M. J. Herbert, Q.C., Commissioner, and Jurats Kerley and Nicolle
Trilogy Management Limited
(1) YT Charitable Foundation (International) Limited
(2) HM Attorney-General
(3) OM-LC² Charitable Foundation International
(4) The Empowerment Charitable Trust
(5) The Saving Grace Charitable Trust
(6) OM-VC5 Charitable Foundation
(7) The Well Foundation
(8) Mrs C
Advocate P. C. Sinel and Advocate P. Tracey (in September and October 2013) and Advocate S. M. Baker (in December 2013) for the Representor.
Advocate D. Evans for the First Respondent.
Advocate D. S. Steenson for RBC Trustees (CI) Limited as trustee of the Third to Seventh Respondents.
Advocate N. F. Journeaux for the Eighth Respondent.
1. These proceedings relate to a charitable trust (which we shall call the foundation) established on 28th May, 1987, by a settlor to whom he himself and other members of his family referred as OM, standing for Old Man, and we shall use the same abbreviation. The trustee is the first respondent, which we shall call YT or the trustee company. The original trusts of the foundation were, by clause 3 of the trust instrument, to pay or apply the income, with power also to pay or apply capital, for charitable purposes. There was, however, no obligation to distribute capital, and there was power to accumulate income:- paragraph (b) of the proviso to clause 3. Clause 7(a) conferred on the trustees a power to vary the trusts of the foundation, and that power was exercised in 2004 in a way we shall describe.
2. The assets of the foundation include almost all of the issued share capital of an investment company which we shall call JY. We were told that at trial its assets were worth some US $500 million. The share capital of JY is divided into 40,000 A shares and 10,000 B shares all of HK$100 each. Holders of all the shares have the right to vote, but the A shares plainly carry the overwhelming majority of the voting rights. The holders of a majority of the A shares also have a specific right to remove and appoint directors. The B shares carry the rights to dividends and other distributions. Originally only the B shares were vested in the trustee company on the trusts of the foundation, with OM retaining the A shares in his personal ownership.
3. OM died on 10th December, 2001. He was survived by his widow whom we shall call Mrs C. He was survived also by his eight children, to whom we shall refer by initials. (The Court ordered on 4th February, 2011, that the representation should until further order be heard in private. There has been no subsequent order reversing that direction, and we are maintaining anonymity accordingly.) The children have formed into two broad groups, though there are differences also within the groups. One group comprises LC (a daughter), PC and AC (sons) and MC (another daughter). As will be seen, these four were appointed as executors of OM's will. Another group comprises CC, JC and MWH. These are the so-called Trilogy sisters. VC is another daughter and she has taken no part in the dispute before us and little part in any of the disputes within the family.
4. OM's children are not themselves parties to these proceedings. As we have mentioned, YT is the first respondent. HM Attorney-General is the second respondent, and he has taken no active part in the proceedings. The representor Trilogy is the sole trustee of three charitable trusts established in 2004, and each of the Trilogy sisters CC, JC and MWH was appointed 'guardian' of one of these Trilogy sub-trusts, which they remained until 2005 when they became directors of Trilogy instead. The third to seventh respondents are five other charitable trusts, of which the other five children LC, PC, AC, VC and MC are guardians. RBC Trustees (CI) Limited ('RBC') is the sole trustee of these five non-Trilogy sub-trusts, which we shall call the RBC sub-trusts. Mrs C is the eighth respondent, added by an order dated 11th March, 2011.
5. Trilogy was represented initially by Advocate Stephen Baker in the sense that he signed the representation and most of Trilogy's later pleadings. But at trial it was represented by Advocates Philip Sinel and Paul Tracey, except that from December 2013 (when closing speeches were heard) it was again represented by Advocate Baker. The Attorney-General was not represented. YT was represented by Advocate Damian Evans. The RBC sub-trusts were represented by Advocate David Steenson. Mrs C was represented by Advocate Nicolas Journeaux.
6. OM left a will dated 30th June, 2001, nominating as executors and trustees the then partners in S&S a well-known firm of London solicitors (expressing a wish that no more than two should take probate) and four of his eight children, namely LC, PC, AC and MC. Of the partners in the firm of solicitors only one joined in taking the grant of probate, whom we shall call CG. Clause 6 of the will contained a specific gift of the A shares in JY and all the shares in the trustee company YT to the will trustees. The clause continued:-
"Please note that my Trustees cannot sell them, but must hold them with a view to supporting [the foundation], or any other trust succeeding or replacing it and having the same principles or character as [the foundation] and the Trustees shall follow my wishes to them."
7. That clause gave rise to difficulties. It appears to have created a separate trust having the purpose of supporting the foundation (and other replacement trusts), but advice was received from leading counsel in London that it was of uncertain meaning and that the separate trust might not be exclusively charitable, in which case it would be void. It was also thought that the estate or the will trust was potentially exposed to adverse tax treatment because two of the executors, AC and MC, were resident in Australia and LC lived in the United States of America. (AC now lives in Singapore, but MC still lives in Australia and LC in the USA.) By 2003 there were already sharp differences of view within the family about the future administration of the estate and the foundation.
8. Proceedings were issued, and a compromise was negotiated and approved by the Royal Court as reflected in an Act of Court dated 11th June, 2004, though there remains an important dispute on at least one aspect of the compromise, as we shall explain. We shall also need to explore the process by which the parties arrived at the terms of compromise, but first it will be convenient to describe its actual effect.
9. The structure which was put in place by the compromise can be described as follows:-
(i) A new purpose trust was to be established, with the four children of OM who were executors as its enforcers.
(ii) The purpose trust was to hold ninety-six per cent of the share capital of the trustee company YT. One per cent was to be held by OM's widow Mrs C, and the remaining three per cent by another discretionary trust established by OM which we shall call the GDS. The same four children were to be directors of YT together with the Jersey advocate Alan Binnington.
(iii) Ninety-nine per cent of the A shares in JY were to be transferred to YT, which continued to hold the B shares. The remaining one per cent of the A shares were to be transferred to Mrs C. The same four children and Mr Binnington were to be directors of JY.
(iv) Eight new charitable sub-trusts were to be established, each with one of OM's children as guardian.
(v) An instrument of appointment was to be made by YT as trustee of the foundation, the effect being that all the income and any capital distributions from JY (including any distribution received on the winding-up of JY) were to be paid to the trustees of the eight sub-trusts in equal shares.
(vi) The articles of association of JY were also to be amended. Article 76 was to provide that decisions of the board must be unanimous.
(vii) Importantly article 96 was to be amended to include the following sentence : -
"Notwithstanding any other provision of these articles, the Directors shall, in any financial year in which profits of that year are available for dividend, recommend to the Company a dividend of not less than 75% of such profits (or such greater amount as a majority of the Directors shall agree, notwithstanding the terms of Article 76)."
The words in brackets at the end of this citation contained the only exception to the requirement for unanimity provided by article 76. Article 96 also provided that the company was obliged to give effect to the directors' recommendation.
10. The words "of that year" in the passage cited above are highly controversial, as will appear. The draft documents to give effect to the compromise were not finalized until more than two weeks after 11th June, and the Act of Court, with those finalized drafts scheduled to it, was not issued until 28th June, though it bears the date 11th June. The controversial words "of that year" were added only on 21st June during a signing meeting.
11. It was also agreed between the parties, though this did not form part of the documents approved by the Court, that in order to "prime the pump " (PTP) JY would declare and pay a dividend of US $80 million and that that sum was to be distributed equally amongst the sub-trusts.
12. Regrettably the 2004 compromise has not put an end to the internal hostility within the family, partly because each of the siblings has his or her own views about what was intended and what was achieved. The Trilogy sisters emphasize what they describe as the 'spirit' of the compromise, which they understand to be a measured but comprehensive distribution of the assets of JY to the eight sub-trusts over a period. Others, including Mrs C as well as LC and MC, emphasize what they see as OM's wish to preserve capital, and see the compromise as intended merely to provide for more modest distributions. MC and LC see JY or YT as having a role of supervising or controlling what the sub-trusts have done with funds distributed to them, and they have shown reluctance towards authorising distributions from JY beyond the mandatory requirement for minimum distributions contained in Article 96.
13. Trilogy's representation was dated 3rd November, 2010. In early 2011 Mrs C, who was not originally a party to the proceedings, applied to the Royal Court to become an additional respondent. That application was successful. At the risk of over-simplification, the Bailiff said in his judgment of 30th March, 2011, that the application was difficult, but he accepted submissions made on behalf of Mrs C that, as her late husband's widow, she was in a good position to give evidence and to make submissions about her late husband's intentions in regard to the foundation.
14. Trilogy's pleading contains two main threads. The link between those threads is the assertion that distributions from YT to the eight sub-trusts have been slow in coming, irregular and insubstantial, so that the compromise has failed to further the charitable purposes of the foundation. This general assertion is supported by a number of more specific allegations, which are explained in paragraph 29 below. Some of those issues were dealt with as preliminary issues as described in the next section, but Trilogy also relies on the actions or inaction of the board in respect of these points to support its principal argument that the structure imposed by the 2004 compromise is unworkable.
