BUSINESS AND PROPERTY COURTS IN BRISTOL
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
2 Redcliff Street, Bristol, BS1 6GR
B e f o r e :
(sitting as a Judge of the High Court)
| Robert Sofer
|- and –
|SwissIndependent Trustees SA
Leslie Blohm QC (instructed by Burges Salmon) for the Respondent
Hearing dates: 22-23 May 2019
Crown Copyright ©
HHJ Paul Matthews :
"lend any money forming the whole or any part of the assets of this Trust to any person who may for the time being be a Beneficiary upon such terms as to repayment and interest or interest free as the Trustees may in their absolute discretion think fit" (clause D3(3)).
On the other hand,
"The Trustees must not pay convey or transfer any part of the corpus of the Trust to any Beneficiary for any purpose prior to the date of death of Hyman Sofer" (clause M1(1)).
The Trustees shall not be liable for or responsible for –
a) any loss or damage occasioned to this Trust or any assets of this Trust or to any person by the exercise or purported exercise of any power by this Deed or by law conferred on the Trustees or by any alleged failure to exercise any such power or
b) any other loss or damage to this Trust or any assets of this Trust howsoever arising except where the same shall be proved to have been caused by acts done or omissions made in personal conscious and fraudulent bad faith by the trustee charged to be so liable or
c) [ … ]" (emphasis supplied).
"None of the trustees shall be liable for the consequence of any mistake or forgetfulness, whether of law or fact of the trustees or their advisors, whether legal or otherwise, or any of them or for any breach of duty or trust whatsoever, whether by commission or omission unless it shall be proved to be made, given, done or omitted in personal conscious or bad faith of the trustees or any of them" (emphasis supplied).
"Exemption clauses such as this are common in trust deeds nowadays."
It is not clear how specific the Lord Justice was intending to be in making this comment. He might have been referring to the precise phraseology used in this particular case, or he might have been referring to trustee exemption clauses more generally.
The payments to Hyman Sofer
Dispute with the Australian tax authorities and the deeds of indemnity
(A) The Trustee is the present trustee of the Settlement Deeds dated 25 July 2006 made between Cilantro Holdings Ltd and SwissIndependent Trustees SA known as the Gabri Trust, the Puyol Trust and the Xavi Trust (together "the Settlements").
(B) HYMAN SOFER ("Mr Sofer") is a member of the class of beneficiaries in respect of each of the three Settlements referred to in recital A pursuant to Deeds of Addition of a Specified Beneficiary dated 23 August 2006.
(C) The Trustees have at the request of Mr Sofer previously advanced to him by way of loan the following sums in respect of each of the Settlements:
- Gabri Trust: USD 10,223,073
- Puyol Trust: USD 10,223,073
- Xavi Trust: USD 10,223,073
(together "the Existing Loans").
(D) The Trustees have been requested to exercise their powers to advance a further loan of AUD9,500,000 to Mr Sofer in accordance with the powers vested in the Trustees under clause D3 (3) of each of the Gabri Trust, the Puyol Trust and the Xavi Trust.
(E) The Trustee has agreed to make further loans to Mr Sofer of AUD 3,166,666.66 from each of the Gabri Trust, the Puyol Trust and the Xavi Trust ("the New Loans") so that the total advances made to Mr Sofer from the Settlements together will total approximately USD 40,603,000 subject to receiving the indemnities hereinafter set out.
NOW THIS DEED WITNESSES AS FOLLOWS
The Trustees, in exercise of the powers conferred by clause D3(3) of the Settlements and of all other relevant powers, have hitherto agreed to advance the Existing Loans and agrees to advance the New Loans to the Beneficiary, these loans being unsecured, interest-free and repayable on demand.
