IpsofactoJ.com: International Cases [2008] Part 4 Case 3 [PC]


THE PRIVY COUNCIL

(from the Court of Justice, Isle of Man)

Coram

Oakley

- vs -

Osiris Trustees Ltd

LORD SCOTT OF FOSCOTE

LORD RODGER OF EARLSFERRY

LORD WALKER OF GESTINGTHORPE

LORD MANCE

LORD NEUBERGER OF ABBOTSBURY

14 JANUARY 2008


Judgment

Lord Walker of Gestingthorpe

(delivered the majority judgment of the Board)

  1. On 19 July 2006 Her Majesty in Council approved a report dated 3 July 2006 advising that a petition for leave to appeal should be granted:

    solely on the grounds of whether the requisite intention to enter existed in executing the resolution of 3 December 1997 to change the proper law of the Trusts (and in particular the Tabatha Trust) from the law of Jersey to the law of the Isle of Man.

    The petitioner was Mr Christopher Oakley, an English solicitor who practised for some time in the Isle of Man. The decision from which he was granted this limited leave to appeal was a judgment given on 21 December 2005 by the Staff of Government Division of the High Court of Justice of the Isle of Man.

  2. The Staff of Government Division dismissed Mr Oakley's appeal from a judgment given on 26 August 2005 by Acting Deemster Linda Sullivan QC, after the hearing of a preliminary issue in accordance with directions which she had given in orders dated 13 August 2003 and 8 December 2004. After four days of oral evidence and two further days of closing submissions the Acting Deemster declared that the proper law of the relevant trusts (the Tabatha Trust and the Timothy Trust) remained the law of Jersey. In reaching that conclusion she rejected four separate lines of argument relied on by Mr Oakley as establishing a change of proper law to the Isle of Man (a fifth line of argument was abandoned in the course of the hearing). The leave granted for an appeal to the Board was expressly limited, not merely to one of those four lines of argument (the resolution of 3 December 1997) but to a particular component of that argument (intention).

  3. The issue which it is open to the appellant to argue in this appeal is therefore an extremely narrow one. But in view of the contentious circumstances in which the issue arises, and because of the respondents' submissions as to what the appeal will or will not decide, it is necessary to provide at least a sketch of the very complicated background.

  4. Mr Eric Morgan is a businessman who settled in Guernsey and then, in or around 1990, moved to Jersey. He has had various business interests of which the largest, and the most relevant for present purposes, was a joint venture for the assembly and sale of a large site at Hoo in Kent for development as a power station ("the Power Park project"). One of the corporate vehicles formed for the purposes of the project was a company called Belgrove (Isle of Man) Ltd ("Belgrove"). By direct or indirect means (the details are not before the Board, and are not material) Mr Morgan settled a majority shareholding in Belgrove in one or more of three settlements governed by Jersey law. The first of these, dated 22 September 1983 ("the 1983 Trust"), has been wound up, wholly or partly by a transfer to one of the other two settlements, the Tabatha Trust dated 21 November 1990. The third settlement, the Timothy Trust, was dated 12 December 1990.

  5. Although the two subsisting settlements were governed by Jersey law, originally their sole trustee was a Guernsey company, Abacus (Guernsey) Ltd ("Abacus"), whose registered office is at St Peter Port, Guernsey. Both settlements contained a power (Clause 11) in the following terms:

    11.

    (1)

    This Trust is established under the laws of the Island of Jersey and (subject to any exercise of the powers conferred by sub-clauses (2) and (3) hereof) the rights of the Beneficiaries and the rights powers and duties of the Trustees under this Trust and the construction and effect of every provision of this Trust shall be governed by and determined according to the laws of the Island of Jersey which Island shall be the initial forum for the administration hereof.

    (2)

    The Trustees may at any time or times and from time to time during the Discretionary Period by deed declare that this Trust shall from the date of such declaration be governed by and take effect in accordance with the law of some other jurisdiction in any part of the world (not being any place under the law of which (a) any of the trusts powers and provisions herein declared and contained would not be enforceable or capable of being exercised and so taking effect or (b) this Trust would be revocable) and that the forum for the administration thereof shall thenceforth be the Courts of that jurisdiction AND as from the date of such declaration or such later date as may be specified therein the law of the jurisdiction named in the said declaration shall be the proper law applicable to this Trust and the Courts thereof shall be the forum for the administration thereof but subject to the power conferred by this sub-clause and until any further declaration is made hereunder PROVIDED ALWAYS that so often as any such declaration as aforesaid shall be made the Trustees shall be at liberty to make such consequential alterations or additions in or to the trusts powers and provisions of this Trust as the Trustees may consider necessary or desirable to ensure that the trusts powers and provisions of this Trust shall (mutatis mutandis) be no less valid and effective than they are at the date hereof under the laws of the Island of Jersey.

    (3)

    The Trustees may at any time or times and from time to time during the Discretionary Period move the general administration of this Trust or any part thereof to any part of the world whether within or outside the jurisdiction the law of which is the proper law for the time being of this Trust.

  6. The two settlements were similar in many other ways. The beneficiaries were defined as Mr Morgan, his wife Mrs Valerie Morgan, his adult children Adrian and Paula, the International Committee of the Red Cross, and such additional beneficiaries as the trustees might appoint (but during Mr Morgan's lifetime only with his prior written consent). Mr Morgan himself was later excluded from the class of beneficiaries of each settlement.

  7. There was however one significant difference between the terms of the settlements. Each defined a "Discretionary Period" but in the case of the Tabatha Trust this was to end on 1 December 2063 at latest; under the Timothy Trust it was to end on 12 December 2090 at latest. The most likely reason for the difference is that the Tabatha Trust was from the first intended to be able to receive a transfer from the 1983 Trust (which antedated the Trusts (Jersey) Law 1984 and was limited to an 80-year trust period ending on 21 September 2063).