15. In August 2011 the Court identified three issues to be heard as preliminary issues:- (1) the true construction of JY's Article 96, (2) a determination of the mandatory dividends payable for the years 2003 to 2009 and (3) the determination of the sums due to the eight sub-trusts accordingly.
16. The construction of Article 96 resolved itself into two main points relating to the 2005 and 2003 accounts:-
(i) In regard to the adoption of the IFRS accounting standard, which JY adopted in relation to the accounts for 2005 and later years, Trilogy argued that, by comparing the net assets shown at the end of 2004 (with the 2004 accounts prepared on the historic cost basis) with the net assets at the end of 2005 (with the accounts prepared under IFRS), a large profit should be recognized, leading to a large mandatory dividend. Mrs C argued that the change of accounting method for 2005 required the market value to be substituted also at the end of 2004, which resulted in no profit 'of the year' 2005 at all, in fact a small loss.
(ii) The second point (still part of the first preliminary issue) was whether the regime for minimum seventy-five per cent dividends agreed in the 2004 compromise applied also to the year 2003.
17. The second preliminary issue was, in effect, to determine the amounts of JY's profits for the years 2003 through to 2009 in the light of the Court's decisions on the construction of Article 96.
18. The contentious part of the third issue was whether the initial PTP payment of $80 million was intended to be separate from, and additional to, the provisions relating to the mandatory seventy-five per cent dividends. Trilogy claimed that it was, but the trustee company had claimed to apply it towards the mandatory dividend for 2004.
19. The Bailiff gave judgment on the preliminary issues on 10th May, 2012. In regard to the construction of article 96 (paragraph 16 above) he decided in favour of Trilogy on both points, resulting in a large unpaid dividend for 2005 and a minimum seventy-five per cent dividend for 2003. The order also contained declarations of the amounts of profits of the several years in question. Finally the Court decided that YT had been wrong to count the PTP payment against the mandatory distribution for 2004. It was a separate and additional payment. However, it was also held that the board of YT could, if they so decided, apply the sum of $80 million towards the mandatory dividend for 2003.
20. Mrs C appealed but only against the first of those points (see paragraph 16(i) above), and on 22nd August, 2012, the Court of Appeal allowed her appeal, holding that the profit of the year 2005, computed on IFRS terms, had to take account of a revaluation at the end of 2004, leading to no mandatory dividend for 2005. Trilogy applied for special leave to appeal to the Privy Council, but on 9th May, 2013, leave was refused. All the preliminary issues have therefore now been determined conclusively between the parties.
21. Reverting to the remaining issues, we have mentioned that Trilogy's representation was dated 3rd November, 2010. It was amended on 7th December, 2011, and re-amended on 27th November, 2012, after the decision of the Court of Appeal on the last of the preliminary issues. The re-amended Representation now contains a wide-ranging criticism of the management of the post-compromise structure and indeed of that structure itself. The relief claimed by Trilogy is expressed in this way:-
(i) Either to distribute three-eighths of the trust fund of the foundation to the three Trilogy sub-trusts;
(ii) Or to distribute the whole of the trust fund to all the eight sub-trusts in equal shares;
(iii) Or to remove YT from the trusteeship of the foundation (though this is described as being in addition to the relief already mentioned);
(iv) Or to make other directions to further the charitable purposes of the foundation.
22. We comment now that items (i) and (ii) of that claim do not literally make much sense. Item (i) would involve each of the Trilogy sub-trusts having no more than one-eighth of the shares in JY. Similarly item (ii) would give all the eight sub-trusts a one-eighth minority holding in JY. In each case the Trilogy sub-trusts would continue to have an in-built minority interest for the future and the RBC sub-trusts, for so long as they kept a common trustee, would apparently have an in-built majority. None of this would assist the Trilogy sub-trusts. But in practice neither of these items has been read literally. Instead they have been regarded as asking for either partial or total dismantlement of the whole structure, meaning a forced distribution of some or all of the net capital assets comprised in JY and another investment company (not a subsidiary of JY) holding real property which we shall abbreviate to 'Top'. That could be achieved by directing YT to resolve to liquidate JY and Top. The true battle has therefore been between that revised claim for dismantling the structure and the claim to remove YT from the trusteeship, together with such other directions as may be appropriate under item (iv).
23. At the outset of the hearing the Court asked for clarification of the jurisdictions which the Court was being asked to exercise. At first sight the power to remove YT as trustee was clear enough, except that the representation actually asks for it only as part of a larger dismantlement. There were indeed periods during the proceedings when Advocate Sinel denied that he was asking for the removal of YT as an alternative to dismantlement, though this position was not ultimately maintained either by Advocate Sinel or by Advocate Baker. As for dismantlement, Trilogy pointed to the inherent, quasi-parental jurisdiction of the Court to supervise charitable trusts and to Article 51 of the Trusts (Jersey) Law 1984 as amended, on the basis that the Court has power to give directions for the administration of the foundation in each of those ways.
24. During the hearing (in fact on 14th October, 2013, Day 11 at the beginning of the third week) Trilogy put forward an alternative basis for achieving dismantlement, and the Court did give permission to add this by way of a re-re-amended representation. The basis of this further claim was that Article 47A(3) of the 1984 Law, or alternatively Article 47A(2)(h), confers powers on the Court to enlarge or modify the powers of management or administration of trust property held for charitable or indeed non-charitable purposes, or to declare different charitable trusts. That article applies 'on the application of a trustee or the Attorney-General', and Trilogy claimed to satisfy this requirement by arguing that YT has the right to invoke this jurisdiction, and that Trilogy, as a beneficiary of the foundation, is entitled to claim due administration of YT's right. On 14th October, 2013, the Court expressed scepticism about this 'far-fetched' line of argument but granted permission to amend. And yet, after further thought, that scepticism has hardened. The fact is that article 47A confers statutory powers on the Court, and those powers are conditional on the application being made by a trustee or the Attorney-General. If neither of those persons makes the application, then in our judgment the Court has no power to exercise the statutory jurisdiction. We therefore give no further thought to this alternative claim.
25. As for the respondents, on 11th December, 2012, YT, finding that its board could not agree on its response to the re-amended Representation, served its own representation applying to surrender its discretion in this regard to the Court and seeking directions. On 29th January, 2013, the Court made an order accepting the surrender and gave directions that YT should take a neutral role in the main proceedings, giving such assistance as the Court may require, and on that footing allowing its costs out of the trust fund. The Court also ordered that, if Mrs C should cease to take an active role in the main proceedings, YT shall return to the Court for further directions. Despite its neutral role, YT's answer of 18th March, 2013, runs to 71 pages, containing a detailed factual narrative of the facts but declining to engage with the principal allegations.
26. YT being neutral, Mrs C nevertheless wished to defend Trilogy's claim. Her answer was served on 21st March, 2013. It was not limited to pleading her late husband OM's wishes and intentions, or to resisting the break-up of the foundation. It also sought to defend the conduct of the board of YT. Some of this involved a defence of her daughter MC, who is the focus of some at least of Trilogy's attack. In this situation Mrs C made an application to the Court for a pre-emptive costs order in her favour, but on 29th July, 2013, the Commissioner issued a written judgment rejecting that application. In the aftermath of that rejection Mrs C amended her answer to remove those passages which attempted to defend the conduct of the board. She does not now positively resist the removal of YT from the trusteeship, though she emphasizes the importance of the Court having regard to OM's wishes, including his original appointment of only four of his children as executors (including MC), and she does resist the dismantlement of the foundation.
27. The RBC sub-trusts have consistently taken a half-way position, supporting the removal of YT but resisting the break-up of the foundation, either in whole or in part. As for OM's children themselves, none of them is a party to these proceedings, but their positions in regard to the relief being sought are these:-the Trilogy sisters obviously support Trilogy; VC is neutral; PC and AC favour total dismantlement (and PC has now voted with his feet, so to speak, by resigning from the boards of both YT and JY with effect from 6th May, 2013); LC is against dismantlement but is now in favour of a new trustee being appointed; MC alone resists both a change of trustee and dismantlement of the structure.
28. The litigation is therefore in a strange state. None of the parties truly opposes the removal of YT, but a majority of the sub-trusts (plus Mrs C) do oppose the dismantlement of the foundation's structure. At the same time Mr Steenson for the RBC sub-trusts has pointed out that Trilogy has made no attempt to criticise the basic structure of a trustee company holding shares in an investment company, or to show that dismantling the structure would produce a better result than replacing YT. He made the beguiling submission at the outset that the Court should make a decision on removing YT as a summary matter, leaving the rest of the representation to be adjourned. The Commissioner did not accept that submission, accepting that Trilogy's case for dismantling the structure deserved to be heard. As we have mentioned, there were times during the hearing that Advocate Sinel, on behalf of Trilogy, denied that he was applying for the removal of YT except as an ancillary part of the dismantlement process, but that is no longer Trilogy's position, so that dismantlement and removal remain live issues, essentially as alternatives.
