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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Judge and Judge v CSC Trustee 2 (Jersey) Limited [2024] JRC 233 (04 November 2024) URL: http://www.bailii.org/je/cases/UR/2024/2024_233.html Cite as: [2024] JRC 233 |
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Before : |
Advocate David Michael Cadin, Master of the Royal Court. |
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Between |
Christopher Paul Judge |
First Plaintiff |
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Michael James Judge |
Second Plaintiff |
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And |
CSC Trustee 2 (Jersey) Limited |
Defendant |
Advocate J. M. Sheedy for the Plaintiffs.
Advocate A. Kistler for the Defendant.
judgment
the master:
1. This is my judgment in relation to an application, heard on 23 October 2024, by the Plaintiffs to amend their Order of Justice.
2. The Plaintiffs are the sons of the late Sir Paul Rupert Judge ("Sir Paul"), who died on 21 May 2017. The Defendant was at all material times, the trustee of two trusts established by Sir Paul called the PRJ Settlement, and the Proteus Trust.
3. The PRJ Settlement was established by a deed of settlement dated 30 September 1986 and was subject to Guernsey law:
(i) The beneficiaries of the settlement were defined as:
"The Beneficiaries" means and includes the Settlor and such person or persons now living or born during the Trust Period as the Trustees may by Deed or Deeds executed during the Trust Period appoint.
(ii) At all material times, the beneficiaries of the PRJ Settlement were Sir Paul, his wife, Lady Barbara, and the trustees of another trust.
(iii) The trust property comprised an interest in a leasehold, residential property in London, called the Panoramic.
(iv) Sir Paul's Letter of Wishes dated 18 March 2010 for the PRJ Settlement stated that:
3. If The Panoramic is sold, the Trustee's share of the proceeds should be applied as follows:
One quarter of the sale proceeds (after deduction of all tax that may become payable) should be appointed to each of my sons Christopher Paul and Michael James;..."
4. The Proteus Trust was established on 22 October 2001. It is a discretionary trust governed by Jersey law. The beneficiaries of the Proteus Trust are the Plaintiffs, Lady Barbara and a charity. The main assets of the Proteus Trust were two loans made in favour of the PRJ Settlement.
5. The summary of the Plaintiffs' (unamended) claim is set out in paragraph 3 of the Order of Justice dated 12 January 2024 in the following terms:
"3. In summary, the claim relates to the Trustee's complete failure, as a result of its pervasive conflicts of interest, to properly administer the PRJ Settlement and Proteus Trust, in particular since the death of Sir Paul in May 2017. This resulted in a situation where the PRJ Settlement became de facto insolvent and the Proteus Trust was unable to recover the sums owed it to by the PRJ Settlement and, consequently, unable to safeguard the assets of the Proteus Trust. The Trustee's total mismanagement of the PRJ Settlement and the Proteus Trust, and its singular aim of acting for the benefit of Lady Barbara and itself, led to losses for which Christopher and Michael seek equitable compensation. Despite numerous requests, the Trustee has refused provided all the information necessary to Christopher and Michael. The particulars set out in this Order of Justice are accordingly the best particulars that Christopher and Michael can provide at this time."
6. These claims are expanded in the body of the pleading which alleges that the Defendant acted in breach of its duties:
(i) as trustee of both trusts in managing the alleged conflict of interest (paragraphs 27.1, and 28 to 31);
(ii) as trustee of the PRJ Settlement in, amongst other things, failing to add the Plaintiffs as beneficiaries of the PRJ Settlement (paragraphs 27.2.1 to 27.2.3, and 32 to 39), failing to market the Panoramic properly (paragraphs 27.2.4, and 40 to 49), and allowing the PRJ Settlement to become insolvent (paragraphs 27.2.5 to 27.2.7, and 50 to 63); and
(iii) as trustee of the Proteus Trust, in amongst other things, failing to secure repayment of the loans from the PRJ Settlement (paragraphs 27.3.1, and 66 to 70).
7. Notwithstanding that the Plaintiffs were beneficiaries of the Proteus Trust, but not of the PRJ Settlement, the Prayer for relief is similar for both trusts, and claims an account and/or "equitable compensation for any loss suffered by Christopher and Michael as a result of the Trustee's breaches of trust and/or duty".
8. An Answer was filed in February 2024 denying the Plaintiffs' substantive claims and further, advancing a positive case that the claims made in the Order of Justice were prescribed pursuant to Article 57(2)(b) of the Trusts (Jersey) Law 1984 (the "Trusts Law"), as amended. That plea was on the basis that, as evidenced by their pre-action correspondence, the Plaintiffs had knowledge of the alleged breaches of trust in or about 2018 and/or in any event, over 3 years before they issued the Order of Justice in January 2024. The Answer did not plead any defence arising out of the Plaintiffs' locus standi to sue for breach of trust in respect of the PRJ Settlement.