  8. Whatever the reason for the difference, it has, in the events which have happened, proved significant. Under the law of the Isle of Man (Perpetuities and Accumulations Act 1968 section 1) a fixed period of 80 years (but no longer) is a permitted perpetuity period (as an alternative to the traditional "royal lives" period). In view of the terms of clause 11 of the Timothy Trust, it was conceded that it was impossible to change the proper law of that trust to the law of the Isle of Man without first taking the preliminary step (presumably by exercise of a power of appointment) of curtailing the discretionary trust period. No such action was ever taken. Consequently this appeal relates only to the Tabatha Trust.

  9. After the establishment of the two subsisting settlements many disputes and difficulties arose in connection with the Power Park project, and relations between Mr Morgan and Abacus became correspondingly strained. Mr Morgan as settlor complained about the way in which Abacus was handling the joint venture and the level of its charges for doing so. Abacus complained of interference by Mr Morgan and his close associates, including Mr Ronald Draper, Mr Morgan's business manager. In or about August 1996 Mr Morgan contacted an Isle of Man trust company, Crossman Trust Company Ltd ("Crossman"), with a view to it becoming a trustee in place of Abacus. Soon afterwards Mr Oakley (who was licensed to practise as a lawyer on the Isle of Man) was appointed to the board of Crossman, which seems to have been a corporate trustee of some substance, with about six directors. Eventually Crossman was appointed as a trustee of the two settlements on 26 May 1997. Mr Morgan seems to have thought that Abacus had by then agreed to retire as a trustee, but Abacus declined to retire, and Mr Morgan had no power to replace it without cause (insolvency, refusal or unfitness to act, or incapacity). So the settlements found themselves with one Guernsey trustee and one Isle of Man trustee, and Abacus understandably refused (as Mr Oakley accepted in his oral evidence to the Acting Deemster) to go ahead with changing their proper law as long as it remained a trustee. It was also unwilling to retire and part with the trust assets until satisfied that it was sufficiently indemnified against possible liabilities.

  10. These apprehensions had some substance. The sale of the Power Park land was eventually completed, for a total consideration of over £40m, in September 1997. Proceedings against Mr Morgan and the trustees were threatened and then (in or about November 1997) commenced in the Royal Court of Jersey by some of Mr Morgan's business partners in the Power Park project. There were also proceedings in London before Ferris J and the Court of Appeal. At a later stage (May 1999) a provisional liquidator of Belgrove was appointed by the High Court of the Isle of Man.

  11. There were long and difficult negotiations about arrangements for indemnifying Abacus against these and other potential liabilities. Mr Oakley was, by his own account, heavily involved in these matters (often on trips outside the Isle of Man) both before and after 3 December 1997, the date on which the respondent De Montfort Securities Ltd ("DMS") became a trustee of the two settlements. In particular, there was a meeting at the Waldorf Hotel in London, on 18 November 1997, about which Mr Oakley was cross-examined at length during the hearing of the preliminary issue.

  12. DMS is an Isle of Man company, incorporated on 2 December 1997, with an issued share capital of £2. The circumstances in which it became the sole trustee of the settlements are (like much else in this case) obscure and contentious. But it seems to be common ground that Crossman resolved on 31 October 1997 (at a board meeting not attended by Mr Oakley, as he was on holiday) to give not less than 30 days' notice to Mr Morgan of its intention to resign from its trusteeship (as it could do under clause 10(1) of the settlement, since Abacus was still a trustee). Crossman's board of directors seems to have come to the conclusion that the rewards of the trusteeship did not justify the risks and responsibilities which it involved. One serious and immediate consequence of this was that the settlements might lose control of the board of Belgrove, since the Crossman directors on the board of Belgrove proposed to resign their directorships, and did so in or about December 1997.

  13. On 1 December 1997 Advocate Michel (of Crills, St Helier, who seems to have been acting for some or all of the beneficiaries) wrote to Mr Oakley as follows:

    Matters are becoming difficult, to put it mildly.

    As you are aware, Crossman Trust Co. "CTC" resigned with effect from the 2nd December as co-Trustees of the above Trusts. Abacus Guernsey have never, in their view, and legally, in my view, resigned as Trustees. Abacus Guernsey, therefore, remains the sole Trustee of both Trusts.

    Due to some confusion, which I cannot explain, the dates which we had fixed for the hearing of the dispute over the Trustee of these Trusts were not confirmed by the Court.

    In ignorance of that fact, I wrote to Mr Quinn of Olsen Backhurst & Dorey [for Abacus] on 6th November seeking some response from him as to the changed circumstances. I have received no response.

    The Court has confirmed, subject to our confirming the date today, that we can have next Monday, 8th December. I wonder why we want that date? Not only do we have no papers to put before the Court in relation to the present position, but we cannot now pursue the previous application to have Abacus Guernsey removed as Trustees because if we do so, neither Trust will have in place a Trustee.

    I also understand, off the record, that Richard Haig Martin [a participant in the Power Park project] has now commenced proceedings before the Royal Court against Eric Morgan personally and Abacus Guernsey and possibly A. N. Other, but I know nothing more than that.

    The more that I read the file and speak with those involved, the more certain I am that the Royal Court, if all the underlying facts were brought to its attention, would hold in accordance with the Rahman principles that these Trusts are a sham. For tax purposes, if the matter was investigated by the Comptroller of Income Tax, I have absolutely no doubt but that he would assess all the profits arising in the Trusts as the personal income of Eric.

    We really do need to discuss carefully and leisurely where we are going from here. I have to bear in mind that my responsibilities are to the beneficiaries. I have expressed concern in various letters to Valerie how necessary it is for me to involve not only her, but also her two children in all decisions in relation to these Trusts. Every time that I make the recommendation, it is ignored.

    Can you please telephone me so that we can discuss a way forward. The most important decision is the hearing for next Monday, which date should be vacated today, if possible.

    Mr Oakley was criticised by counsel in the course of his cross-examination in these proceedings for referring to this letter without adding that Advocate Michel later modified his view on the "sham" issue. But the letter gives a vivid insight into how matters stood at the beginning of December 1997.