29. In resolving those issues the Court has been faced with several subsidiary factual questions which need to be decided and evaluated, though naturally there is no need to revisit any of the preliminary issues which have already been decided. Trilogy's overriding complaint is that the current situation is unacceptably dysfunctional, not enough of the profits and gains realised within JY have been distributed to the sub-trusts, and it identifies MC as the principal cause of this shortfall, but it also criticises other members of the boards of YT and JY for condoning or permitting her intransigence. The more specific factual issues in question are these:-
(i) Trilogy's first specific complaint is, in terms, that the 2004 compromise, as embodied in the Act of Court dated 11th June, 2004, does not accurately represent what was agreed between the parties; in other words, that the compromise does not state what it ought to have stated. Trilogy is in a difficulty making that complaint, because neither Trilogy nor any of the Trilogy sisters was a party to the 2004 compromise and none of them is in a position to appeal the Act of Court or to apply for its rectification. (None of the other parties has taken either of those steps, either.) Nevertheless, Trilogy points to two particular aspects of the 2004 compromise, one general and the other more specific, and they are closely linked:-
(a) The more general aspect is that the basis on which the proposals were described to the Court was that the new structure would result in significant distributions to the eight new sub-trusts, including not only current income, but also accrued and future profits and gains of JY, including gains of a capital nature. The Act of Court is said not to achieve that result, at least not in the way the documents have been applied since 2004.
(b) The more specific aspect is focused on the precise terms of article 96 of JY's articles of association. Trilogy claims, and in our judgment rightly claims, that the text of the amendment was altered after 11th June, 2004, but before the date when the Act of Court and its accompanying schedules were issued by the Court in their final form. Trilogy's claim is that this alteration was promoted by MC and, whether or not that is the case, that the alteration enabled the boards of YT and JY to keep the minimum distributions provided by article 96 even smaller than they would otherwise have been.
(ii) The second allegation concerns the delay in paying the PTP payment, which was not paid until 1st November, 2004. Again the finger is pointed mainly at MC, but Mr Binnington, LC, PC and AC are also criticised for condoning what are said to have been MC's tactics.
(iii) The third allegation is that YT and JY originally treated the PTP payment as part of the mandatory dividend for the year 2004.
(iv) Trilogy's fourth specific complaint relates to the change of accounting standard, which occurred during the year 2007 but took effect in relation to the year 2005 and later years. This too is rightly said to have reduced the amount of mandatory distributions required by article 96.
(v) The fifth specific complaint concerns advice given by Mr Binnington to the board of JY about distributions to be made over and above the minimum distribution provided by article 96. He advised, specifically in regard to the year 2005, that any such additional distribution would require a unanimous decision of the board, and it is claimed by Trilogy that only a majority decision was truly required. This too is said to have reduced the overall distributions made to the sub-trusts.
(vi) The sixth complaint is that, whatever may be the outcome of the other complaints, it was always open to JY, by unanimous resolution of its board, to make distributions over and above the minimum prescribed by article 96, so as to correct (or compensate for) what are said to be under-payments caused by those other events and matters, but that no serious attempt has been made to do that.
We turn now to consider those issues. The first is complex, but the others less so.
30. In the period leading up to 2004 relations within the family were already strained. A number of disputes had arisen in regard to OM's estate and in particular the disposition of his shares in JY and the trustee company. This was the context in which a position paper dated 2nd November, 2003, was circulated amongst the family. It was signed by CC, PC, AC, JC and MWH. It contained proposals for a revised structure for the foundation, which need not be set out here (because what was eventually decided differed significantly), but it mentioned a number of themes which remain important. First, there was an express wish to preserve control of the foundation for OM's children as opposed to outsiders. Second, it was described as of vital importance that all eight of the children should be involved, but there was said to be no need to involve descendants more remote than children. One of the motivations for the position paper seems to have been a loss of confidence, on the part of some members of the family, in CG. More immediately there was the tax problem which we have already mentioned.
31. Specifically by May 2004 three sets of proceedings had begun in the Royal Court:-
(i) First, on 2nd March, 2004, LC and MC issued an Order of Justice against their co-executors PC, AC and CG for an order to transfer the shares in YT and the A shares in JY into the names of the five executors.
(ii) Second, on 30th March, 2004, BNP Paribas Jersey Trust Corporation Limited ('BNP'), which was the trustee of the GDS, applied for directions in regard to that settlement's interest in the residuary estate.
(iii) Third, on 27th April, 2004, PC and AC issued a representation naming LC, MC, CG, YT and BNP as respondents, seeking directions as to clause 6 of the will and the future of YT and JY. In the event this appears to have become the most important of the three proceedings.
32. The three proceedings were all compromised as we have summarised, and it might be thought that this court would not have had to examine the process by which the terms of compromise were reached. We shall indeed try to keep any such examination to a minimum. But we have found that the examination of the process reveals some of the subtleties of the terms of compromise and also the attitudes of the parties, which have remained remarkably unchanged between 2004 and today.
33. To recapitulate, the parties to the various proceedings were the five executors (including CG), YT and BNP. They did not include OM's non-executor daughters CC, JC or MWH (who are now the Trilogy sisters). Nor indeed did they include VC. The fact that the Trilogy sisters were not parties to the 2004 proceedings is important. They took some part in the negotiations which led to the compromise, and the then Deputy Bailiff allowed their advocate to be heard in court when the compromise was debated and, in the event, approved. But it remains the case that they were not parties to the compromise. The reason for this is that they were not executors, not direct beneficiaries under their father's will, and were not necessary parties to any of the three sets of proceedings. Their interest was as beneficiaries of the GDS, which would have become entitled to the shares in YT and the A shares in JY if clause 6 of OM's will were found to be invalid. The language in which this exclusion was described in their affidavits suggests that some at least of the Trilogy sisters resented it. MWH wrote that they were marginalised and ignored (which we take as a criticism) and that this culminated in them and their adviser Mr Gowar being excluded from certain meetings. CC described the way in which they were treated as disappointing and upsetting.
34. There was urgency in the situation, because steps needed to be taken before the end of June 2004 to avoid the continuing risk of tax exposure in Australia. In particular it was important for the shares in JY and YT not to be in the names of individuals resident in Australia after 30th June, 2004, the end of the tax year in that country. By early June proposals were being made to negotiate a compromise with a view to having it approved by the Royal Court.
35. The chief participants in the negotiations were not only represented by advocates but were also advised by English solicitors and in some cases leading and junior counsel also from England. These included many well-known and experienced practitioners in the field. Many of them are known to the Commissioner personally, some better than others, as he declared before and at the outset of the hearing. PC and AC were advised by Richard Moyse and Alison Meek then both of Boodle Hatfield and by Simon Taube QC, to be represented in court by Advocate Robinson of Bedell Cristin. LC was advised by John Wood of Herbert Smith (as it was then called). MC was advised by Robert Hunter and Arabella Saker (now Mrs Murphy) both then of Allen & Overy. In court LC and MC were both represented by Advocate Journeaux (now representing Mrs C). Mrs C was advised by Christopher Jarman then of Payne Hicks Beach and represented in court by Advocate Hoy of Voisin. YT and JY were advised by Keith Bruce-Smith and Lucy Gibson of Harcus Sinclair and by Alan Steinfeld QC, to be represented in court by Advocate O'Connell of Bailhache Labesse. BNP was advised by Baker & McKenzie and by Christopher McCall QC, to be represented in court by Advocate MacRae of Ogier.
36. To begin with the Trilogy sisters were not represented, but they were taking advice from Martyn Gowar, then of Lawrence Graham, and they were ultimately represented in court by Advocate Damian James of Crill Canavan.
37. By the end of May a document entitled Global Settlement Proposal was being discussed amongst the solicitors, and it was amended further in the coming days. In all relevant versions of this document the proposal was for eight sub-trusts to be established, and for income to be divided equally amongst them. One point of difference between the parties emerged on 4th June, when Boodle Hatfield, in addition to mentioning the PTP proposal, suggested to Robert Hunter of Allen & Overy that ultimately all the income and capital from JY would be fully distributed within a defined period, but Mr Hunter disagreed. In a series of faxed letters of the same date Mr Hunter set out revised terms, not mentioning any period for the distribution of capital. On the other hand, as Trilogy has later emphasised, a sentence reading 'The capital remains with the YT charity', which appeared in earlier drafts, was deleted. The structure of shareholdings and directorships for YT and JY, and the enforcers of the purpose trusts, were settled (so far as this exchange of correspondence was concerned) by the time of Allen & Overy's final fax of 4th June.
38. By 8th June, 2004, Bedell Cristin were sending bundles of documents to the Royal Court in anticipation of a hearing at 2pm on Thursday 10th June, and a draft order and other draft documents were circulated amongst the advisers. In the meantime on 7th June a long letter was written by CC, JC and MWH to Mr Brian Kenyon of BNP expressing two particular concerns, namely (1) that the proposals would entrench control in the hands of the four proving executors at the expense of other family members and (2) that the proposals no longer included an orderly disposal of the underlying assets to the eight sub-trusts. These points were backed up by the proposition that OM had wanted his wealth to be largely disposed of in the lifetimes of his children, not preserved for later generations. The letter suggested that, instead of the global settlement proposal, the shares in YT and the A shares in JY should be transferred to independent Jersey trustees, with a view to a further family agreement being reached by the end of 2004. On 8th June the same three sisters instructed Crill Canavan, and their letter was circulated to the other advocates. At this time they were not proposing to be represented at the forthcoming hearing, but they did ask for permission to be present and for the court to know of their dissentient views.