9. A Reply was filed in April 2024, alleging that the claims were not prescribed whether under the provisions of the Trusts Law or the equivalent provision under the Trusts (Guernsey) Law 2007 (albeit that that plea was not raised by the Defendant) and further pleading that:
"2... the Plaintiffs were not (and are still not) beneficiaries of the PRJ Settlement and had no ability to bring an action for, or founded upon, a breach of trust, against the Defendant.
3...The Plaintiffs, not having standing to sue as beneficiaries, are subject to a legal disability and time, for the purposes of prescription, has not been running against them in respect of these claims.
4...The Plaintiffs' action in respect of the PRJ Settlement is not as beneficiaries for breach of trust against the Trustee...
7. The Plaintiffs have standing, as objects of the Defendant's fiduciary power to add them as beneficiaries, to commence proceedings against the Defendant for breach of the Defendant's fiduciary duty to give adequate deliberation to the exercise of its power to add the Plaintiffs as beneficiaries."
10. In May 2024, the Plaintiffs issued an application to amend their Order of Justice. That application came before the Court in August 2024 when it was adjourned to October 2024. In the meantime, the proposed amendments, set out in a draft Amended Order of Justice, have been further refined to highlight, what the Plaintiffs submit, is the clear distinction between a claim for a breach of trust on the one hand, and a claim for a breach of fiduciary duty on the other.
11. I was addressed comprehensively on issues of trust law and prescription as summarised below.
12. The Plaintiffs submit that:
(i) They are the objects of a power to add them as beneficiaries of the PRJ Settlement; the exercise of that power is subject to duties and those duties can be enforced by the object of the power. How the Court enforces those duties and the remedy that is granted is a matter for the discretion of the Court, following Schmidt v Rosewood Trust [2003] 2 AC 709 (at paragraph 51):
(ii) In circumstances where the PRJ Settlement is insolvent and no longer in existence, adding the Plaintiffs as beneficiaries will achieve nothing and accordingly, the only appropriate remedy is one of equitable compensation.
(iii) Although the objects of a power can invoke the jurisdiction of the Court, they are not beneficiaries within the meaning of Article 1 of the Trusts Law, as they are not "a person entitled to benefit under a trust or in whose favour a discretion to distribute property held on trust may be exercised" and cannot therefore bring a claim for breach of trust.
(iv) It would be wrong to treat the object of a power as equivalent to a beneficiary:
(a) Although the distinction may not have been clearly articulated as clearly as it might have been in Freeman v Ansbacher [2009] JLR 1, it is a distinction that exists. In that case, the Court was dealing with a conventional discretionary trust providing for accumulation of income, subject to powers of appointment of capital or income in favour of a specified class of beneficiaries until the vesting date, when ultimate default trusts applied. Claims had been made by Rosanna who was both a member of the beneficial class and a beneficiary of the ultimate default trust. In dealing with Rosanna's claim, Birt B. held that:
(b) The distinction was subsequently recognised in Re Exeter Settlement [2010] JLR 169 where in the context of certainty of objects, Birt B. held that:
(v) As a matter of law, this is not, and cannot be, a claim by the Plaintiffs as beneficiaries of the PRJ Settlement for breach of trust. Article 57(2) of the Trusts Law is therefore irrelevant given that it only applies to claims "founded on breach of trust" brought "by a beneficiary".
(vi) Accordingly, notwithstanding the contents of their current pleading, the Plaintiffs cannot properly maintain a claim for breach of trust against the Defendant in respect of the PRJ Settlement as they are not, and never were, beneficiaries of that trust. The fact that the Defendant has not raised this point is irrelevant as a matter of law the Plaintiffs cannot sue for breach of trust.
(vii) Nor would it be right to apply the provisions of Article 57(2) of the Trusts Law to a claim by the object of a power "by analogy" (following Nolan v Minerva [2014] (2) JLR 117). In O'Keefe v Caner [2017] EWHC 1105 (Ch), notwithstanding what it held were the "the clear analogies to be drawn between the causes of action for breach of directors' fiduciary duties and for breach of trust", the English High Court held that the applicable prescription period for breach of fiduciary duty by directors of a Jersey company was 10 years.
(viii) Insofar as the Defendants now seek to rely on a prescription period under Guernsey law, not only has it not been pleaded but it is not the silver bullet for which the Defendant contends.
(ix) The proposed amendment withdraws the Plaintiffs' original claim for breach of trust in respect of the PRJ Settlement and provides greater particularity about the claim for breach of the Defendant's fiduciary duties concerning the non-exercise of the Defendant's power to add the Plaintiffs as beneficiaries of the PRJ Settlement.