  14. DMS was incorporated by company registration agents. Its subscribers and first directors were Mr Banks and Mrs Winkworth, two of the agent's employees. Mr Oakley's case is that voting control and board control of DMS passed on 3 December 1997 to himself and Mr Brian Holt (who on Mr Oakley's case became the only shareholders and the only directors on either 2 or 3 December 1997). Mr Holt was then a recently-retired bank official. He had had a career of some distinction as a banker in the Isle of Man, but his health had deteriorated and he was, by his own account, short of funds and glad to become Mr Oakley's business associate.

  15. The crucial document in this appeal is headed "RESOLUTION OF THE DIRECTORS OF DE MONTFORT SECURITIES LTD DATED 3 DECEMBER 1997". It was signed by Mr Holt and Mr Oakley. Its text is as follows:

    APPOINTMENT OF DIRECTORS

    IT IS HEREBY RESOLVED THAT Brian Holt be and is hereby appointed as Director of the Company with immediate effect. It is also resolved that Christopher Richard Oakley be and hereby appointed as a Director of the Company with immediate effect.

    RESIGNATION OF DIRECTORS

    IT IS HEREBY RESOLVED that the Company notes the letters of resignation of John Banks and Rebecca Maria Winkworth as Directors of the Company, such resignations to take effect at the termination of the meeting.

    APPOINTMENT OF SECRETARY

    IT IS HEREBY RESOLVED THAT Brian Holt be and is hereby appointed as Secretary to the Company with immediate effect.

    RESIGNATION OF SECRETARY

    IT IS HEREBY RESOLVED THAT the Company notes the letter of resignation of John Banks as Secretary to the Company, such resignation to take effect at the termination of the meeting.

    APPOINTMENT AS TRUSTEE

    IT IS HEREBY RESOLVED THAT

    (1)

    the company accepts the appointment as Trustee of The Timothy and Tabatha Trusts with immediate effect and

    (2)

    that the Company will act solely as Trustee for The Timothy and Tabatha Trusts and no other business.

    RESIGNATIONS OF TRUSTEES

    IT IS HEREBY RESOLVED THAT the Company acknowledges the resignations of

    (1)

    Crossman Trust Company Limited as Trustee and

    (2)

    Abacus (Guernsey) Limited as Trustee.

    JURISDICTION

    THE TRUSTEES RESOLVED THAT the proper law of the Trusts is the Law of the Isle of Man with effect from the third day of December 1997.

  16. It will be observed that it is described as a resolution, not as the minutes of a meeting (except for the two references to "such resignation[s] to take effect at the termination of the meeting" which purport to state the effect of letters of resignation from Mr Banks and Mrs Winkworth). Mr Oakley readily accepted that there was no face-to-face meeting between himself and Mr Holt on that day, since Mr Holt was at their office at Church Street, Douglas, while Mr Oakley was in Jersey engaged in urgent negotiations about the matters mentioned in Advocate Michel's letter. Although Mr Holt fell out badly with Mr Oakley and appeared as a witness for the respondents, both witnesses agreed that there was a telephone conference between them which resulted in the resolution. Mr Holt said that Mr Oakley dictated it and he (Mr Holt) signed it because Mr Oakley said that it was necessary, but he (Mr Holt) did not know the reasons. Mr Holt said that Mr Oakley signed it, but did not say when this occurred. Mr Oakley denied that he dictated it and professed ignorance about the earlier part of the document (dealing with corporate matters). He said that the letters of resignation were part of the "package" supplied by the company registration agents. He said that he signed the resolution on his return to the Isle of Man. The Acting Deemster preferred the evidence of Mr Holt to that of Mr Oakley, where their evidence differed.

  17. The Acting Deemster's preference for Mr Holt's evidence is not at all surprising since in the course of his long cross-examination (and further lengthy questioning by the Acting Deemster) Mr Oakley was shown to have given (to say the least) seriously misleading evidence in support of two of his original five lines of argument. Those other lines of argument are no longer directly at issue, but it is necessary to say a little about them in order to explain, and if possible resolve, some of the difficulties of the Acting Deemster's judgment.

  18. Originally there were, as already mentioned, five strands to Mr Oakley's case. The first (that Crossman changed the proper law in or around May 1997) was abandoned during the first-instance hearing. The second was the resolution of 3 December 1997 in the form set out above. The third was a document giving a much fuller version of what was said to have occurred at a meeting (so described) of the DMS directors at Church Street, Douglas, on 3 December 1997. This document (signed by Mr Oakley alone) was admitted by him to have been prepared in July 1999, and placed among records kept by DMS. The Acting Deemster rejected these minutes both as not being a resolution (para 26 of her judgment) and as not being a genuine document (para 27). The Staff of Government Division noted that the Acting Deemster's first ground of decision was conceded to be correct, and that they need not decide on the second ground – at the same time, they pointed out that the minutes purported to contain an indemnity to Mr Oakley, Mr Holt, Mr Banks and Mr Oakley's secretary, Miss Donna Dillon, in respect of any liabilities as directors of Belgrove despite the fact that (apart from Mr Oakley himself) they were not appointed as directors of Belgrove until February 1998 (paras 38 to 40 of the judgment of the Staff of Government Division).

  19. Mr Oakley's fourth line of argument was reliance on a "deed of variation and confirmation" purportedly executed on 23 October 1998, which declared that the proper law of the settlements was changed "from 3 December 1997 and in any event hereafter." The Acting Deemster (in para 32 of her judgment) rejected this as not being a genuine document, either because Mr Holt's signature had been forged, or because the document was executed at a much later date – perhaps in 2003, when Mr Oakley no longer had access to the common seal of DMS (one curiosity of the deed was that the seal of DMS had been drawn in ink). The Staff of Government Division (in paras 48 to 50 of its judgment) rejected the only argument put forward for departing from the Acting Deemster's findings of fact on this point.