39. MWH wrote a further letter to Mr Kenyon on 9th June, 2004, enclosing a five-page statement explaining her involvement with her father's estate. In that statement she mentioned that the concepts and structures proposed in the position paper of 2nd November, 2003, had originated from her (that being perhaps an understatement because later, in her affidavit evidence in the present proceedings, she claimed to have been its author, with input from CC and JC), and further explained that it was principally she who took a number of steps on behalf of her brothers PC and AC in relation to the estate and its complexities, and in giving instruction to professional advisers. This letter seems to have fanned the flames, and Mrs C, MC, LC and VC expressed themselves as being offended by MWH's statement. On the same day VC, in a rare contribution to the matter, wrote to Mr Kenyon distancing herself from the views of CC, JC and MWH, and supporting the global settlement proposals set out in Allen & Overy's letter of 4th June.
40. By the evening of 9th June, 2004, many of the advisers from England had arrived in Jersey, and a series of meetings was held. The first started at 8pm under the chairmanship of Sir Jeremiah Harman, a retired English judge who had acted for OM when at the Bar and had then continued to be a friend and adviser of his. That meeting was attended by all four family executors, VC, Mrs C, CC and many of the English solicitors. These included Mr Gowar but not his other clients JC or MWH. The question for decision was whether to continue with the global settlement proposal or to adopt the alternative put forward by MWH and her sisters. The difficulty expressed by Miss Meek was that BNP, which was not represented at the meeting, might not agree to the global settlement proposal if MWH and her sisters, as beneficiaries of the GDS, disagreed with it. At the same time it was evidently made clear that MWH and her sisters were not parties to the applications before the Court and that the executors were not negotiating with them. CC recorded that she felt bullied and humiliated at this meeting and MWH described CC as having been upset, which we understand, but in our judgment it reflected the reality of the court process, harsh though that seems to her. Nevertheless Mr Gowar repeated the main concerns of his clients, namely the entrenchment of the four family executors and the absence of any provision for the distribution of capital. There was no agreement arising from the meeting.
41. A further meeting was held between lawyers only, including Advocate Robinson, Advocate Journeaux and Mr Taube as well as the English solicitors who had attended the earlier meeting. Mr Gowar repeated his clients' emphasis on all eight children being involved, and on capital distributions. Mr Taube proposed a compromise by way of a further recital to the purpose trust, recording an intention to distribute profits when properly available. This materialized in due course as recital E to the purpose trust (the parties to which were to be LC, PC, AC and MC):-
'The parties hereto state that their intention is that the Trustees should (but without imposing any binding legal obligation on them) hold the shares in [YT] with a view to procuring that the income and profits of [JY] and its subsidiaries shall be distributed for the benefit of the eight charitable sub-trusts in equal shares.'
42. At the hearing before the then Deputy Bailiff on the afternoon of 10th June, 2004, Advocate Robinson on behalf of PC and AC described the global settlement proposal and explained also that MWH and her two sisters were not in agreement. The letters of 7th and 9th June were read. To the surprise of some the Deputy Bailiff was impressed by the criticisms of the global settlement proposal, namely that they entrenched the four family executors and made no provision for the distribution of capital. The hearing was adjourned to the afternoon of the following day on the footing that MWH and her two sisters should be consulted and that they in turn should participate in negotiations, and that their advocate would be heard by the Court.
43. After court on 10th June Miss Meek and Mr Taube arranged to meet Mr Gowar and his clients, together with Advocate James and Advocate Boxall from Crill Canavan. Their purpose was to reassure MWH and her sisters about the global settlement proposal. At the same time they were clear that they were not there to negotiate, because (as had been made clear already) MWH and her sisters were not parties to the litigation and had no locus to make any agreement.
44. The written evidence of what happened at that meeting was, to begin with, less than fully informative. JC and CC said nothing of value about the meeting in any of their affidavits. MWH wrote in her affidavits that she was left with the clear impression that substantial distributions would ultimately be made, at least when the unrealised profits of JY came to be realised, if not before. More specifically Mr Gowar, in his second affidavit of 12th September, 2013, said that Mr Taube had told him:-
'Because the article defining profits for the purpose of Jersey company law includes capital profits and distributions are to be a minimum of 75%, this means that the distributions out will work towards a wind down of the structure over a 10-15 year period.'
In evidence before us Mr Gowar corrected this to say that the figure discussed on 10th June was fifty per cent, and that it was increased to seventy-five per cent only on the following day, as a result of his own negotiations. There is no dispute about that.
45. In cross-examination, however, MWH referred for the first time to notes which had been taken of the meeting by Advocate Boxall. These notes had not been included in discovery. But on 10th October, 2013, (Day 9 of the hearing) they were produced to the Court, ultimately without objection, by way of further discovery. Advocate Journeaux emphasised in further cross-examination of MWH that these notes importantly confirmed a part of his client's case, namely that there was no commitment to make any distribution out of previous years' income. That was true but, in one sense, it was also an obvious and therefore somewhat trivial point, because it should already have been appreciated that until the future directors of JY were installed it was not possible for anyone to make a true agreement or commitment to make any such distributions.
46. More importantly for present purposes, and contrary to the thrust of Advocate Journeaux's point about past income, the notes largely bear out what MWH and Mr Gowar had already recalled in their written evidence. The notes read in part:-
"Simon T [Mr Taube]: . . . The concept is that money shouldn't stay locked up in JY but that profits should be declared up. Profits are income and capital profits. Test will be company law test of distributable profits. Anything in excess of par value is distributable. Capital profits might arise from maturing deposits, or . . . It's not a pure income test. JY's articles will provide that not less than 50% of distributable profits will pass up. That represents compromise between the on-going need to plough back. Our view is that as much as is available should go up. But it's not realistic to provide that a co distribute 100% of distributable profits. YT will declare these sub trusts and will say that any income or capital will be distributed equally to these 8 sub-trusts."
We comment that Mr Taube is there recorded as saying that distributable profits means anything over and above the par value of a company's share capital, so that it does include the undistributed income of previous years. He also included capital gains, because the test for ascertaining a company's distributable profits is not what he called a 'pure income test', by which we take him to have meant that the test for ascertaining a company's profits is different from the test for distinguishing trust income from trust capital.
47. Later during the same meeting, in answer to a question from MWH, 'What about available profits in the accounts to be used for refunding', Mr Taube is recorded as having said:-
"They may be used. A board of YT will comprise 5 people comprising PC, AC, LC, MC and Alan Binnington. They will also be the JY board. Decision approving final dividend will be for board of YT. The practical analysis is that you have 3 directors who are keen to see charity done plus Jsy advocate. They'll have to decide each year, "Should we have to distribute JY's accumulated profits". Hitherto JY has been conservative. There's no obligation and I think in practice PC and AC can't obtain stipulation for immediate distribution. Once this structure is in place, it'll be very difficult for any director of YT to justify a decision that JY should get into long-term investment when it has cash. For YT to allow JY to act as piggybank will be very hard to justify. . . Keith B-S said he couldn't advise on distribution from YT to 8 untested trusts of $400m. But when the 8 trusts are tested, there will be great pressure to distribute the accumulated profit."
There is no need to interpret the abbreviations used in those notes.
48. There was no attack on the genuineness of those notes, and in our judgment the meaning of what Mr Taube is recorded as having said is clear enough. He was explaining that nothing could be certain about future distributions because they would depend on decisions by the future board members of JY. He was neither negotiating with MWH and her sisters nor making promises on behalf of JY or YT. He was instead offering an analysis of the future effect of the structure which was then being proposed. And we find that that analysis was a good justification for the impression which both Mr Gowar and MWH took from the meeting, as recorded in their respective affidavits.
49. On 11th June discussions were resumed during the morning and continued until shortly before the Court sat again at 2.30pm. At the same time Miss Saker produced a document entitled "Memorandum of Understanding", which attempted to set out the result of the negotiations at that time. When the Court resumed Advocate Robinson took the Deputy Bailiff through the draft documents, including the memorandum of understanding, though acknowledging that the latter was not final. On the other hand it revealed that the PTP payment had now been doubled to $80 million and the minimum distribution under article 96 was now seventy-five per cent instead of fifty per cent.
50. Advocate James was permitted to express the concerns of the Trilogy sisters to the Court. They were not parties, so that their consent was not required. But BNP, as trustee of the GDS (of which they were beneficiaries), was a party and was unwilling to consent without taking the beneficiaries' views into account. The hearing was adjourned for further discussion, during which an amendment to the terms of the purpose trust was offered. This became clause 8(b), declaring an intention (but not imposing a legal obligation) for the enforcers of the purpose trust to consult the eight guardians, so far as reasonably practicable, on the exercise of their powers and duties in regard to the relevant guardians' sub-trusts. This was not truly enough for MWH, but the executors were not prepared to concede anything more and BNP gave its consent. The Court approved the proposal in principle, and Mr Robinson then had the task of co-ordinating the draft documents which would need to be annexed to the Act of Court.