[ … ]
In consideration of the advances of the Existing Loans and the New Loans to Mr Sofer, the Beneficiary and the Potential Beneficiaries hereby covenant with the Trustees and the Guardian at all times to fully and effectually indemnify the Trustees and the Guardian and any person that is from time to time an officer or employee of the Trustee and the heirs, assigns, personal representatives and estates of such officers and employees in respect of all liabilities, actions, proceedings, claims, demands, taxes and duties, and all associated interest, penalties and costs, and all other costs and expenses whatever arising out of the agreement of the Trustees to advance the Existing Loans and the New Loans to Mr Sofer."
Striking out and summary judgment
"the criterion which the judge has to apply under CPR Part 24 is not one of probability; it is absence of reality".
The exoneration clause and the deeds of indemnity
The standard of proof
"The court may strike out a statement of case if it appears to the court –
(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or
(c) that there has been a failure to comply with a rule, practice direction or court order."
"The claimant must specifically set out the following matters in his particulars of claim where he wishes to rely on them in support of his claim:
(1) any allegation of fraud,
(2) the fact of any illegality,
(3) details of any misrepresentation,
(4) details of all breaches of trust,
(5) notice or knowledge of a fact,
(6) details of unsoundness of mind or undue influence,
(7) details of wilful default, and
(8) any facts relating to mitigation of loss or damage".
"In addition to the matters which PD 16 requires to be set out specifically in the particulars of claim, a party must set out in any statement of case:
- full particulars of any allegation of fraud, dishonesty, malice or illegality; and
- where any inference of fraud or dishonesty is alleged, the facts on the basis of which the inference is alleged."
"183. Having read and re-read the pleadings, I remain of opinion that they are demurrable and could be struck out on this ground. The rules which govern both pleading and proving a case of fraud are very strict. In Jonesco v Beard  AC 298 Lord Buckmaster, with whom the other members of the House concurred, said, at p 300:
'It has long been the settled practice of the court that the proper method of impeaching a completed judgment on the ground of fraud is by action in which, as in any other action based on fraud, the particulars of the fraud must be exactly given and the allegation established by the strict proof such a charge requires' (my emphasis).
184. It is well established that fraud or dishonesty (and the same must go for the present tort) must be distinctly alleged and as distinctly proved; that it must be sufficiently particularised; and that it is not sufficiently particularised if the facts pleaded are consistent with innocence: see Kerr on Fraud and Mistake 7th ed (1952), p 644; Davy v Garrett (1878) 7 Ch D 473, 489; Bullivant v Attorney Genera; for Victoria  AC 196; Armitage v Nurse  Ch 241, 256. This means that a plaintiff who alleges dishonesty must plead the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent, and that facts, matters and circumstances which are consistent with negligence do not do so.
185. It is important to appreciate that there are two principles in play. The first is a matter of pleading. The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him. If the pleader means 'dishonestly' or 'fraudulently', it may not be enough to say 'wilfully' or 'recklessly'. Such language is equivocal. A similar requirement applies, in my opinion, in a case like the present, but the requirement is satisfied by the present pleadings. It is perfectly clear that the depositors are alleging an intentional tort.
186. The second principle, which is quite distinct, is that an allegation of fraud or dishonesty must be sufficiently particularised, and that particulars of facts which are consistent with honesty are not sufficient. This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowing not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the court will not normally allow proof of primary facts which have not been pleaded, and will not do so in a case of fraud. It is not open to the court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.
187. In Davy v Garrett 7 Ch D 473, 489 Thesiger LJ in a well known and frequently cited passage stated:
'In the present case facts are alleged from which fraud might be inferred, but they are consistent with innocence. They were innocent acts in themselves, and it is not to be presumed that they were done with a fraudulent intent.'
This is a clear statement of the second of the two principles to which I have referred.
188. In Armitage v Nurse  Ch 241 the plaintiff needed to prove that trustees had been guilty of fraudulent breach of trust. She pleaded that they had acted 'in reckless and wilful breach of trust.' This was equivocal. It did not make it clear that what was alleged was a dishonest breach of trust. But this was not fatal. If the particulars had not been consistent with honesty, it would not have mattered. Indeed, leave to amend would almost certainly have been given as a matter of course, for such an amendment would have been a technical one; it would merely have clarified the pleading without allowing new material to be introduced. But the Court of Appeal struck out the allegation because the facts pleaded in support were consistent with honest incompetence: if proved, they would have supported a finding of negligence, even of gross negligence, but not of fraud. Amending the pleadings by substituting an unequivocal allegation of dishonesty without giving further particulars would not have cured the defect. The defendants would still not have known why they were charged with dishonesty rather than with honest incompetence.