  20. The fifth and last line of argument was an estoppel said to arise from earlier proceedings in the High Court of the Isle of Man, in which it had been common ground that the settlements had become governed by the law of the Isle of Man. Those proceedings arose out of a petition presented on 20 July 1999 by Osiris Trustees Ltd ("Osiris") and Goodways Ltd ("Goodways"), two of the respondents to this appeal, seeking recognition that they were on 12 July 1999 validly appointed as trustees of the settlements jointly with DMS. On 5 November 1999 Deemster Cain ruled in favour of the petition and against a cross-petition presented by DMS (then still effectively controlled by Mr Oakley, although shortly afterwards he resigned his directorship in that company). The judgment of Deemster Cain is reported at [1999-01] MLR 206. The Acting Deemster and the Staff of Government Division both rejected the estoppel argument since the change of proper law was not decided, but assumed, and the assumption was made on the strength of a questionable assertion made by Mr Oakley (paras 37 to 39 and 59 to 60 of those respective judgments).

  21. It is appropriate to mention at this stage the reason why the issue as to the change of proper law has assumed such importance in the litigation. By their amended statement of case dated 14 March 2003 Osiris and Goodways made a claim against Mr Oakley both for professional negligence while acting as a solicitor to the trustees, and for breach of fiduciary duty in charging fees as a solicitor for work which the trustees could and should have done personally. The pleading appears to relate only to Mr Oakley's activities while a director of DMS, rather than Crossman (DMS was later joined as a plaintiff in the proceedings). The amended statement of claim pleaded and relied on article 52 of the Trusts (Jersey) Law 1984 (re-enacted as article 56 under the Law Revision (Jersey) Law 2003).

  22. Article 52(2) provided as follows:

    Where a breach of trust has been committed by a corporate trustee to which this article applies, every person who at the time of the commission of the breach of trust was a director of such corporate trustee shall be deemed to be a guarantor of such corporate trustee in respect of any pecuniary damages and costs awarded by the Court against such corporate trustee in respect of such breach:

    Provided always that the Court may relieve a director either wholly or partly from personal liability as a guarantor of such corporate trustee where it appears to the Court that he ought fairly to be excused from such liability, because–

    (a)

    he has proved that he was not aware of such breach of trust being contemplated or committed, and in being no so aware, was not behaving in a reckless or negligent manner; or

    (b)

    he expressly objected, and exercised such rights as he had by way of voting power or otherwise as a shareholder, director or other officer of the company so as to try to prevent the commission of such breach of trust.

    This provision applied to the corporate trustee of a trust with Jersey proper law, or any other corporate trustee resident or having a business presence in Jersey.

  23. This provision for the concurrent liability of directors of Jersey corporate trustees (which was in force from 1984 until 2006 when it was repealed by the Trusts (Amendment No. 4) (Jersey) Law 2006) is the reason why the respondents (the plaintiffs in the proceedings) have been anxious to establish that the settlement remained subject to Jersey law during 1998 and 1999 (the period during which breaches of fiduciary duty are alleged) and Mr Oakley has been anxious to establish that a change occurred on 3 December 1997. As mentioned above, the breaches of fiduciary duty alleged against Mr Oakley appear to relate to the period after 3 December 1997. It seems not to have been put to Mr Oakley, in the course of his lengthy cross-examination, whether he was aware of article 52, or was concerned about its possible application to him, either in 1997 or at any later date until he ceased to be a director of DMS on 7 November 1999. He was asked a single general question about an attempt "to potentially limit" his liability, which he denied (page 103 of the transcript for 19 April 2005, page 650 of the record). Their Lordships will return to what the Acting Deemster said on this point, which might be material if and so far as the resolution of 3 December 1997 was under attack, not on grounds of formal validity or corporate capacity, but on grounds of bad faith (or failure, in exercising a fiduciary power, to have proper regard to the interests of the beneficiaries).

  24. On the hearing of the preliminary issue the Acting Deemster had written and oral evidence of Jersey law from a Jersey solicitor, Mrs Fiona del Amo (on behalf of the plaintiffs, the respondents on this appeal) and a Jersey advocate, Mr David Petit (on behalf of Mr Oakley). Mrs del Amo wrote an opinion dated 11 February 2005; Mr Petit advised by a letter dated 14 April 2005; and Mrs del Amo responded by a further opinion dated 18 April 2005, the first day of the hearing. When he gave his written advice Mr Petit seems not to have seen either Mrs del Amo's opinion or (more importantly) the authentic resolution of 3 December 1997. Both experts enlarged on their views in the course of their oral evidence, though neither did so in a dogmatic way; indeed it is a mark of their objectivity that it is sometimes difficult, on reading the transcripts of their evidence, to recall which side had called them.

  25. Both witnesses agreed that the proper law of a Jersey trust can be altered. This is provided for in article 37 of the Trusts (Jersey) Law 1984, which does not specify any procedure for the change. They also agreed that the proper law of the Timothy Trust had not been changed effectively, because of the perpetuity point. They also agreed that "deed" (the means of changing the proper law specified in clause 11(2) of the Tabatha Trust) is not a term of art in Jersey law (though Mr Petit noted that the formula of knowing "the content of the deed" is used during the Royal Court's supervisory jurisdiction over purchases of real estate in Jersey). Mrs del Amo stated that she would have advised the use of

    a document in writing, dated and executed on behalf of the trustee as trustee of the Trusts.

    Mr Petit's opinion was similar, that it would be appropriate to show of the relevant document that:

    (a)

    it was in writing;

    (b)

    it was duly executed by those signing it or otherwise was approved by those on whom it was binding (through representatives if that be the case); and

    (c)

    it had a degree of formality, according to the circumstances, as to indicate that it was intended to give rise to legal obligations.

    To these requirements he added, for completeness, a fourth requirement of sufficient cause (in the French civil law sense). Mr Petit stated (apparently with reference to the unauthentic minutes) that minutes were informal, private records of corporate activity, and

    the Directors should have passed a resolution authorising the execution of a deed to change the proper law, which deed should have been executed and then placed with the Trusts' papers.

    However I must stress that this is not yet settled law and a Jersey court could quite easily determine that the view expressed above is unnecessarily formal and that the minutes were sufficient to change the proper law of the Tabatha Trust.