51. The dispositions mentioned in the Act of Court of 11th June, 2013, were made during the weeks following the approval of the compromise, broadly as previously provided, including (after a considerable delay) the PTP payment of $80 million. But, as we have mentioned, there was one important change. In its ultimate form JY's article 96 requires the directors, 'in any financial year in which profits of that year are available for dividend' (italics added), to recommend a dividend of at least 75 per cent of those profits. The effect of article 96 with those added words is in our judgment that the mandatory 75 per cent dividend in any year applies only to the current year's profits and gains. That is also the basis on which all relevant parties have proceeded since 2004. The controversy concerns the way in which those words were added.
52. After the hearing on 11th June the advisers went back to London and then began work on the documents. The memorandum of understanding at this stage included some passages relevant to the present dispute. After referring to the PTP payments of $10 million to each sub-trust, the amount of which appears to have been based on somewhat confused thinking as to the profits properly available for distribution at that time (the actual distributable profits were some $271 million, and the $80 million figure was derived from one particular deposit of some $88 million which was known to be available for the purpose), the document continued:-
"We [the family executors] have separately agreed that the articles of association of JY shall (as part of the compromise) be amended to stipulate that, each year, not less than 75% of the distributable profits of JY in that year shall be distributed by way of dividend to YT (and therefore in equal shares to each of the eight sub-funds). However, if the amount proposed to be distributed represents 10% or more of the Net Asset Value of JY in the relevant year, the amount required to be distributed by way of dividend shall not be more than 50% of the distributable profits in that year."
53. There was at least one error in that text, namely that the phrase 'shall not be more than 50%' should have read 'shall not be less than 50%'. This led to an exchange of e-mails between Mr Gowar and Mr Moyse. On 15th June, 2004, Mr Gowar spelt out his understanding of what had been agreed on the telephone immediately before the hearing on 11th June, and in particular the proviso relating to the net asset value of the company. He wrote:-
"This was a recognition that in those circumstances, there would be a potential risk that JY might find itself in a position where it could be in debt, and that would, obviously, not be appropriate. In those limited circumstances, at least 50% of the distributable profits of that year will still need to be distributed. This is a point which is of major importance and I hope can please be corrected."
54. On the following day Mr Moyse dealt with this point as follows:-
"Para 2. We confirm that what we agreed on behalf of the four Executors was that not less than 75% of the distributable profits of JY would be distributed by way of dividend to YT (and in equal shares to each of the 8 charitable sub-funds) but if the net asset value of JY dropped to a figure of less than 10% of the net asset value as determined in the accounts, then the level of distributable profits would reduce to not less than 50%."
This not only corrected 'not more' to 'not less' but also changed the nature of the proviso relating to 10 per cent of the net asset value. In the original draft the question had been whether the amount of the distribution would exceed 10 per cent of the net asset value, but now it was a question whether the distribution resulted in the net asset value of the company being reduced to less than 10 per cent. It is also significant that the e-mail used the phrase 'distributable profits' without any explicit qualification or limit.
55. At this time the text for article 96 was also being circulated. The relevant passage (cited partially in paragraph 9(vii) above) was initially in these terms:-
"Notwithstanding any other provision of these articles, the Directors shall, in any financial year in which profits are available for dividend, recommend to the Company a dividend of not less than 75% of such profits (or such greater amount as a majority of the Directors shall agree, notwithstanding the terms of Article 76), provided always that if the payment of such a dividend would result in the net asset value of the Company, as disclosed in the accounts of the Company for that financial period, reducing to less than 10% of the net asset value of the company as disclosed in the accounts of the Company for the preceding period, the Directors shall recommend a dividend of not more than 50% of such profits. If the Directors make such a recommendation, the Company in general meeting shall ratify and approve such dividends accordingly."
56. Three points need to be mentioned. First, the proviso was indeed phrased so as to apply if the net asset value fell below 10 per cent, not merely if the distribution exceeded 10 per cent. Second, the substitution of 'not less' for 'not more' had not yet been incorporated. Third, the phrase 'in any financial year in which profits are available for dividend' did not include the words 'of that year'.
57. It is however clear that those words 'of that year' do appear in the final version of article 96 spelled out in the draft resolution which forms appendix 3 to the Act of Court. They also appear in the text of the resolution which was executed by AC and Mrs C on behalf of JY on 25th June. In our judgment they do significantly affect the meaning and effect of the article. Without those words the article would have required JY to distribute at least 75 per cent of all distributable profits each year, and the natural meaning of those words is that the distribution would have included capital profits and also undistributed profits brought forward from previous years. That would be consistent with the exchange of e-mails between Mr Gowar and Mr Moyse which we have cited. And this construction is also borne out by the revised form of the proviso, which (so far as we can see) would never (or almost never) come into effect if the only mandatory requirement were the distribution of 75 per cent of each year's current profits and gains. It follows that the addition of the words 'of that year' does (whether deliberately or not) limit the mandatory distribution to the profits and gains specific to the year in question, making the proviso otiose or at least virtually so.
58. Much time has been spent, and much evidence given, identifying the moment when the words 'of that year' were added, by whom and on whose authority. This question throws light on the actions and attitude of all the individuals who were or became directors of YT and JY, and we now turn to examine that evidence. This is also of direct relevance to the present proceedings because in its (now) Re-Re-Amended Representation and in its Reply, relying on certain evidence previously given by MC herself (though later withdrawn), Trilogy accuses MC of directly or indirectly causing the words to be added.
59. So far as the basic facts are concerned, the responsibility in Jersey in regard to the documents lay with Bedell Cristin, but in London it was Harcus Sinclair on behalf of YT who were the firm entrusted with finalising the draft documents. We have seen plenty of documentary evidence, including numerous versions of article 96 without the words 'of that year', sent from Harcus Sinclair as late as 2:24pm on 21st June, 2004. This reveals clearly enough that those words were added during the signing meeting which started, or was at least intended to start, at 4:30pm on 21st June. Specifically the final version of the draft, including the words 'of that year', was sent by Harcus Sinclair to numerous addressees at 5:00pm. There is no record of any discussion at the meeting of the addition of these words, and none of the witnesses before us claimed or admitted to any such discussion.
60. Mr Gowar was clear in his evidence that he regarded article 96 as being intended to apply not just to future income but to distributable profits in the full sense of the term, and he assumed that Richard Moyse was of the same mind while they were exchanging e-mails on 15th and 16th June, 2004. Having considered the evidence of Mr Gowar and the Trilogy sisters, both in writing and in court, we have no doubt that they all believed that the provision for distribution was intended to apply to 'distributable profits' in the full meaning of that term. It appears also that Mr Moyse and Mr Taube had the same understanding, but we cannot make a definitive finding to that effect, not having seen or heard evidence from either of them.
61. Mr Brian Kenyon of BNP originally held a similar view (or took a similar position), expressed in an e-mail of 26th November, 2004, (at which time BNP was trustee of what are now the Trilogy sub-trusts), in which he contended (in the context of article 96) that the compromise was intended to require the directors of JY to declare a dividend of all profits of each year (his emphasis), and that this would have a very substantial effect as it would include accumulated profits. Mr Kenyon also pointed out that, once the words 'of that year' were added, the proviso became meaningless.
62. The Trilogy sisters wrote a long letter dated 13th December, 2004, for the attention of all relevant parties, in which (among many other points) they argued that the intention behind article 96 was to include accumulated profits. Not long after this, however, in an e-mail of 16th December, 2004, to MWH (which was made available only during the trial) Mr Kenyon wrote:-
"The intention of the parties to the compromise agreement was that Article 96 of JY be amended to provide for an annual distribution of the profits of the financial year of the company and not accumulated profits, although it was agreed that in order to prime the pump and initial distribution would be made, totalling US$ 80 million."
The e-mail suggested that a document containing the words 'of that year' was actually in circulation on 11th June, 2004, but no such document emerged before us. Mr Gowar told us in cross-examination that he saw no such document, and we accept that as true. MWH was cross-examined about Mr Kenyon's later view, and her replies were to the effect that Mr Kenyon was by that time simply relying on the final terms of article 96, and that he had not personally been involved with the relevant negotiations, even though he had been present during part of the proceedings on 11th June. Mr Kenyon did not give evidence before us, either orally or in writing, and we are unable to resolve the apparent contradiction in his understanding. This apparent change of mind, and his refusal to support the Trilogy sisters' position, was one of the reasons for BNP being replaced as trustee.
63. We should in any event emphasise that neither Mr Gowar nor any of his clients, nor Mr Kenyon, was present at the meeting on 21st June, 2014, and we shall therefore attempt to consider the evidence of those who were.
64. So far as concerns PC's understanding of the purpose of the compromise, his first recorded statement on the subject was a brief response dated 10th January, 2005, to the letter of 13th December, 2004, from the Trilogy sisters: "[AC] and I recognize and think we understand your concerns but we think it will be more prudent to follow Alan's suggested approach as laid out in his letter to you dated 21st December, 2005." That was in reality a reference to Mr Binnington's letter of 21st December, 2004, but in fact that letter had not addressed this particular point, merely asking for all parties to set out in writing their views as to distribution policy generally.
