Before : |
M. C. St. J. Birt, Esq., Bailiff, and Jurats Kerley and Nicolle. |
IN THE MATTER OF THE REPRESENTATION OF BARCLAYS PRIVATE BANK AND TRUST LIMITED
AND IN THE MATTER OF THE JJJ TRUST
Advocate G. Robinson for the Representor.
Advocate J. Dickinson as Guardian ad litem for the minor and unborn beneficiaries.
judgment
the bailiff:
1. This is an application by Barclays Private Bank and Trust Limited, as trustee of the JJJ Trust, seeking the Court's approval of a proposed compromise of certain claims against the Trust.
2. The background can be shortly stated. The Trust was established by the late A in June 2005. It is the indirect beneficial owner of C Limited, which in turn owns D Limited. These companies were part of a group of companies, all of which were run by A who died unexpectedly in May 2008. Shortly after A's death grave irregularities came to light resulting in a police search of certain premises in August 2008. As a result the trustee dismissed all the existing directors of C and D and appointed itself as sole corporate director of those companies. Subsequently, on 15th September, 2008, it was ordered that both companies be wound up under Article 155 of the Companies (Jersey) Law 1991.
3. Two partners of Deloitte LLP were appointed as liquidators. In November 2008 the liquidators made a claim against the Trust, on the basis that A had wrongfully withdrawn £454,400 from C and £319,073 from D and had paid the resulting total of £773,473 into the Trust. Various discussions and investigations then took place and the trustee took advice from specialist insolvency counsel in London. Her advice was to the effect that the liquidators had enough evidence to establish a prima facie case of breach of fiduciary duty on the part of A, with a consequential proprietary claim which they could trace into the Trust. In other words they could claim for the sums which A had contributed to the Trust out of monies he had apparently taken from the companies. Furthermore she advised there would be no right of set-off in respect of various claims which the Trust had against the companies.
4. In brief counsel advised the trustee to seek to try and negotiate a settlement. That is what the trustee has done. At present the claims against the Trust are as follows:-
(i) There is the claim of the liquidators, which is now in the reduced sum of £528,850;
(ii) Although it is not claiming for time spent in administering and sorting out the affairs of the trust, the trustee is claiming for 3 years annual trustee fees and this totals £90,000; and
(iii) The trustee is claiming in respect of an undertaking which it gave to F Limited in respect of funding which F provided to C, and this is in the total of £200,000.
So the total claims are £813,850, taking account of the negotiated reduction in the liquidators' claim.
5. The total assets of the Trust are thought to be in the region of some £400,000. The compromise agreement provides that all three of the above creditors will be paid pro rata from the trust assets, resulting, at present, in a recovery of something in the region of 50% of their claims. The compromise means that the beneficiaries will not receive anything, but it is clear that they would not receive anything in any event; this Trust is hopelessly insolvent.
6. The trustee believes that the compromise agreement is in the best interests of the beneficiaries for the following reasons:-
(i) It brings certainty to the position;
(ii) it reflects a reduction of £244,623 in the liquidators' claim compared with the original sum of £773,473;
(iii) it enables the Trust's creditors to be paid off in part and sets out a mechanism for them to be dealt with in future should further assets come to light;
(iv) it avoids any public claim of dishonesty against the late A;
(v) it preserves the claims which the Trust has in the liquidation of C and D. It is of course not known at this stage whether such claims are worth anything but they are at any rate preserved in case there is a dividend; and
(vi) importantly, it avoids any risk of a tracing claim as against any of the beneficiaries in respect of distributions which they received after the payments into the Trust by A, but before the claim was lodged by the liquidators. There have been no distributions since the liquidators notified their claim but there were some distributions during that interim period and the compromise agreement means that beneficiaries can keep those distributions.
7. The trustee acknowledges that it is in a position of conflict because payments are being made to it and to F as part of the compromise. It nevertheless believes the compromise is fair and reasonable and asks the Court to approve it in the knowledge of the conflict of interest as described in paragraph 28 of the Court's judgment in A Trustees Limited v W and Others [2008] JRC 097. The adult beneficiaries have been notified of the proposal and have not opposed it. Advocate Dickinson has been appointed to represent the minor and unborn beneficiaries and he supports the compromise.
8. In view of the conflict of interest the Court has scrutinised the matter carefully, but we are quite satisfied that, for the reasons given by the trustee which we have summarised above, the decision of the trustee to enter the compromise agreement is eminently reasonable and should be approved.
9. We therefore make an order in the terms of the draft supplied to us.
Authorities
Companies (Jersey) Law 1991.