  26. Both witnesses made some reference to the requirement, under Jersey law, for fiduciary powers to be exercised for proper reasons. Mrs del Amo stated,

    More and more in recent years the courts in the UK have concerned themselves with the processes by which trustees make their decisions and decisions in the UK can have significant influence on Jersey courts. When exercising their fiduciary powers, trustees are bound to inform themselves of the matters which are relevant to their decision (see Scott v National Trust [1998] 2 All ER 705), and in arriving at their decisions whether and how to exercise their discretionary powers to take into account all relevant, but no irrelevant factors (see Edge v Pensions Ombudsman [2000] Ch 602). In particular, (a) the trustees must ask themselves the correct questions; (b) they must direct themselves correctly in law; and (c) they must not arrive at a perverse decision.

    Mr Petit made a brief reference to article 20(2) of the Trusts (Jersey) Law 1984 requiring a trustee to:

    exercise his powers only in the interests of the beneficiaries and in accordance with the terms of the trust.

  27. In his oral evidence Mr Petit was cross-examined at some length, and also had a large number of questions put to him by the Acting Deemster. Miss del Amo's cross-examination was much shorter, partly because the Acting Deemster had put many questions to her also. Some of Mr Petit's answers to the Acting Deemster were discursive and inconclusive, especially some references which he made to the issue of intention being "evidential." But in the course of his cross-examination the substance of his evidence (page 112 of the transcript for 21 April 2005, page 958 of the record) was that a person who signed a document must be taken to have intended its legal consequences.

  28. In her judgment the Acting Deemster referred (para 6) to the expert evidence as to how the expression "deed" would be understood in Jersey. She misstated the effect of Mr Petit's evidence (as set out in para 25 above) by omitting the first part of sub-paragraph (b). She then (paras 7 to 17) summarised the agreed facts and the evidence as to disputed factual issues. Then (para 18) she reverted to the expert evidence as to the resolution of 3 December 1997 and the difference between the experts as to whether a resolution, by itself, could have immediate effect.

  29. The Acting Deemster's decision as to the resolution is to be found in paras 23-25 of her judgment. Having stated that she preferred the evidence of Mr Holt as to the circumstances in which it was signed, she went on,

    The fact that the Defendant was prepared to substitute the Minutes for the Resolution in July 1999 and that the original Resolution is now nowhere to be found all indicate that the Defendant did not regard the Resolution as having the necessary intention to create a binding decision which is Mr Petit's condition (d) necessary to create what would be regarded as a "deed" according to the laws of Jersey.

  30. In paragraph 24 the Acting Deemster stated that it was unnecessary to decide the point about correct corporate procedure, but she then proceeded to decide that point against the respondents, since the actions of Mr Oakley and Mr Holt "could have been subsequently validly ratified in the absence of any challenge from the original directors or shareholders."

  31. In paragraph 25 the Acting Deemster preferred Mr Petit's view that the resolution was capable of having, and did have, immediate effect, to Mrs del Amo's view that it looked forward to the execution of a further instrument which was never in fact executed. It is convenient to dispose of this point at once. The Staff of Government Division agreed with the Acting Deemster on this point (para 20 of its judgment) and in their Lordships' view that was plainly correct, since although some board resolutions do contemplate the execution of a further document (for instance, when a board resolves to execute a contract or transfer on behalf of the company) this resolution was, on its plain language, not of that type.

  32. The Acting Deemster then went on to deal with the other three points which remained live at the hearing and before the Staff of Government Division (but are no longer live on this appeal): that is the minutes which gave a different and longer account of the board meeting on 3 December 1997 (paras 26 to 28 of the Acting Deemster's judgment); the deed of variation purportedly executed on 23 October 1998 (paras 29 to 34); and estoppel (paras 35 to 39). Those parts of her judgment would not be relevant were it not for a passage in para 34, in which the Acting Deemster stated,

    I am satisfied that the change of proper law provided no advantage to the Settlor in relation to tax matters.

    Later in the paragraph, after referring to some evidence given by Mr Oakley, she stated,

    I am not satisfied on the evidence that the Defendant believed it was in the Settlor's interest or the beneficiaries' interest to change the proper law. I am satisfied that the Defendant was anxious to evade personal responsibility in relation to his actions as trustee of the Trusts.

    She then referred to article 52 (later article 56) of the Trusts (Jersey) Law 1984 and concluded by stating,

    On that factual basis I am satisfied that in Jersey the beneficiaries could apply to the Court to set aside the trustee's change of the proper law on the basis that it is 'clear that it' (the trustee) 'would not have taken the action if it had not ignored relevant considerations or taken into account irrelevant considerations.' See In the matter of The Green GLG Trust (2002 JLR 57).

  33. These passages in the Acting Deemster's judgment are difficult to assess. They are in the part of her judgment dealing with the deed of variation and with the events of the summer of 1999, when Mr Oakley knew that he was under attack from Mr Morgan and the new trustees whom Mr Morgan was seeking to appoint. At that time Mr Oakley was no doubt seeking to defend himself from attack, and the deed of variation was held not to be an authentic document. But paragraph 34 of the judgment ostensibly quotes from the evidence of Mr Oakley (the quotation does not appear verbatim in the transcript but seems to be a summary of some cross-examination about the meeting at the Waldorf Hotel in November 1997: see pages 94-96 of the transcript for 19 April 2005, pages 641-643 of the record). As already mentioned, no point about article 52 (later article 56) was expressly put to Mr Oakley, only a single general question about protecting himself against potential liability. The Acting Deemster seems to have rejected or overlooked the evidence of Mr Oakley (though largely confirmed by Mr Petit) that it was more or less standard procedure to change the proper law of a trust if the trusteeship moved to another jurisdiction. She also seems to have rejected or overlooked the evidence of Mr Oakley (again, though largely supported by Mr Petit) that while the Tabatha Trust made no difference to the settlor's tax liability if the settlement was valid, Mr Oakley seems to have thought (however wrong-headedly) that a change of proper law would reduce the risk of a successful attack on the settlement as a sham.