65. Some years later, on 10th October, 2008, PC wrote in the following terms in an e-mail to Mr Binnington, showing that at that time his view was the same as Mr Kenyon's revised (December 2004) view (see paragraph 9(vii) above):-
"The MOU [memorandum of understanding] was never finalized but it very much captured the spirit of what was agreed, however reluctantly by all parties. I underlined the words "of that year" and in a subsequent email from Martyn Gowar, who represented the three sisters from Trilogy, he also reaffirmed the use of that phrase (underlined in an attachment). It would have made little sense if that phrase was not there, as it would have meant that at least 75% of the accumulated profits would have been distributable immediately, and therefore the initial injection of USD10 million into each subtrust simply made no sense."
66. Later still, in his first affidavit of 11th November, 2011, (paragraphs 65 to 69) PC expressed a different view, concluding by saying that the words "of that year" did not reflect the terms of the compromise.
67. Naturally PC was cross-examined about this contradiction by Advocate Journeaux. It is fair to say that some of his answers to that cross-examination were unclear and confused. But he concluded by saying this:-
"I mean, I was in two minds. At the same time I would prefer to have not a huge distribution in the first year, but if, as a result of the fact that, this is my belief that "of that year" was not something that was actually agreed, then if it happens that a huge distribution goes into each of the sub-trusts in the first year, I accept that as a consequence."
Advocate Journeaux did not take the matter further. We conclude that PC's evidence is that the words "of that year" were not agreed (and presumably he did not notice the added words on 21st June), but that he had not in fact contemplated a very large distribution in the first year after the compromise.
68. Turning to MC, it has always been her position, and for that matter the position of Mrs C, that article 96 was intended to apply only to the profits of each future year separately. She wrote to her fellow directors to that effect in an e-mail of 26th November, 2004, echoing an earlier letter of 13th September from Mrs C. In her first affirmation of 15th November, 2011, (paragraph 45) MC also gave clear evidence that the addition of the words "of that year" was made at her request, and that her request was made for the purpose of keeping the mandatory distributions to a minimum:-
"At this stage, I say only that the words "of that year" were added to the draft written resolution of JY by Ms Saker at my request because I understood my father would always wish to preserve the capital. A copy of the amended Article 96 (showing Ms Saker's addition in manuscript) is at pages 198-200 of MC1. It is clear to me that this was a deliberate effort to make sure that the profits of previous years were not counted. I am certain this reflects what I insisted on at the time; no doubt the Royal Court will receive substantial evidence on the issue in due course."
That could hardly have been expressed in more definite terms, and it should be borne in mind that when that affirmation was given the amounts of the mandatory dividends were specifically in issue, and it was part of MC's case to keep them to a minimum. Before us MC told us that Miss Saker had worked with her in preparing that affirmation, though obviously the evidence was MC's not Miss Saker's.
69. Almost immediately however MC resiled from this position. Even during her oral evidence in December 2011 she described the paragraph cited above as a mistake. The reason for this change was that she had by then been reminded that she had received an e-mail of 7th January, 2005, from Mr Binnington stating that Keith Bruce-Smith of Harcus Sinclair had told him on the telephone that the addition had been "effectively at his insistence." We have not seen or heard evidence from Mr Bruce-Smith, and it is unclear what exactly he meant by that.
70. In her latest affirmation of September 2013 MC has elaborated on this, apologising again for what she described as her original error. She referred to the paragraph cited above from her previous affirmation and also to the e-mail mentioned above. She went on to refer to several documents, few of which throw much light on the question, except for PC's much later e-mail of 10th October, 2008, which we have already mentioned (paragraph 65 above). She also exhibited a more recent letter dated 26th March, 2013, from Miss Saker (now Mrs Murphy) which seems intended to support (or at least not to contradict) her recent position, even though MC's original affirmation, on which Miss Saker had worked, actually refers to herself making the amendment at MC's request.
71. Mrs C also gave evidence, in line with MC, that OM always wanted to preserve capital and that she had had no intention of allowing previously accrued profits to be included in the mandatory provision of article 96.
72. The question remains whether Harcus Sinclair had instructions to add the words in question and, if so, from whom. It would be surprising for them to add those words without instructions, and without our having heard evidence from any of the solicitors at that firm we are not able to make any finding to that effect. It remains possible as an alternative that Harcus Sinclair understood that there was a sufficient consensus at the signing meeting to add the fateful words in accordance with that perceived consensus.
73. In attempting to disentangle these facts, the Court has difficulty in reaching decisive conclusions on all points. The reason is that many of the relevant persons have not given evidence before us, either in writing or under cross-examination. This applies to Mr Taube, Miss Meek, Mr Moyse, Mr Kenyon and Miss Saker (though the latter contributed in the form of a letter supporting MC's latest position). We are also aware that Trilogy has already launched proceedings in England claiming that Harcus Sinclair added the words "of that year" without instructions, and it would be wrong for this Court on the evidence before us to make findings on that question ourselves.
74. Even so, acknowledging that weakness, we reach the following conclusions relevant to the present case. First, Mr Gowar and the Trilogy sisters were in our view entitled to understand and expect that article 96 was to apply to distributable profits in the full sense of the term. That was what the memorandum of understanding had provided, or at least, once Mr Gowar's e-mail exchange with Mr Moyse had clarified certain ambiguities, it appears that that was what the compromise was understood by both of them to provide. The addition of "of that year" defeated that understanding and expectation.
75. Second, that understanding and that expectation are consistent with everything that we have heard and read, from all relevant parties, about what Miss Meek and Mr Taube told Mr Gowar and the Trilogy sisters on the evening of 10th June, 2004. Mr Taube's analysis that the proposed terms of article 96, even when referring to 50 per cent distributions, would in practice lead to a total distribution of the assets of JY within 10 or 15 years, can in our view be explained only on the basis of two assumptions. The first is that future capital disposals would occur over the 15-year period, and that those profits would be distributable. But that alone would not be enough. The second assumption must have been that previous years' accrued profits were also in principle distributable. At the same time they may not have appreciated the full extent of the distributable profits of JY.
76. Next, the proviso to article 96 makes little sense, or at least that it is unlikely ever to apply in practice, once the earlier part of the article had been amended by adding the words "of that year". Without those added words, the proviso does appear to us to have been a valid addition to the article.
77. On the other hand the understanding of Mr Taube and Mr Moyse does not appear to have been shared by all of the executors themselves, perhaps not fully by any of them. LC and MC claim never to have thought that article 96 would apply to previously accrued profits. And in our view this conclusion is to an extent justified also by PC's evidence, including the confused nature of that evidence. If we have correctly understood this evidence, it means that PC did contemplate distributions as including undistributed profits brought forward from previous years, but that he had not in fact contemplated a substantial dividend in the first year. But we question PC's reasoning given at the end of his 2008 e-mail, to the effect that the PTP payment would have made no sense if the words 'of that year' had never been added. The PTP payment was agreed as an immediate payment, no doubt using part of accrued profits. The first mandatory payment of 75 per cent, without the words 'of that year', would doubtless have been more substantial, subject to the operation of the proviso, but it would have taken some time before that first distribution could be made, and the PTP provision cannot be said to have made no sense.
78. As for MC's contribution, the choice before this Court on the evidence is this. Her original affirmation of 15th November, 2011, stated that she had deliberately had the words "of that year" added by Miss Saker, and went to far as explain at some length, and with some cogency, her reason for doing so. In our judgment that is the kind of evidence which cannot have been a mere mistake or trick of memory. It was either true or a lie. If it was a lie, then it remains a mystery why Harcus Sinclair altered the text of the draft article 96, unless they had the understanding that the added words reflected that of the executors and the proposed boards of YT and JY as to the intended meaning of the article. If it was true, that may to some extent explain Harcus Sinclair's action, in which case MC's subsequent denials of her involvement in the point should be disregarded as self-serving untruths. One of the reasons why it is difficult for us to reach a conclusion on this point is that Miss Saker, now Mrs Murphy, who was advising MC in 2004 and attended the signing meeting on 21st June, did not give evidence before us, either in writing or orally, though (as we have mentioned) she has written a letter which MC has prayed in aid apparently to weaken the force of her own original evidence. Despite that difficulty we have come to the conclusion, after having seen and heard MC in the witness box, that on the balance of probabilities, and on the basis of the evidence which we have seen and heard, her original evidence was true and that her later evidence on the point was not.
79. We turn now to the complaint that there was unjustified delay in effecting the PTP payment. Some evidence on this point was given at the hearing of the preliminary issues, but the Court made no specific finding. The bare facts are that the Court's order sanctioning the compromise was issued by the end of June 2004 but that the PTP payment was not made until 1st November, 2004. The given reasons for that four-month delay included discussions amongst the board of YT about the funding of a particular scholarship (an issue which had been overlooked during the 2004 negotiations), waiting for the 2003 accounts to be available and questions about properties in Singapore belonging to some subsidiary companies of JY, including possible outstanding liabilities to Singapore tax.
80. The directors other than MC have attributed the delay to her, and our reading of the correspondence and written evidence, endorsed by oral evidence before us, confirms that attribution. Eventually, after pressure from Mr Binnington to the effect that there was no justification for further delay (a view with which we agree), MC agreed and the payment was made. This was therefore an occasion on which MC acted to delay a distribution to the sub-trusts.