189. It is not, therefore, correct to say that if there is no specific allegation of dishonesty it is not open to the court to make a finding of dishonesty if the facts pleaded are consistent with honesty. If the particulars of dishonesty are insufficient, the defect cannot be cured by an unequivocal allegation of dishonesty. Such an allegation is effectively an unparticularised allegation of fraud. If the observations of Buxton LJ in Taylor v Midland Bank Trust Co Ltd (unreported) 21 July 1999 are to the contrary, I am unable to accept them.
190. In the present case the depositors (save in one respect with which I shall deal later) make the allegations necessary to establish the tort, but the particulars pleaded in support are consistent with mere negligence. In my opinion, even if the depositors succeeded at the trial in establishing all the facts pleaded, it would not be open to the court to draw the inferences necessary to find that the essential elements of the tort had been proved."
I add that Lord Millett dissented in the result, though not on this aspect of the case, and it is clear that his views set out above nonetheless represent the law: see eg Fattal v Walbrook Trustees (Jersey) Ltd  EWHC 2767 (Ch), , per Lewison J (as he then was).
Timing of the application
"12. … It was not a pre-requisite to strike out that the point should have been taken in the defence as the judge noted. …"
"as if the defendant trustees had filed a defence containing a plea that [that clause] afforded them an absolute defence to the claim" (see at ).
On appeal, the Court of Appeal affirmed the decision of the judge:
"34. … the 2006 Action was rightly struck out on the ground that [the clause] was available as a complete defence to the [trustees] where there was no wrongdoing … "
(1) The limits of trustee exoneration clauses
"No trustee shall be liable for any loss or damage which may happen to Paula's fund or any part thereof or the income thereof at any time or from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud . . . ."
"Breaches of trust are of many different kinds. A breach of trust may be deliberate or inadvertent; it may consist of an actual misappropriation or misapplication of the trust property or merely of an investment or other dealing which is outside the trustees' powers; it may consist of a failure to carry out a positive obligation of the trustees or merely of a want of skill and care on their part in the management of the trust property; it may be injurious to the interests of the beneficiaries or be actually to their benefit. By consciously acting beyond their powers (as, for example, by making an investment which they know to be unauthorised) the trustees may deliberately commit a breach of trust; but if they do so in good faith and in the honest belief that they are acting in the interest of the beneficiaries their conduct is not fraudulent. So a deliberate breach of trust is not necessarily fraudulent."
"In the context of a trustee exclusion clause, however, such as section 30 of the Trustee Act 1925, ['wilful default'] means a deliberate breach of trust … Nothing less than conscious and wilful misconduct is sufficient. The trustee must be
'conscious that, in doing the act which is complained of or in omitting to do the act which it said he ought to have done, he is committing a breach of his duty, or is recklessly careless whether it is a breach of his duty or not:' see In re Vickery  1 Ch. 572, 583, per Maugham J.
A trustee who is guilty of such conduct either consciously takes a risk that loss will result, or is recklessly indifferent whether it will or not. If the risk eventuates he is personally liable. But if he consciously takes the risk in good faith and with the best intentions, honestly believing that the risk is one which ought to be taken in the interests of the beneficiaries, there is no reason why he should not be protected by an exemption clause which excludes liability for wilful default."
"consciously takes the risk in good faith and with the best intentions, honestly believing that the risk is one which ought to be taken in the interests of the beneficiaries,"
whilst committing a breach of trust, is not committing a fraudulent or dishonest breach of trust, and hence may be protected by an appropriately drawn exoneration clause.
