appellant obtained injunctions to prevent the trustees exercising any of their controlling powers thus securing the status quo for both himself and his brother while they pursued independently the Greek and Cayman actions. He filed summonses for judicial accounting and for the disclosure of named documents and accounts.

In response, the trustees sought Beddoe orders in respect of the two summonses and orders and directions in connection with their defending the Greek action. The appellants also applied for a pre-emptive order for costs. The trustees then filed their defence in the main proceedings and counterclaimed first, for the joinder of the first appellant”s brother, George, as a defendant to the counterclaim (he subsequently became an appellant also); secondly, for orders putting both appellants to their election between the Cayman and Greek proceedings; and, thirdly, for a declaration as to the validity of the powers vested in them by the trust to remove beneficiaries in the circumstances specified. On the basis of this part of the counterclaim the trustees were granted leave to serve the

brother George out of the jurisdiction. These matters gave rise to, inter alia, the following appeals:

(a) appeals by the first appellant against orders (i) granting the trustees permission to defend the Cayman proceedings and to obtain legal advice in the Greek proceedings (Grand Court proceedings are reported at 1992–93 CILR 26 and 291); (ii) authorizing the trustees at the expense of the trust fund to make application to the Greek court for notice of suit to be served on those beneficiaries not joined in the action; (iii) authorizing the trustees to defend the Greek proceedings; (iv) authorizing payment of the costs of the trustees” associates in the Greek proceedings out of the trust fund...