81. The complaint under this heading is that the boards of YT and JY initially resolved, in effect, to treat the PTP payment as the mandatory distribution provided for by article 96 for the year 2004. In fact the profit for the year 2004 was $35 million, far less than the PTP payment. By contrast all the evidence of the 2004 negotiations shows that the PTP payment and article 96 were intended to be separate from the outset. This issue was dealt with by the Court hearing the preliminary issues, and paragraph 135 of the judgment contains the conclusion that the decision of the board was one to which no reasonable trustee could come. We have no difficulty in agreeing with that conclusion. In the light of other evidence which we have read and heard, this episode is symptomatic of the board's approach since 2004, namely to take advantage of circumstances which might appear to justify relatively modest distributions or even (as in this case) to take active decisions towards that result. In our judgment this approach has been dominated by MC's negative attitude.
82. The complaint under this heading is, in general terms, also about minimising distributions to the eight sub-trusts. It concerns two events, namely the sale of one-half of JY's holding in HSBC and the adoption of the accountancy standard known by the initials IFRS.
83. The holding in HSBC was substantial. In May 2005, half the holding was sold for $118.5 million, realising a gain of about $100 million. The board understood that a gain would in principle be a distributable profit for the purposes of article 96, but the amount of the gain was not so clear. MC argued that only that part of the gain which occurred after the making of the 2004 compromise would be affected by article 96, though the terms of the compromise did not express that result at all.
84. The board of JY obtained professional advice on this question from Mr Victor Joffe QC to the effect that the mandatory provision of article 96 required a revaluation of assets at the end of each accounting year (which was the same as the calendar year). The effect of that advice was that only that part of the gain which had accrued since 31st December, 2004, would be caught by article 96.
85. That advice was not available in its final form until July 2007 (and appears no longer to be relied on by any of the parties). And meanwhile in 2006 the board of JY had appointed KPMG as its accountants, and KPMG had tendered on the basis of the adoption of IFRS with effect from the year 2005. In previous years investments belonging to the company had been recorded at their historic cost, apparently at OM's own request, but under IFRS marketable securities are revalued at successive year ends. The ramifications of this change were the subject of one of the more controversial issues decided by the Court as a preliminary issue. In the end the Court of Appeal, upholding Mrs C's appeal, decided that for the purposes of article 96 the HSBC holding had to be revalued as at the end of 2004 (though this did not affect the 2004 accounts). That revaluation was over $200 million higher than the acquisition cost which had been used for the purpose of earlier accounts. It turned out in fact that the value of JY's investments fell during the year 2005, resulting in a loss of some $2.1 million. In terms of article 96 this meant that there was no mandatory distribution in 2005, though the board did in fact resolve to make a discretionary distribution of $16 million.
86. Over the long term the adoption of IFRS should not make a difference to the totality of profits and gains recognised by the company, but the combination of (1) the wording of article 96, including the words "of that year", (2) the adoption of IFRS for 2005, and (3) the HSBC sale occurring in the same year meant that the gain of $100 million on the disposal of those shares never became subject to the mandatory provision in article 96, and it never will. The same can be said of the whole of the 2004 revaluation.
87. In those circumstances Trilogy's claim is that the choice of new accounting standards was either (a) adopted deliberately by the board of JY in order to minimise the distribution of profits to the eight sub-trusts or alternatively (b), if the board did not consider the effect on article 96 dividends, that they were in breach of duty for not so considering it. All the evidence shows, and we accept this to be true, that the boards of YT and JY had no discussion about the adoption of the new accounting standard, and we therefore find as a fact that the adoption was not made deliberately to minimise the distribution of profits. The Royal Court had reached the same conclusion in paragraph 33 of its judgment on the preliminary issues.
88. As for the question whether the board of JY was in breach of any duty owed to Trilogy (or to the Trilogy sub-trusts) for failing to consider the change of accounting standard in the context of article 96, we are not persuaded. The Royal Court accepted expert evidence during the hearing of the preliminary issues, and that evidence was unanimous that IFRS gives a more accurate picture of the annual performance of a company and that it was therefore a suitable standard for JY to adopt. We do not think that the board can be effectively criticized for accepting the implicit advice of KPMG that it was suitable.
89. Having said that, the description of the effect of the adoption of IFRS for the first time in 2005 (paragraph 86 above) is accurate and relevant. And it is true also that, apart from the distribution of $16 million for the year 2005 itself (see paragraph 90 below), there has been no resolution of the board to make a discretionary distribution to take account of the gain in question falling outside the reach of the mandatory provision in article 96. This is therefore an example of the board failing to act positively so as to counteract an unnecessarily small distribution, though not on this occasion an example of their taking positive action to keep the level of distributions down. Under cross-examination MC justified this particular decision, though perhaps only with the benefit of hindsight, by reference to her opinion of OM's wish to preserve capital.
90. The accusation under this heading is that Mr Binnington, in his capacity as a director of JY, gave advice to his co-directors about the ability of the board to declare a discretionary dividend for the year 2005. Ultimately the Court of Appeal decided that there was no distributable profit of that year, and the question of a discretionary dividend was discussed. Mr Binnington advised that a unanimous decision would be needed. Accordingly only the figure unanimously approved by the board was decided ($16 million), even though a majority were expressly in favour of a higher figure. The complaint is that Mr Binnington should have advised that the proviso to article 96 provides for a majority decision in regard to distributions over and above the mandatory minimum, and that if he had done so the majority vote would have produced a larger distribution.
91. It is correct that article 96 provides expressly for a majority vote in favour of a discretionary distribution over and above a mandatory one, to that extent overriding the general requirement of unanimity provided by article 76. It appears clear enough also that Mr Binnington overlooked this detail. But in our judgment, on the true construction of article 96, the proviso applies only to a year in which there was a profit, and for the year 2005 the Court of Appeal has ruled definitively that there was no profit. Our view therefore is that a unanimous decision was required for a discretionary distribution in the year 2005, so that Mr Binnington's advice was inadvertently correct and not a ground for criticizing the board of JY in these proceedings. Trilogy did not apply specifically for article 96 to be construed (though in general terms that was one of the preliminary issues previously formulated and there were submissions and exhibited opinions of counsel about the article before us in the present proceedings), but in any case it has been necessary for us to construe the article in order to deal with this criticism of Mr Binnington and the other board members. We are aware that Trilogy has launched separate proceedings claiming damages in respect of this advice, but if our view expressed here is correct that may lead to a re-consideration of those proceedings.
92. In addition to the specific complaints which we have mentioned, with some of which we agree, Trilogy's more general complaint is that the current arrangements for the foundation are dysfunctional, and that it is this which has led to inadequate distributions from JY to the sub-trusts. Much of this criticism is directed at MC, who is characterised as intransigent.
93. MC, though not a party to these proceedings, has provided the Court with hundreds of paragraphs by way of written evidence, and she has given oral evidence before us. We have therefore had every opportunity of considering her approach and motivation. Subject to one matter of factual evidence, which we have already mentioned (paragraph 78 above), we are happy to accept that the views and opinions on which she has relied, ever since the 2004 compromise, are honestly held. Essentially she bases her single-mindedness (and we acknowledge that a single-minded pursuit of the interests of beneficiaries is in principle a positive quality in a trustee) on her interpretation of OM's wishes, specifically a wish to preserve capital and a wish to impose accountability.
94. This single-mindedness or intransigence might not in itself be a sufficient ground of complaint, but it is said that it is a ground for complaint in view of the entrenched position of the four executors as enforcers of the purpose trust, directors of YT and directors of JY, coupled with the requirement for unanimous decisions on the board of JY provided by article 76 of its articles. That entrenchment has always been part of the Trilogy sisters' basis for criticising the current structure, and was part of their criticism at the time of the 2004 compromise. The entrenchment was indeed authorised by the 2004 compromise. In the end it has meant that MC has been able to vote against, and therefore to veto, any proposal which goes against her own views.
95. That too would not in itself be a matter of criticism, but it is said that her single-mindedness or intransigence is irrational and inconsistent with the spirit of the 2004 compromise. For our part we are reluctant to base our decision on a criterion so vague as the spirit of the 2004 compromise. We prefer to examine its actual effect. In other words, the question of dysfunctionality boils down, in our view, to the question whether MC's single-mindedness or intransigence is inconsistent with the true effect of the 2004 compromise.
96. Much of the argument in these proceedings has concentrated on the meaning and effect of article 96, and particularly the question of minimum distributions from JY to YT and the eight sub-trusts. But this obscures some of the more fundamental effects of the 2004 compromise. We therefore take the step now of stating our own analysis of the effect of that compromise:-
(i) The first point is that YT has appointed all future distributions from JY to the eight sub-trusts, with YT having no discretion in the matter. The original power to accumulate income, contained in the foundation's original trust instrument, has not survived.