13. The Defendant resists the application to amend on the grounds that:
(i) As proximate objects of a power to be appointed as beneficiaries of the PRJ Settlement, the Plaintiffs had the power to bring proceedings for breach of trust and this is reflected in amongst other things:
(a) The decision in Schmidt v Rosewood in which the Privy Council held that:
In so doing, the Privy Council considered the position of the appellant in relation to the Everest Trust, who was in a similar position to the Plaintiffs and had "exceptionally strong claims to be considered" when the High Court of the Isle of Man came to consider his request for disclosure, in that:
(b) The Royal Court's decision in Freeman v Ansbacher set out above.
(c) The decision of the Eastern Caribbean Supreme Court in Roussev v Leman (unreported, 24 April 2018) where the Court held that:
(d) the commentary of the editors of Underhill & Hayton, at 1.65:
(e) The commentary of the editors of Lewin, at 21-086 and 33-062:
(ii) The Plaintiffs' claims are prescribed given that they were set out at the latest in a detailed letter before action from Mourant, their then Jersey lawyers, on 18 December 2020 and that date was more than 3 years before January 2024, when the Order of Justice was issued.
(iii) Whilst the Defendant's pleaded position is that Article 57(2) of the Trusts Law applies to these claims, on closer analysis, the position of the PRJ Settlement is different to that of the Proteus Trust in that:
(a) the PRJ Settlement is a Guernsey law settlement, and the Hague Convention on the Law Applicable to Trusts has been extended to Guernsey such that Article 57 does not apply (pursuant to Article 57(4) of the Trusts Law);
(b) this was a deliberate exclusion on the part of the Jersey legislature given that the Projet de Loi for the draft Trusts (Amendment No.2) (Jersey) Law 199- notes that:
(c) notwithstanding the decision of Commissioner Page in Pell Frischmann Engineering Limited v Bow Valley Iran Limited [2007] JLR N.38 that "procedural matters, which included issues of limitation, were governed by the lex fori (which, in the present case, was Jersey)", Guernsey law must apply;
(d) the prescription period under section 76 of the Trusts (Guernsey) Law 2007 is 3 years but critically it is "three years from the date on which the claimant first has knowledge of the breach" and is not limited to claims by beneficiaries.
(iv) Accordingly, the Plaintiffs' current claims are "doomed to fail" by reason of prescription and so too, are the proposed amendments.
14. The proposed substantive amendments to the Order of Justice are:
(i) the deletion of paragraphs 27 to 31 to withdraw the breach of trust claim in relation to the PRJ Settlement;
(ii) amendments to plead that this is a claim for breach of the power to add rather than a breach of trust, and greater particularisation of that claim by an amendment to paragraph 3, and the insertion of paragraphs 3A, 3B, 3C, 24A, 27A, 28A, 29A, 30A, 31A, 39A-39H; and
(iii) particularisation of the claims for breach of trust that the Plaintiffs would have pursued had they been beneficiaries of the PRJ Settlement (paragraph 39I).
15. The Defendant does not object to the proposed deletions and/or to the addition of non-material facts and/or to the correction of typographical errors. The substance of its objections is that the Plaintiffs' current claims are prescribed, and so too, are those proposed by way of amendment.
16. The law on amendments was set out in Cunningham v Cunningham [2009] JLR 227 and succinctly summarised in Financial Technology Ventures II (Q) LP and Ors v ETFS Capital Limited and Tuckwell [2020] JRC 152 (at paragraph 11) as follows:
17. The application before me is not a "late amendment" and more stringent considerations do not arise.
18. In Freeman v Ansbacher [2009] JLR 1, Birt B. approached the question of amendment by asking two questions:
19. That latter question reflected the position set out in Bagus Investments Limited v Kastening [2010] JLR 355 where Birt B. held that:
20. Notwithstanding the detailed submissions made as to whether or not there is a tangible distinction between a claim by a beneficiary and a claim by the object of a power, and as to the prescription periods applicable to such claims, this is an application to amend the Order of Justice and it is neither necessary, nor appropriate, for me to determine these nuanced points.
21. Instead, given that prescription is clearly in issue, the Court should pose the questions set out by Birt B. in Freeman v Ansbacher (set out in paragraph 18 above). Neither party submitted that the effect of any of the amendments would be to add a new cause of action:
(i) from the Plaintiffs' perspective:
(a) the current Order of Justice pleads that the Defendant as Trustee of the PRJ Settlement, failed to add the Plaintiffs as beneficiaries (at paragraphs 27.2.3, 32 to 39, and 64.2) and claims equitable compensation in relation thereto;
(b) the amendments merely provide additional particulars in relation to that claim.