"15(1)(a) In the professed execution of the trusts and powers hereof no Trustee … shall be liable … by reason of any other matter or thing other than wilful fraud or dishonesty on the part of the Trustee whom it is sought to make liable…"
"It seems to me impossible to call a trustee's conduct 'dishonest' in any ordinary sense of that word, even if he knew he was acting in breach of the terms of the trust, if he so acted in a genuine (even if misguided) belief that what he was doing was for the benefit of the beneficiaries."
"163. At least in the case of a solicitor-trustee, a qualification must in my opinion be necessary to take account of the case where the trustee's so-called 'honest belief', though actually held, is so unreasonable that, by any objective standard, no reasonable solicitor-trustee could have thought that what he did or agreed to do was for the benefit of the beneficiaries."
"In the execution of these trusts no trustee shall be liable for any loss to the Trust Fund arising by reason of any improper investment made in good faith or for the negligence board of any agent employed by such trustee or by any of the Trustees although the employment of such agent was not strictly necessary or expedient or by reason of any mistake or omission made in good faith by such trustee or by any of the Trustees or by reason of any other matter or thing except wilful and individual fraud or dishonesty on the part of the trustee who is sought to be made liable."
It will be noted that this clause was materially the same as that in Walker v Stones. Lewison J pointed out that it was in a standard form, and owed its origins to Prideaux's Forms and Precedents in Conveyancing.
"that in order to establish dishonesty it is necessary to show that a trustee deliberately committed a breach of trust which he did not honestly believe was in the interests of the beneficiaries."
"accepted that the law about the interpretation of exoneration clauses was still to be found in Walker v Stones"
and that there was no argument that a different standard should be applicable to a professional trustee as compared with a solicitor trustee. (In the present case the defendant was prepared to adopt the same position for the purposes of this hearing, though it has reserved the right to argue the contrary if the case goes further. For what it may be worth, for my part I consider that the claimant was right not to argue the point.)
"what is required to show dishonesty in the case of a professional trustee is:
i) A deliberate breach of trust;
ii) Committed by a professional trustee:
a) Who knows that the deliberate breach is contrary to the interests of the beneficiaries; or
b) Who is recklessly indifferent whether the deliberate breach is contrary to their interests or not; or
c) Whose belief that the deliberate breach is not contrary to the interests of the beneficiaries is so unreasonable that, by any objective standard, no reasonable professional trustee could have thought that what he did or agreed to do was for the benefit of the beneficiaries."
"38. … The phrase 'wilful fraud' means that it is a knowing and deliberate breach of a relevant equitable duty or reckless indifference to whether what is done is in breach of such duty which has to be shown. The word 'wilful' here does not carry the much weaker connotation of intentional action which Mr Tager proposes."
Sir Terence Etherton C added a number of observations emphasising that, for particular action intentionally carried out by the trustee to amount to 'wilful fraud' within the meaning of this exoneration clause, there must be "awareness by the trustee that it was wrongful": see at , , and .
"He took positive steps to fix the deck. That, in a game which depends on random delivery of unknown cards, is inevitably cheating. That it was clever and skilful, and must have involved remarkably sharp eyes, cannot alter that truth."
"Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant's mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The Court of Appeal held this to be a correct state of the law and their Lordships agree."
"74. These several considerations provide convincing grounds for holding that the second leg of the test propounded in Ghosh does not correctly represent the law and that directions based upon it ought no longer to be given. The test of dishonesty is as set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan and by Lord Hoffmann in Barlow Clowes: see para 62 above. When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest."
(1) committed a deliberate breach of trust, and
(2) either (a) knew, or was recklessly indifferent as to whether, it was contrary to the interests of the beneficiaries, or (b) believed it to be in the interests of the beneficiaries, but so unreasonably that no reasonable professional trustee could have so believed.
(2) The true construction of the clause
"The Trustees shall not be liable for or responsible for [ … ] any other loss or damage to this Trust or any assets of this Trust howsoever arising except where the same shall be proved to have been caused by acts done or omissions made in personal conscious and fraudulent bad faith by the trustee charged to be so liable … " (emphasis supplied).