  34. There are therefore real difficulties in determining how far the findings in paragraph 34 of the Acting Deemster's judgment were intended to go. But from a reading of her judgment as a whole it is reasonably clear that she did not base her decision that the resolution of 3 December 1997 failed to change the proper law on a finding of some improper motive on the part of Mr Oakley, or his failure to address his mind to the right issues. At the highest what she was saying was that one or more of the beneficiaries might have applied to the Royal Court of Jersey at any time during the period when DMS was trustee, and effectively controlled by Mr Oakley, for an order setting aside the resolution of 3 December 1997, and that such an application might have succeeded. Alternatively she was saying that such an application could have been made and might have succeeded at some time during or after 1999, when the unauthentic minutes and the unauthentic deed of variation were prepared, setting aside those instruments (if otherwise valid). Her views on this point were clearly based on answers given to her by Mrs del Amo, who repeatedly agreed with the Acting Deemster that there was a difference between an instrument being invalid (or void) and its being liable to be set aside (or voidable): see pages 15 to 22 of the transcript for 22 April 2005, pages 1000-1007 of the record. The respondents did not argue that the resolution should be set aside as voidable by the Acting Deemster herself, and no application to set it aside has ever been made to the Royal Court of Jersey.

  35. In these circumstances their Lordships conclude that the Acting Deemster's only effective ground of decision, in determining the preliminary issue in favour of the respondents, was lack of the requisite intention on the part of Mr Oakley when he signed the resolution. The Acting Deemster took this lack of intention to have been evidenced by his subsequent wish to substitute unauthentic minutes for the original resolution (which was not actually produced and was before the court only in the form of a copy).

  36. That was the sole ground of decision in the Staff of Government Division also. There was no respondent's notice on behalf of the respondents seeking to reopen any point about the requisite degree of formality of the resolution, or whether the telephonic board meeting of 3 December 1997 met the requirements of corporate procedure, or whether there had been such a failure to take account of the interests of the beneficiaries as to make the resolution void. The Staff of Government Division did raise and discuss the issue of formality (apparently to the dismay of counsel on both sides) but noted (in paragraph 32 of its judgment) that it had not heard sufficiently full argument to justify any ruling on the point.

  37. The decision of the Staff of Government Division on intention is set out in para 30 of its judgment:

    It was for the Appellant to demonstrate that he and Mr Holt had the requisite intention and the Acting Deemster was not satisfied that such was the case. For the reasons she gave, as set out in paragraph 24 above [which quotes paragraph 23 of the judgment below], we are satisfied that she reached the correct conclusion. In particular we regard two matters as wholly inconsistent with the existence of such an intention. Firstly, given that the Appellant's own evidence was that the Resolution did not accurately reflect the discussion which he had had with Mr Holt, we fail to comprehend how the Appellant could have intended an inaccurately recorded Resolution to be binding on those affected by it. Secondly, the Appellant's failure to appreciate that a Deed was necessary to change the proper law is in our view also inconsistent with the required intention.

  38. In the opinion of their Lordships the reasoning of the Acting Deemster in paragraph 23 of her judgment cannot be sustained. Although they had fallen out and their evidence differed on some points, Mr Oakley and Mr Holt agreed on the essential points. Mr Oakley gave undisputed evidence that he had signed the resolution (probably on 4 December 1997), that he had intended to change the proper law, and that Mr Holt had also signed it. Mr Holt agreed that he had signed it on 3 December, that Mr Oakley had signed it later, and that he (Mr Holt) had intended to change the proper law (although he did not understand why this was being done). The text of this part of the resolution was entirely unambiguous, and professional men are taken to intend that if they sign a document of some degree of formality (such as the resolution) it will have the legal effect which it purports to have. The fact that Mr Oakley later had doubts about the effectiveness of the document (doubts which emanated from advice given by a Jersey firm of advocates), and ill-advisedly sought to replace it by the unauthentic minutes, cannot alter the fact that Mr Holt and Mr Oakley signed the resolution on or very soon after 3 December 1997, and intended it to have legal effect.

  39. Nor can the reasoning of the Staff of Government Division (para 30 of its judgment) be sustained. The first reason given was mistaken. Apart from repeating the Acting Deemster's misstatement of Mr Petit's test the court oversimplified Mr Oakley's evidence. He doubted the first part of the resolution because he thought that the corporate steps necessary to give Mr Holt and himself control of DMS had been dealt with separately as part of a "package" with the company registration agents. But his evidence was quite clear as to the second part of the resolution, dealing with the change of proper law. The second reason given by the Staff of Government Division is also mistaken. All the evidence shows that Mr Oakley intended to change the proper law; his failure to consider what formalities were necessary was lamentable, but cannot alter the fact that he had the requisite intention. As Mr Petit put it during his cross-examination (page 104 of the transcript for 21 April 2005, page 950 of the record),

    The fact that it's awful in terms of drafting I think doesn't disqualify it. It might offend a trust draftsman's sense of right and wrong but I don't think it wins or loses the argument as a result of deficiencies in it.

  40. There are two further points which their Lordships think it right to mention. On this appeal the Board has been sitting as the final Court of Appeal of the Isle of Man, in proceedings in which expert evidence was given below as to the law of Jersey, which was properly treated, in the courts below, as an issue of fact. But the Board also sits from time to time as the final Court of Appeal of Jersey, and on those occasions it takes judicial notice of the law of Jersey without receiving evidence about it. When the House of Lords hears an appeal from the English Court of Appeal, any incidental question as to Scottish law is a matter of judicial notice, not evidence: Elliot v Joicey [1935] AC 209, 236; MacShannon v Rockware Glass Ltd [1978] AC 795, 815. The learned editors of Dicey, Morris & Collins, The Conflict of Laws, 14th edition, para 9-007, express the view that the same principle applies to the Judicial Committee of the Privy Council. But neither side put forward any argument on this point, and their Lordships have thought it right not to express views about Jersey law which go beyond the expert evidence which was before the Acting Deemster.

  41. The other point is that their Lordships are in some doubt as to whether the protracted and expensive litigation on the preliminary issue will serve any useful purpose. The law of the Isle of Man recognises accessory liability for breach of fiduciary duty: Barlow Clowes International Ltd v Eurotrust International Ltd [2006] 1 WLR 1476. The respondents' amended statement of case appears to raise such claims against Mr Oakley. It is debateable what if anything would be added by reliance on article 52 (later 56) of the Trusts (Jersey) Law 1984. However that is an issue for the future, and their Lordships express no view on it.