(ii) on the Defendant's submissions, claims for breach of trust and claims by the objects of a power are part of the same continuum of causes of action.
22. It is, however, correct to note (as the Defendant does) that it is no part of the Plaintiffs' current pleading that as a result of the failure to add the Plaintiffs as beneficiaries, the Plaintiffs could not bring proceedings and/or but for the failure to add them, they would have brought proceedings. This is a new factual matter which will have to be explored by the parties and the Court in due course, if the amendments are allowed. In Freeman v Ansbacher, the Court held that:
23. The set of facts which entitles the Plaintiffs to relief is an alleged breach of duty in relation to a power to add that the Plaintiffs submit, gives them a right to equitable compensation. Those facts have been pleaded in the Order of Justice. The fact that the Plaintiffs may, or may not, have brought proceedings had they been appointed may be relevant to the amount of that compensation, but is not a cause of action in itself and the newly pleaded averment does not make it one.
24. Accordingly, I answer the first question in the negative. In my judgment, the amendments by way of addition to the Order of Justice merely provide additional particulars of an already-pleaded claim.
25. The Court must then consider whether or not to allow the amendments as a matter of general discretion applying the normal criteria.
26. As part of their summons, the Plaintiffs invite me to make an order that they pay "the Defendants' reasonable costs of and occasioned by the amendment, to be taxed if not agreed" and it was not suggested by the Defendant that it could not be compensated in costs. Accordingly, the amendments should be allowed unless they "infringe the rules of pleading or introduce a claim which is so hopeless that it would be liable to be struck out."
27. The Court was initially concerned about whether there was an inconsistency between the fact of the Plaintiffs' current pleading brought when they were not beneficiaries, and the proposed amendments to the effect that in having not been added as beneficiaries, the Plaintiffs were "without standing to bring a claim against the Trustee for breach of trust in respect of its management of the PRJ Settlement" (paragraph 3A.1).
28. However, in my judgment whilst this may be an issue of fact and law to be resolved in due course, it is not an impermissible inconsistency from a pleading perspective. The requirement for consistency in pleading is that a pleading must be consistent in and of itself, and with any subsequent pleadings filed by the same party. It is not a requirement that an amended pleading must be consistent with the facts of a previous, abandoned pleading.
29. Accordingly, the real issue for the Court on the application to amend is whether the amended claims are "so hopeless that it would be liable to be struck out". In Trant v AG [2007] JLR 231, Beloff JA held that:
30. Is it plain and obvious that the amended claims in relation to the PRJ Settlement cannot succeed because they are prescribed pursuant to Guernsey law? In my judgment, it is not:
(i) notwithstanding that this defence relies on the nuanced interpretation of Guernsey statutory provisions, the Defendant has not adduced any evidence of Guernsey law beyond the wording of the statute and the provisions of the Projet de Loi. If nuanced points of Guernsey law are to be considered by the Jersey Court, expert evidence is required, as was noted in O'Keefe v Caner, albeit in the context of Jersey law and an English Court:
(ii) the Defendant did not plead the Guernsey law provisions when it filed its Answer;
(iii) moreover, in relation to the Defendant's pleaded case of prescription based on Article 57(2) of the Trusts Law, the Plaintiffs' Reply also raises an empêchement based on knowledge (paragraph 8) and/or a breach of a continuing duty which could have been remedied by the Defendants at any time until the termination of the PRJ Settlement in July 2021 (paragraph 9), in addition to the points set out at paragraph 9 above in the judgment;
(a) I have no evidence before me as to whether similar pleas could be raised in relation to any Guernsey law prescription argument;
(b) if I apply Jersey law in the absence of any evidence as to the applicable Guernsey law, neither of these pleas can be ignored or properly determined on an application to amend and/or on the basis of limited evidence and/or in the absence of full argument;
(c) whilst evidence has been adduced as to the contents and dates of the pre-action correspondence, I have not been addressed from the perspective of either Jersey law or Guernsey law on the significance of and/or factual and/or legal differences between:
(1) the Plaintiffs' letter before action dated 18 December 2020 which the Defendant submits evidences the requisite degree of knowledge to bring a claim; and
(2) the Defendant's response dated 21 January 2021 which, the Plaintiffs allege, finally provided the information necessary for them to bring a claim (and was less than 3 years before the Order of Justice was issued).
(iv) the Defendant has not issued any interlocutory applications itself based on prescription.
31. Whilst the Plaintiffs' claim might not be without its challenges, it is not plain and obvious to me on this application that the Plaintiffs' claims in relation to the PRJ Settlement are doomed to fail on the grounds of prescription.
32. Accordingly, in the absence of any other factors weighing against the exercise of my discretion, I grant permission to amend the Order of Justice in terms of the draft Amended Order of Justice.