"… The trustee can arguably be held liable not only for actual fraud (that is, for acts of dishonesty) but also for unconscientious conduct amounting to equitable fraud because it would be an act of bad faith to fail to comply with an obligation which is enforced by a court of equity".
"162. The trial judge erred in concluding that any failure to comply with an obligation enforced by a court of equity constitutes bad faith. Bad faith connotes conscious wrongdoing that is knowingly or recklessly inconsistent with the interests of the beneficiaries. Further, the words 'conscious fraudulent bad faith' in cl 13.4 are intended to be conjunctive not disjunctive. The clear but clumsily stated intention is that there only be liability for actual fraud not its equitable equivalent. Actual fraud in this context means dishonesty or bad faith (Armitage, 251)."
"for present purposes, the principal significance of Wilden is that it confirms that the exoneration clause in the present case extends to all acts/omissions save for actual fraud."
(3) The allegations made, or proposed to be made, by the claimant against the defendant
"29. In breach of trust in respect of each payment made by the defendant to Hyman Sofer out of the Puyol trust
(1) Failed to exercise the power to lend money to Hyman Sofer;
(2) Advanced the money to Hyman Sofer with the intention that Hyman Sofer should not have to repay the same if he did not wish to (and it is averred that Hyman Sofer also received the money on the footing that he would not have to repay it);
(3) Failed to consider the exercise of the power to lend money to Hyman Sofer;
(4) Advanced the money to Hyman Sofer at his direction;
(5) Advanced the money to Hyman Sofer in breach of the prohibition at clause M(1)(1) of the terms of the trust;
(6) Was recklessly indifferent to the requirement that the defendant lend and not advance the money to Hyman Sofer such that the defendant is not entitled to rely on the exclusion of liability contained in clause F4 of the trust;
(7) Insofar as the monies were advanced to Hyman Sofer after 8 October 2015, the said payments amounted to a disposal of a trust asset at less than market value, and were therefore further in breach of the terms of the 2006 trust deed as amended."
"(6) Was recklessly indifferent to the requirement that the defendant lend and not advance the money to Hyman Sofer alternatively advanced the money to Hyman by way of advance and not loan knowing that the said money was being provided by way of advance and not loan and contrary to the terms of the trust and (in the premises) in personal conscious and fraudulent bad faith by the trustee charged to be so liable such that the defendant is not entitled to rely on the exclusion of liability contained in clause F4 of the trust…"
For the sake of clarity, I have italicised the proposed additional words.
"Particulars of dishonesty
30. The Claimant avers that the personal conscious and fraudulent bad faith, alternatively dishonesty of the Defendant in making the advances may be inferred from the following matters:
(i) the Defendant was a party to the Deeds referred to at paras 4, 11, 16, 19 (and purported to exercise its powers under the 2006 Trust Deed by the Deed dated 23 August 2006 exhibited at C.2; the Deed of Amendment dated 8 October 2015 exhibited at C.3 and the Deed dated 8 October 2015 exhibited at C.4). It was therefore aware of its express duties and the restrictions upon its powers set out in those documents.
(ii) the Defendant was and is a professional trustee as pleaded at paragraph 3 above. As such it is to be inferred that it was aware both of its duties and the restrictions upon its powers contained within the trust documents, and the restrictions and duties imposed by law as set out at paragraph 18 of the Particulars of Claim.
(iii) As set out at C.5 the Defendant made a number of payments at Hyman's request between 31 October 2006 and 30 November 2014.
(iv) As set out in paragraph 23 of the particulars of claim, and each and every occasion that Hyman requested payment from the trust, the Defendant made payment in the sum requested.
(v) The Defendants [sic] never made enquiry of Hyman as to the reason why payment was required (para 25(1) above).
(vi) The Defendant never made enquiry of the financial position of any beneficiary or of the financial position of any prospective beneficiary indicated in Hyman's letter of wishes (para 25(2) above).