  42. For these reasons their Lordships will humbly advise Her Majesty that the appeal should be allowed and a declaration made that the proper law of the Tabatha Trust has since 4 December 1997 (the most likely date of signature of the resolution by Mr Oakley) been the law of the Isle of Man. The parties should make written submissions as to costs within 28 days.

    Lord Scott of Foscote

    (dissenting)

  43. I regret that I am unable to agree with my colleagues that this appeal should be allowed. I would for my part have dismissed it. My noble and learned friend Lord Walker of Gestingthorpe, in giving the judgement of the majority, has fully described the background facts and the issue which has come before the Board for decision. I gratefully adopt what he has said and can, I think, express the reasons for my dissent relatively briefly.

  44. The issue before the Acting Deemster was whether the proper law of the Tabatha Trust and the Timothy Trust had been changed from the law of Jersey to the law of the Isle of Man. Each of the two Trusts had contained power for the trustees by deed to declare that the proper law should be changed to the law of some other jurisdiction, but not to a jurisdiction under the law of which any of the trust powers and provisions would not be enforceable (see para. 5 of the majority judgment). It is clear that this power for the trustees to change the proper law is a fiduciary power and cannot be validly exercised otherwise then for the benefit of the trust and the trust beneficiaries. An exercise of the power by the trustees with an ulterior motive and not with the intention of benefiting the trust and its beneficiaries could not be a valid exercise. These propositions appear to me to be self-evident but, in any event, are confirmed by the written statement dated 11 February 2005 of Fiona del Amo, a solicitor of the Royal Court of Jersey, that was given in evidence to the Acting Deemster. The statement said that under the law of Jersey

    Trustees' powers are to be exercised only in the interests of the beneficiaries of the trust (see Article 20(2) of the Law). In Jersey the doctrine of 'fraud on the power' is recognised (see In the matter of The X Trust (2002 JLR 377)

    and that (pp. 365-366 of the Record)

    The Jersey Court will set aside an action taken by a trustee if it is 'clear that it would not have taken the action if it had not ignored relevant considerations or taken into account irrelevant considerations (see In the matter of the Green GLG Trust (2002 JLR 57).

    It appears to me from this evidence that there is no relevant difference in this area of the law between the law of Jersey and the law of England.

  45. As has been explained in the majority judgment the original trustee of the Tabatha Trust and the Timothy Trust was Abacus (Guernsey) Ltd., a trust company forming part of the Coopers & Lybrand International group. Crossman Trustee Co. Ltd, an Isle of Man corporate trustee, was appointed trustee of the two Trusts on 28 May 1997. The appellant was a director of Crossman. In December 1997 Abacus and Crossman resigned as trustees and De Montfort Securities Ltd was appointed trustee of the two Trusts in their place. De Montfort, unlike Abacus and Crossman which had been substantial corporate trustees, was a shell company without assets that was acquired off-the-shelf by the appellant on 3 December 1997. The appellant and a Mr Holt became the shareholders and directors of De Montfort. The appointment of De Montfort as trustee had been made by Mr Morgan, the settlor of the two Trusts.

  46. The reason for De Montfort's appointment is explained by the appellant in paragraphs 31 and 32 of an affidavit he swore on 3 August 1999 in related trust proceedings:

    31.

    In November 1997 Mr Morgan told me that…he wished me to take over as trustee of the Trusts.

    32.

    .... I suggested .... that I could arrange to form an Isle of Man company with minimal share capital that would act solely as trustee of the Trusts .... I explained .... my association with Mr Brian Holt (a former Managing Director of Bank of Scotland (Isle of Man) Limited). I proposed that both he and I should become directors of the new Trustee ....

    De Montfort remained the sole trustee of the two Trusts from 3 December 1997 to 12 July 1999 when Osiris Trustees Ltd and Goodways Ltd were appointed trustees. On 7 November 1999 the appellant resigned as director of De Montfort.

  47. The proceedings in the Isle of Man that have led to this appeal to the Board were commenced by Osiris and Goodway, as trustees of the Trusts, on 4 February 2000. Damages and other relief arising out of alleged misfeasance and breaches of duty both by De Montfort and by the appellant in connection with the conduct of the Trusts' affairs during De Montfort's sole trusteeship are claimed. The amended statement of claim, dated 14 March 2005, pleaded that the proper law of the trusts was the law of Jersey. The appellant, in response, denied that that was so. His first contention was that the proper law had been changed to the law of the Isle of Man by Crossman.But that contention had to be abandoned because no document or documentary evidence could be produced in support of the contention. His alternative contention was that De Montfort had brought about the change of the proper law. The importance of the point was that under the law of Jersey a director of a corporate trustee can be held liable as a guarantor for damages for breaches of trust committed by the corporate trustee. De Montfort as a £2 company (see para. 12 of the majority judgment) would not be worth suing. The appellant on the other hand, might be. Accordingly the Acting Deemster directed that the proper law issue should be decided as a preliminary point.

  48. At the hearing of the preliminary point by the Acting Deemster evidence of Jersey law was given by Ms. del Amo and Mr Petit. This was necessary because it appeared that Jersey law did not recognise the concept of a "deed" (see para. 25 of the majority opinion). However the expert evidence, accepted by the Acting Deemster was that a document could be treated as a "deed" if it was in writing, was duly signed by those it had to bind and had a requisite degree of formality (para. 25 of the majority opinion).

