Edmonds Marshall McMahon Quarterly update on Trusts

Hague Plant v Hurtley [2016] EWHC 2663 (Ch)

In a complex action relating to a cross invoicing scheme between two companies, Norris J followed the Supreme Court decision in Patel v Mirza [2016] UKSC42 and held that allowing recovery for an illegality was a fact sensitive enquiry depending upon whether it would produce inconsistency and disharmony in the law and so cause damage to the integrity of the legal system, having regard to: (a) the underlying purpose of the prohibition; (b) any other public policies that might be rendered less effective by denial of the claim; and (c) the need to maintain a sense of proportionality.

 

Barnett v Creggy [2016] EWCA Civ 1004 Court of Appeal

A solicitor had, in breach of fiduciary duty, transferred money from the offshore accounts to a third party without authority. The monies were legally and beneficially owned by third party companies (in turn owned by the claimants) and not by the Claimants themselves. The Claimant’s claim was therefore not proprietary in nature and was subject to a six-year limitation period.

The solicitor had written a letter to the respondents in 2006 saying that if the third party had not returned the funds to the first respondent by 2008, he (the solicitor) undertook to “procure that my estate acknowledges a debt to you of US$ 961,416”. The question arose as to whether this constituted an acknowledgment of “a debt or other liquidated pecuniary claim” for the purposes of s.29(5) of the 1980 Act, so that limitation ran from the date of the letter and the claim was therefore brought within time.

Held:

The above claim in this case was more akin to a claim in contract for breach of a duty of skill and care, which could not be classified as a right of action to recover a liquidated pecuniary claim because it was not for a liquidated sum. Accordingly, the action was time barred and the solicitor’s appeal succeeded.

Obiter

Some claims for equitable compensation might nevertheless fall within s 29(5).

 

Interactive Technology Corp Ltd v Ferster [2016] EWCA Civ 717

Two brothers used their position as shareholders to procure that the company sued their brother for amongst other things, breach of fiduciary duties and dishonesty. Their brother’s response was to commence a petition under s 994 of the Companies Act saying that the affairs of the company were being conducted in a way that was unfairly prejudicial to his interests as a shareholder.

Held:

The petitioning brother’s case, that it had been agreed at the outset that the online gaming business would be owned by him alone, was totally false. He had acted dishonestly and for his own benefit in his management of the company. Although the company’s affairs had, in some respects, been conducted in a manner that was unfairly prejudicial to him, it was inappropriate to grant him relief under the Companies Act 2006 s.996 because he had been responsible for the overall breakdown of trust and confidence between the brothers.

 

Baker v Dunne [2016] W.T.L.R. 1489

The Claimants were trustees of a trust, the principal asset of which was a public house. The Claimant trustees applied for Beddoe relief to enforce an order for possession against a beneficiary who had been running the public house as a business.

Held:

The Court would authorise the trustees to obtain vacant possession of the public house to sell it. The beneficiary never had any legal or personal interest in the pub and no right to possession of it. His entitlement as a beneficiary ranked equally alongside those of his siblings and did not include any interest in the public house.

 

Gestrust SA v Sixteen Defendants [2016] EWHC 3067 (Ch)

The trustee of a substantial family trust indirectly owned a Guernsey company which in turn owned all the shares in a BVI company. Both companies faced litigation and the trustee sought directions from the Court about how it should direct the companies to conduct the litigation and a proposed mediation.

Held:

The trustee did not own the companies’ assets. The most the Court could do for the trustee was to assist with what instruction it should give to the directors for dealing with the litigation and mediation.

 

Bathurst v Bathurst [2016] EWHC 3033 (Ch)

A trustee applied under the Variation of Trusts Act 1958 for approval of a scheme of arrangement which involved the principle beneficiary of the Trust being given the power to appoint new trustees, with the written consent of the trustees.

Held:

The settlor had originally not entrusted the appointment of the new trustees to the existing trustees, instead he reserved the power to himself, without the need for consent. So the proposed arrangement was not radically different from the structure the settlor first created. Accordingly, the scheme was approved.