(vii) The Defendant made no enquiry as to the ability of Hyman Sofer to repay the same, either at the time that the payment was made or at any time in the future after the making of the second payment (para 25(3) above).
(viii) it is to be inferred from this pattern of request and payment in conjunction with the other matters referred to herein that the payments were made as gifts and not loans; and that the Defendant did not consider the ambit of or restrictions on their powers and duties in making these advances; and did not consider whether the advances were for the benefit of the beneficiaries.
(ix) As set out in paragraphs 6, 23 and 24 of the Particulars of Claim, the total amount advanced was $57,558,360 out of a total of $78,000,000 held in the Jordi Unit Trust.
(x) The payments made to Hyman after 8 October 2015 were a disposal of a trust asset at less than market value and in breach of the 2006 trust deed as amended as set out at para 29(7) above. As a professional trustee and for the reasons set out above the Defendant would have been aware of that restriction and aware that in making the said payments it was acting in breach of trust.
(xi) Further, as set out in paragraph 22 above, Hyman was suffering from dementia and incapable of making a valid request for a loan. The Defendant would have been aware of Hyman's mental condition by its communication with him. That it continued to act on his instructions indicates that it was not performing its duties as a trustee.
(xii) The sums paid to Hyman were recorded in the accounts of the Defendant relating to the trust as loans made by the Puyol Trust to Hyman as set out at para 26 above. It is to be inferred from the fact that these payments were gifts, but were recorded as loans, that the Defendant was aware that it was acting in breach of trust and sought to hide the same from it is averred the beneficiaries and the Australian authorities.
(xiii) Further, as set out at para 31 below, the Defendant released Hyman from his purported obligation to repay the recorded loans on his death. There was in fact no release because there were no loans. This was both evidence indicating that there were no loans; and evidence that the Defendant's actions were dishonest in that it both created and mislabelled a false transaction that did not in truth or fact exist.
(xiv) Further, as the Claimant avers at paragraph 29(3) above the Defendant failed to consider the exercise of the power to lend money to Hyman Sofer in making the payments aforesaid.
31. For the avoidance of doubt, the Claimant avers that the standard of probity and honesty reasonably required of an offshore alternatively Swiss trustee is the same standard required of any professional person administering trust funds as a trustee. To the extent that it may be inferred that the Defendant in making the payments to Hyman considered itself to be acting in the best interests of the beneficiaries, it is denied that the Defendant acted with that intention in fact, and it is averred that no reasonable professional trustee (or trustee in the same category as the Defendant) could reasonably have considered that it was so acting honestly and/or in the best interests of the beneficiaries in the particular circumstances set out at para 30 above."
"no allegation whatsoever is made as to whether the alleged breach was in the best interests of the beneficiaries, still less that [the defendant] had the requisite knowledge that its deliberate breach was contrary to the interests of the beneficiaries…" (D's skeleton, ).
"alternatively advanced the money to Hyman by way of advance and not loan knowing that the said money was being provided by way of advance and not loan and contrary to the terms of the trust and (in the premises) in personal conscious and fraudulent bad faith by the trustee charged to be so liable".
"The court may give summary judgment against the claimant or defendant on the whole claim or on a particular issue if –
(a) it considers that –
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
The possibility of further evidence
"Therefore the courts have in the present case recognised that they must have regard not only to the evidence presently available to the plaintiffs but also to any realistic prospect that that evidence would have been strengthened between now and the trial."
On the other hand,
"The hope that something may turn up during the cross-examination of a witness at the trial does not suffice."
"15. The correct approach on applications [for summary judgment] by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman  1 All ER 91;
ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel  EWCA Civ 472 at ;
iii) In reaching its conclusion the court must not conduct a 'mini-trial': Swain v Hillman;
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at ;
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)  EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd  FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd  EWCA Civ 725."
This statement of the relevant principles was approved by the Court of Appeal in AC Ward & Son v Catlin (Five) Ltd  EWCA Civ 1098, . It is points (v) and (vi) that are particularly relevant in the present case.
