Analysis
The plaintiffs were the former trustees of the Tchenguiz Discretionary Trust (the ‘trust’), which had been established in Jersey by Declaration of Trust dated 26 March 2007 for the benefit of a class of beneficiaries comprising Robert Tchenguiz and his children a remoter issue. The Trust was funded initially by an appointment from the Tchenguiz Family Trust which had previously been established in the British Virgin Islands. Subsequently, the trustee of this trust entered into a loan agreement for borrowing of monies from Kaupthing Bank (the ‘bank’) and then made an appointment of assets to the trust that included the share capital in a number of companies in the British Virgin Islands. Two of those companies were the first and second named defendants (‘Glenalla’ and ‘Thorson’). By separate Deeds of Novation dated 24 August 2007 the plaintiffs assumed liability for monies owed to each of Glenalla and Thorson, as well as the borrowing from the Bank. Later that year, the existing corporate structure was altered to allow the interposition of two companies, respectively the third and fourth named defendants (‘Eliza’ and ‘Oscatello’), between the trust and other companies in which the underlying assets were held. Both of those companies received monies that included amounts said to be due from the plaintiffs. Glenalla and Thorson were placed in liquidation in August 2009, followed by Oscatello in February 2010 and in the same month a winding up order was made for Eliza. In each case, the joint liquidators demanded payment of the outstanding borrowing said to be due to those companies from the plaintiffs.
The fifth named defendant replaced the plaintiffs as trustees of the trust in July 2010. The plaintiffs brought proceedings in the Royal Court seeking the determination of questions as to whether they were liable and, if so, on what terms for monies said to be due from, inter alia, Glenalla, Thorson and Eliza or Oscatello together with declarations that pursuant to art 32(1)(a) of the Trusts (Jersey) Law 1984 (as amended) (the ‘Jersey Law’) they had no personal liability in respect of the monies said to be due and that the claims of those companies extended only to the trust property of the trust and that, as against the fifth named defendant, they had a right of indemnity against the trust property of the trust. The trial before the Lieutenant Bailiff, which included seven or eight days of evidence, lasted from the 11 to 29 of June 2012. Judgment was reserved and, in the event, was not delivered for a period of just over eighteen months, until 6 December 2013. The plaintiffs were found liable in respect of the loans to Glenalla, Thorson and Oscatello. The Lieutenant Bailiff held that the plaintiffs were not entitled to rely on art 32(1)(a) of the Jersey Law and thereby to limit their liability to the trust property of the trust but that their conduct did not constitute unreasonable or improper conduct or wilful default and that the liabilities incurred by them were reasonably incurred in connection with the trust for the purposes of art 26(2) of the Jersey Law. The plaintiffs appealed on the ground that the Lieutenant Bailiff erred in finding that art 32 of the Jersey Law did not apply and this appeal succeeded so that they were entitled to rely on it to limit their liability to Glenalla, Thorson and Oscatello.
In a separate judgment, the plaintiffs’ appeal succeeded that they had no personal liability and a right of indemnity from the fifth named defendant against the trust property of the Trust. The fifth named defendant appealed on grounds, inter alia, that the Lieutenant Bailiff had erred in failing to find the plaintiffs grossly negligent in accepting novation of the loans, that there was serious procedural irregularity in deciding this part of the case on pleadings and without reference to evidence or submissions and failing to find a grossly negligent breach of trust. Further, there had been a serious procedural irregularity in the delay which had elapsed in delivering judgment. For their part, the plaintiffs appealed, inter alia, on the ground that the Lieutenant Bailiff had erred in finding that they were subject to binding obligations in restitution to Oscatello.
Held (dismissing the Defendant’s appeals and allowing the Plaintiffs’ appeal):
As regards the approach to be taken by an appeal court where significant delay in the delivery of judgment at first instance was said to amount to a procedural irregularity, the following principles applied: the existence of delay does not by itself provide a reason to quash the decision explained in the judgment. There is no threshold of time beyond which a delayed judgment becomes unacceptable but it has been recognised that, where it has been delivered more than twelve months after the conclusion of a trial, this gives rise to particular considerations which are to be taken into account by an appeal court. Where those considerations arise, an appeal court must still identify an error or potential error on the part of the judge at first instance and which is apparent from the terms of his judgment. Where consideration of the judgment may suggest an error by the trial judge, the existence of delay was a factor which may provide an explanation for that error. In this case, whilst satisfied that an unacceptable delay did occur between the ending of the trail and the giving of judgment, that would not justify allowing the appeal without properly considering the remainder of the issues – in considering all that the Lieutenant Bailiff said and his reasoning in reaching his conclusions, delay was a factor to be taken into account but should not be regarded as conclusive or definitive in its own right.
With regard to the assertion that the Lieutenant Bailiff erred in failing to find that the Plaintiffs had acted unreasonably and/or in grossly negligent breach of trust in incurring liabilities to Glenalla, Thorson and Oscatello and in failing to divest themselves of such obligations, the Lieutenant Bailiff did not concentrate unduly on the parties’ pleadings at the expense of the remainder of the case as presented to him during the trial and it was impermissible for the fifth named defendant to raise on appeal a case that was not pleaded or properly identified at any point during the course of the trial. Accordingly, the criticisms of the Lieutenant Bailiff’s conclusion were not made out to a sufficient degree to permit the court to interfere with the judgment at first instance. As regards the failure by the Plaintiffs to recognise the problem of future exposure of assets to claims, the Lieutenant Bailiff was entitled to reach the view on the basis of the evidence that such failure could not be described as a serious or flagrant degree of negligence. Moreover, in the whole circumstances, none of the individual pieces of evidence at first instance was sufficiently persuasive to conclude that the Lieutenant Bailiff was not entitled to reach the view that a failure to deal with future exposure could be described as a serious or flagrant degree of negligence. The Lieutenant Bailiff was also entitled to find that there was no evidence to support the creation of a contract of loan in relation to the arrangement with Oscatello.
However, the Lieutenant Bailiff erred in finding that the plaintiffs were subject to binding obligations in restitution to Oscatello immediately after the transfer of funds. There was no evidence of a request by the plaintiffs, or consent given by them, that Oscatello discharge the debt owed by the trust to the bank by paying the loan on their behalf.
JUDGMENT LOGAN MARTIN JA, JUDGMENT OF THE COURT: Introduction [1] The proceedings to which this judgment relates concern the administration of the Tchenguiz Discretionary Trust (‘the TDT’). The proceedings were commenced by the plaintiffs who were previously the trustees of the TDT. The issues raised were the subject of trial before the Royal Court in …Continue reading "Investec & anr v Glenalla & ors [2017] WTLR 205"