  49. On the evidence adduced before the Acting Deemster there were, in my opinion, three matters to be addressed before a conclusion that there had been a valid change of the proper law of the Trusts from the law of Jersey to the law of the Isle of Man could be reached. First, a document with the requisite degree of formality, whereby the change was, or was purported to be, effected, needed to be produced. Second, the document had to be the document of the trustee, De Montfort. Thirdly, the action of the trustee in bringing the document into being, had to be a proper discharge of the fiduciary power. Unfortunately none of these three requirements was, in my opinion, adequately addressed by the Acting Deemster or by the Staff of Government Division. Three documents were relied on, in the alternative, before the Acting Deemster. One was the Resolution of 3 December 1997 (para. 15 of the majority judgment). The next was an amended form of that resolution that purported, falsely as the Acting Deemster found, to record that the beneficiaries under the Trusts had requested the change in the proper law and that Mr. Morgan, the settlor, had consented to the change. The third document was a deed on which, as the Acting Deemster found, the appellant had forged Mr Holt's signature. In view of these findings, upheld by the Staff of Government Division, the appellant has relied before the Board only on the original 3 December 1997 Resolution and no more need to be said about the two other documents relied on below.

  50. As to the formality requirement, the Acting Deemster said that she accepted Mr. Petit's evidence that the Resolution "was capable of satisfying the conditions necessary to be recognised as a 'deed'". Mr Petit had not in fact given evidence in those terms (see the citation of his evidence in para. 25 of the majority judgment). He had in fact expressed a view inconsistent with that conclusion but had gone on to say that the Jersey law on the point was not yet settled and a Jersey court might conclude that his view was "unnecessarily formal". The Staff of Government Division expressed the "preliminary view" that the Resolution "lacked the required formality" but avoided reaching a firm conclusion on the formality issue.

  51. In my respectful opinion, on the evidence given by the two Jersey law experts, the proposition that the Resolution had sufficient formality to qualify as a "deed" of De Montfort for Jersey law purposes is one that ought to be rejected. First, the document was prepared in circumstances that were the antithesis of formal. The contents of the Resolution had been dictated over the telephone by the appellant to Mr. Holt. Mr Holt, who did not know or enquire about the purpose of the change of proper law, typed out the Resolution as dictated, signed it and sent the document to the appellant who then signed it as well. How this document can possibly be described as having any degree of formality, let alone the formality requisite to constitute a "deed" of De Montfort for the purposes of Jersey law, defeats me.

  52. Second, the Resolution does not purport to be an act of De Montfort. It purports to be, and at best was, an act of the directors of De Montfort. No seal, or anything equivalent to a seal, of De Montfort was placed on the document. Even assuming, which was not clear, that by 3 December 1997, the appellant and Mr. Holt had become shareholders and directors of De Montfort, what they had agreed upon regarding the proper law of the Trusts was not agreed upon as a resolution of the company but as a resolution of the directors. This is, of course, no more than a matter of form, but formality is what is in issue. By the same token, subsequent ratification on behalf of De Montfort of what was done or agreed at the telephonic directors' meeting on 3 December 1997 cannot assist. If formality is required of a document in order to enable the document to qualify as a "deed" under Jersey law, an undocumented subsequent ratification of an insufficiently formal document can hardly suffice to cure the informality.

  53. Third, in my respective opinion the findings of fact made by the Acting Deemster are findings that make it impossible to regard the purported change of the proper law from that of Jersey to that of the Isle of Man as a valid exercise of a fiduciary power. The relevant passages from her judgment are to be found in paragraph 34.

    It is common ground that the [appellant] neither sought advice on the benefits/disadvantages of the change of the proper law nor gave it to the beneficiaries or to the Settlor. The [appellant] indicated that the change was for the benefit of the Settlor who was involved with the Revenue Authorities in Jersey. Having heard the expert evidence from both Mr Petit and Mrs. del Amo I am satisfied that the change of the proper law provided no advantage to the Settlor in relation to tax matters. I am not satisfied on the evidence that the [appellant] believed that it would assist the Settlor in relation to tax matters. The [appellant] gave another reason for seeking to change the proper law. He said he sought to change the proper law:

    To protect them [the beneficiaries] from the argument that the Trust was a sham by placing it in a jurisdiction where that could not in any circumstances conceivably be an issue because the law that would determine whether the Trust was a sham would be that of the Isle of Man and not Jersey.

    .... Having taken no advice the [appellant] could not advance that argument…I am not satisfied on the evidence that the [appellant] believed it was in the Settlor's interest or the beneficiaries' interest to change the proper law. I am satisfied that the [appellant] was anxious to evade personal responsibility in relation to his actions as trustee of the Trusts.

    The Acting Deemster then cited Article 56 of the Trusts (Jersey) Law 1984 which places a guarantee liability on the directors of corporate trustees and continued:

    There is no equivalent in the laws of the Isle of Man, so that the [appellant] could escape liability from breach of trust committed by a corporate trustee. On that factual basis I am satisfied that in Jersey the beneficiaries could apply to the Court to set aside the trustee's change of the proper law on the basis that it is 'clear that it' (the trustee) 'would not have taken the action if it had not ignored relevant considerations or taken into account irrelevant considerations.

  54. In the last passage of the above citation the Acting Deemster expresses an opinion of Jersey Law based upon the evidence that she had received from the two experts on Jersey Law. Her findings in that regard make it impossible, in my respectful opinion, to answer the preliminary issue by finding that the purported change of proper law based on the Resolution of 3 December 1997 was valid and effective. To make the declaration proposed in paragraph 42 of the majority judgment seems to me inconsistent with the Acting Deemster's findings of fact.

  55. I have not mentioned the oddity that if that declaration is made the Timothy Trust will retain the law of Jersey as its proper law but the new proper law of the Tabatha Trust will have been changed to that of the Isle of Man. The two Trusts are closely associated and have been administered together. Assuming that De Montfort's exercise of the fiduciary power to change the proper law was in all other respects a proper exercise of its fiduciary power, it is clear that the exercise of the power in relation to the Tabatha Trust did not take into account that it would be invalid in relation to the Timothy Trust. If these Trusts had been subject to the law of England that consideration might well have been sufficient to undermine the validity of the exercise in regard to the Tabatha Trust (see In re Hastings-Bass [1975] Ch. 25, Charman v Charman [2006] 1 WLR 1053 and Abacus Trust Co (Isle of Man) v Barr [2003] Ch. 409). It could not have been intended that the two Trusts should have different proper laws. This point, however, was not the subject of any argument either below or before the Board. There is plenty of other material that in my opinion requires the dismissal of this appeal.


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