"the court must also consider the possibility that the evidence that might become available to establish (or reinforce) the claim if the parties comply with the usual pre-trial processes; and whether the making of an application at this very early stage, where there has been very limited pre-action disclosure or disclosure in the course of the application by the defendant, is not rather an attempt to strangle the claim before that evidence is disclosed."
1. The claimant by entering into the deeds of indemnity acquiesced in or consented to the breaches of trust and cannot now complain of them.
2. The claimant by entering into the deeds of indemnity is estopped from denying that the payments were loans, by virtue of three different kinds of estoppel: estoppel by deed, contractual estoppel and estoppel by convention.
3. The claimant by entering into the deeds of indemnity owes an obligation to the defendant to indemnify him against the consequences of a breach of trust, so that either there is a set-off which amounts to a defence or at the least there is a cross-claim which creates a circularity of action amounting to an abuse of process.
In response the claimant makes a number of attacks on the deeds of indemnity, and I deal with these and the defendant's further arguments below. But first I must summarise the evidence about the deeds of indemnity themselves
The claimant's evidence
"not aware that the 'loans' described in the Deed were not loans but were in reality absolute transfers to my father in breach of the terms of the trust."
He goes on to say that he was not aware that the defendant did not appear to give any consideration to the making of these payments, but simply made them when asked. He then says that if he had known this he would not have signed the documents.
"I believe that I was tricked into signing the deeds without having any opportunity to seek independent advice".
However, it is right to say that at the hearing Mr Blohm QC was clear that the claimant did not seek to rely upon any such doctrine as that of non est factum.
The defendant's evidence
The claimant's arguments
1. The deeds do not amount to a waiver or consent to any breach of trust.
2. The deeds of indemnity were not executed by the claimant as a deed because they do not comply with the requirements of Victorian law.
3. The deeds do not take effect, having at best been executed in escrow, because the Guardian to the trust has not executed them.
4. The claimant is not estopped from denying that the execution of the deeds was invalid.
5. The claimant is not estopped from denying that the payments made by the defendant to Hyman Sofer were loans.
6. In any event, any estoppel binding the claimant affects only payments already made at the date of the deeds, and not those made subsequently.
7. On the true construction of the deeds, the indemnity is joint rather than joint and several, and is given only in relation to loans made, and the payments in this case were not loans but advances.
8. Even to the extent that there is an obligation to indemnify, it is only an indemnity against losses arising from loans made to Hyman Sofer, and is subject to an implied exception where the defendant has acted dishonestly. Moreover, it cannot create a set-off in law or in equity, and so is simply a cross-claim, and not a defence to the claim.
I will deal with each of them in turn.
A pleading point
1. Waiver or consent to breach of trust
"it is not necessary that [the beneficiary] should know that what he is concurring in is a breach of trust, provided that he fully understands what he is concurring in, and that it is not necessary that he should himself have directly benefited by the breach of trust."
2. Formal invalidity
3. Non-execution by Guardian
4. Estoppel as to formal invalidity
"33. Having considered the wording of section 1 in the context of its purpose and the policy consideration which applies to deeds, I am unable to detect a statutory intention totally to exclude the operation of an estoppel in relation to the application of the section or to exclude it in present circumstances. … For the reasons I have given the delivery of the document, in my judgment, involved a clear representation that it had been signed by the third and fourth defendants in the presence of the witness and had, accordingly, been validly executed by them as a deed. The defendant signatories well knew that it had not been signed by them in the presence of the witness, but they must be taken also to have known that the claimant would assume that it had been so signed and that the statutory requirements had accordingly been complied with so as to render it a valid deed. They intended it to be relied on as such and it was relied on. In laying down a requirement by way of attestation in section 1 of the 1989 Act, Parliament was not, in my judgment, excluding the possibility that an estoppel could be raised to prevent the signatory relying upon the need for the formalities required by the section. …"
"43. In the end, I have concluded that estoppel cannot be invoked where a document does not even appear to comply with the 1989 Act on its face or, at any rate, cannot be so invoked in the circumstances of the present case. …"
5. Estoppel as to the character of the payments
"a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between parties and privies and therefore as not admitting any contradictory proof."
For this purpose it no longer matters whether the statement concerned is contained in a recital or an operative provision: Prime Sight Ltd v Lavarello  AC 436, , per Lord Toulson, giving the advice of the Judicial Committee of the Privy Council.
"The operation of an estoppel by deed is limited to actions founded on the deed because the agreement of the parties made by assent to the relevant recital is interpreted as agreement to admit the proposition recited only for the purposes of the deed and the transaction effected thereby."
For this proposition they cite a number of authorities, including Re Simpson, ex p Morgan (1876) 2 Ch D 72, 89, 92-93 (which was cited to me), and more recently Sydenhams (Timber Engineering) Ltd v CHG Holdings Ltd  EWHC 1129,  (TCC) (which was not).
"When a recital is intended to be a statement which all parties to the deed have mutually agreed to admit as true, it is an estoppel upon all. But, when it is intended to be the statement of one party only, the estoppel is confined to that party, and the intention is to be gathered from construing the instrument."
"23. … if a recital contains a statement which a party to the deed is taken to have agreed to admit as true, the statement is binding on him."
And, in Prime Sight, Lord Toulson said
"32. Whether a recital in a contract is intended to be binding on either or both parties involves a question of construction."
"47. It is now firmly established at this level in the judicial hierarchy that parties can bind themselves by contract to accept a particular state of affairs even if they know that state of affairs to be untrue. This is a particular form of estoppel which has been given the label 'contractual estoppel'. Unlike most forms of estoppel it requires no proof of reliance other than entry into the contract itself. Thus as a matter of contract parties can bind themselves at common law to a fictional state of affairs in which no representations have been made or, if made, have not been relied on. Aikens LJ put the point thus in Springwell Navigation Corp v JP Morgan Chase Bank  EWCA Civ 1221;  2 CLC 705 at :
'If A and B enter into a contract then, unless there is some principle of law or statute to the contrary, they are entitled to agree what they like. Unless Lowe v Lombank is authority to the contrary, there is no legal principle that states that parties cannot agree to assume that a certain state of affairs is the case at the time the contract is concluded or has been so in the past, even if that is not the case, so that the contract is made upon the basis that the present or past facts are as stated and agreed by the parties.'
48. He concluded on this point at :
'So, in principle and always depending on the precise construction of the contractual wording, I would say that A and B can agree that A has made no precontract representations to B about the quality or nature of a financial instrument that A is selling to B'."
Leggatt LJ and Sir Colin Rimer agreed with Lewison LJ, although Leggatt LJ also gave a short judgment to the same effect.
"46. … there is no logical reason to treat declaratory statements in a deed which are intended to be contractually binding as less effective than any other express or implied contractual convention."
The difference between them lies in the source of the contractual obligation (deed or consideration), and not in the nature or extent of the obligation itself.
"It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption … It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention."
6. What payments are covered by the deed
7. Joint or joint and several liability?
"The presumption is that a promise made by two or more persons is joint so that express words are necessary to make it joint and several. There are one or two special cases in which equity treats as joint and several an obligation which at law is joint, but they do not cover much ground and are of slight importance in the law of contract. The liability of partners for partnership debts is a good example of joint liability, but it differs from the ordinary case of joint liability in that the estate of a deceased partner is liable for partnership debts (after satisfaction of personal debts) if the firm is unable to satisfy them itself. So also the liability of two or more acceptors, drawers or indorsers of a bill of exchange to the holder thereof is joint. In the case of promissory notes the liability is joint, or joint and several, according to the 'tenor' of the note; but if the note runs 'I promise to pay' and is signed by two or more persons the liability is joint and several. In the absence of words of severance, the liability of principal debtor and surety on a single promise is joint, but if there is not one single promise the general rule is that liability is several. Consequently the liability of a principal debtor and surety is prima facie joint and several."
8. The contractual indemnity