(ii) Second, JY therefore exists only for the benefit of the eight sub-trusts, and in our view it should administer its assets for their benefit; not for the benefit of 'the foundation' as if the foundation had some different nature or identity from the eight sub-trusts. This is not affected by Mrs C owning one per cent of the A shares, which carry voting rights but no right to distributions. The only purpose of the YT/JY structure is to realise and distribute profits and gains to and for the benefit of the sub-trusts. It is implicit in this second point that the boards of YT and JY (who are currently the same persons) should in principle be considering annual or other dividends in respect of all its distributable profits (and those of its subsidiary companies) whenever practicable unless there is some good reason, for the benefit of the eight sub-trusts, to retain some or all of them for the time being.
(iii) Third, the definition of income and capital needs to be considered in the context of companies and trusts. The distributable profits of a company include capital profits, so that JY may declare dividends of capital as well as of income, extending essentially to everything not represented by its original share capital. This extends not only to profits accruing between OM's death and the date of the compromise but also to profits accruing during his lifetime. Then, when a distribution is received by YT, it is received in the form of trust income and must then be distributed to the eight sub-trusts. But the sub-trusts receive those distributions as capital. The post-compromise structure therefore has the effect, over time, of turning all the income and capital profits of JY into the capital of the eight sub-trusts.
97. Our own analysis, though this may not have been shared or understood by all the participants at the time, is that the 2004 compromise made far-reaching changes to the structure created by OM, quite independently of article 96 and the PTP payment. The provisions for minimum distributions under article 96 and the agreement to make the PTP payment are important for what they are, but in the event they have achieved greater importance in this litigation than they deserve.
98. We have said that YT has no charitable object other than to distribute receipts from JY to the eight sub-trusts. This has an effect on its duties and on those of JY. Classically the duties of the directors of a company are to exercise duties and powers in the interests of the company itself, but this makes little sense in the context of a trustee company holding almost all the shares in an investment company wholly in trust for a number of separate charities. In such a situation, especially where the directors of the two companies are identical, the duty of the directors of both companies is to promote the interests of charity, and in the present context it is to promote the interests of the eight sub-trusts. This does not necessarily mean instant distribution of all the assets: there may be good reasons to retain the structure of the two companies, or to retain certain assets in JY and its subsidiaries for certain periods (we have not heard decisive evidence on such questions), but as a matter of broad principle the duty of the directors of both companies is to distribute unless retention is for the benefit of the ultimate recipients, the sub-trusts.
99. An aspect of MC's evidence was that she was intent on enforcing accountability, interpreting this as a duty or entitlement for JY/YT to require the sub-trusts, particularly the Trilogy sub-trusts, to account for their charitable activities. This was said to derive from OM's impressing his children with the need for accountability. But after the 2004 compromise there is no legal or other justification for that requirement. The Trilogy sub-trusts have resisted this requirement for accounting to JY or YT, and in our judgment they were entitled to do so. YT has no discretion whether to make distributions to the sub-trusts or not, and JY is itself no more than an investment company with no right or duty to investigate the ultimate charitable activities of the sub-trusts. There is certainly no such right or duty expressed in the governing documents, and in our judgment no such duty is implied. On the contrary, recital E to the purpose trust (paragraph 41 above) is a positive encouragement in favour of distribution. It would, in the ultimate analysis, be impossible to justify any such right of investigation, because the only sanction which YT or JY could impose on a recalcitrant sub-trust would be to reduce the level of JY's distributions, but that would punish compliant sub-trusts equally with the non-compliant ones.
100. Another aspect of MC's evidence was that her views were based also on OM's desire not to spend capital. We shall return to the question of OM's wishes generally in a moment but, even accepting that this was one of OM's guiding principles, it does not justify MC's approach in the period after the 2004 compromise. We have explained that one effect of the compromise was to remove the pre-existing power to accumulate income, and we have explained also that the trust and corporate structure of YT and JY essentially requires the distribution of all profits and gains, and has the effect of turning those profits and gains into assets of the sub-trusts imbued with the character of capital. To that extent any requirement not to distribute capital was overreached by the 2004 compromise, and at the same time the trust and corporate structure preserves and even enhances the capital nature of JY's assets. That is not to say that the sub-trusts may not spend capital. That is a matter for them. Even so it is not a reason for restricting the distribution of capital gains from JY to the sub-trusts, still less for restricting the distribution of previously accrued profits.
101. In short Miss Meek and Mr Taube were in our judgment right, when attempting to reassure Mr Gowar and the Trilogy sisters on the evening of 10th June, 2004, that JY would not be entitled to act as a piggy bank, and (we paraphrase) that the vast majority of the assets of JY would fall to be distributed to the sub-trusts within 10 to 15 years. Ten of those years have now already passed. Miss Meek and Mr Taube probably had the proposed PTP payment (then of $40 million) in mind and also the proposal that article 96 would provide for a 50 per cent minimum annual distribution, but in our view the analysis holds good even without article 96 or the PTP payment.
102. This Court is therefore persuaded that MC's single-mindedness or intransigence, based on her interpretation of OM's wishes to retain capital and to impose accountability, is not justified and is contrary to the true effect of the 2004 compromise. It is therefore a single-mindedness or intransigence which in the circumstances no reasonable trustee can justifiably maintain. The current arrangements for the foundation, given that unjustified single-mindedness or intransigence, are indeed dysfunctional. There are several features which contribute to that conclusion: the requirement for unanimity imposed by article 76 of JY's articles; the control over the directorship of JY exercisable by YT as holder of the majority of the A shares; the control over YT exercisable by the purpose trust; the same four executors (now without PC) holding all those posts. These features were all part of the 2004 compromise approved by the Royal Court, but we have come to the conclusion that MC's intransigence, supported at least in part by LC and insufficiently resisted at times by her other co-directors, have rendered the current structure unacceptably dysfunctional.
103. We come at last to consider the potential remedies available to the Court. Essentially there are three choices: (1) to order the dismantlement of the existing structure, presumably by directing YT (or some other appointed trustee) to resolve to put JY into liquidation; (2) to order the removal of YT from the trusteeship, a process which will inevitably involve identifying and approving a replacement trustee; (3) to make no order. The first two of those choices carry the requirement for the Court to have regard to, and to take account of, the wishes of OM as settlor of the foundation. There is no unanimity amongst the parties as to what those wishes were, and we therefore turn now to the evidence on the subject which we have seen and heard, and then to express our conclusions about that evidence and its importance.
104. The evidence of MWH on this subject (and that of JC and CC scarcely added to it) was essentially negative in the sense that her evidence was that OM seldom expressed any specific intentions in regard to the foundation. As will appear, we find that this was indeed broadly the case. PC also emphasised that, although OM was working almost continuously during the last year of his life on re-organising his affairs, he did not reach conclusive decisions on many of the questions on which he was working, and like the Trilogy sisters he said that OM told him little specific about the foundation, YT or JY. MWH and PC were also critical of claims by Mrs C and MC that they alone knew OM's wishes about this matter. They say, for example, that Mrs C does not speak English and knows little of business matters, and they express themselves as certain that OM would never have discussed detailed business matters with her.
105. This is not a question of OM working only with one or some of the other members of the family, and it is apparent from the evidence of all the witnesses from whom we have heard that nearly all of his children were involved in discussions from time to time during the last months of OM's life. Some would have been in Singapore with him all this time, such as Mrs C and PC, who all lived together. And LC, AC, MC and MWH in particular all visited for substantial periods during 2001 and worked with him on his business affairs during those periods. Instead we were left with the impression that OM tended to keep his more detailed views to himself. Certainly there is nothing in the way of a formal letter of wishes, which is the usual kind of source which the Court would expect a settlor to provide.
106. The main positive evidence about OM's wishes has therefore come from LC, MC and Mrs C, in particular from a substantial affirmation which MC gave in support of Mrs C's application to the Court for a pre-emptive costs order. It ran to over 100 paragraphs. At the beginning MC described herself as a housewife, and later explained that she is not as proficient in her use of the English language as some of her siblings. But the affirmation was professionally drafted, and Advocate Journeaux volunteered to us that he himself worked on preparing the text. Because of this professional help and the length of the affirmation we feel entitled to assume that it and its exhibits comprise the best material available to Mrs C and to MC to demonstrate their understanding of OM's intentions in regard to the foundation.
107. MC described OM as an extremely principled man and commented on his expectations for his children. She said that he liked to remind his children to be practical, not to take matters at face value or to deal with matters in a superficial way, and to be mindful of the consequences of their decisions and actions. She said he was also concerned that they should not act in a procedural way, meaning (according to her) that they should not give the appearance of making a decision without having properly thought things through first. She went on to describe how, between December 2000 and his death on 10th December, 2001, OM was engaged in devising a plan to restructure his estate (which was held by a variety of nominees or a variety of companies) and that she herself assisted her father in this exercise and was present at a number of relevant meetings, as was sometimes her mother Mrs C. It is however remarkable that MC has pointed to very little of what her father actually said to her about these plans, whether for the foundation or for his estate.
108. We also bear in mind that, sadly, OM died before his proposals for restructuring could be implemented, with the exception of his will, which MC described, correctly in our view, as having been executed as a temporary measure. We have to bear in mind that, whatever plans may have been discussed at this time, OM did not implement them, and that this may have been deliberate.
109. In relation to these plans for restructuring his estate OM received advice from several trusted professionals, including DW (a retired partner who had previously advised OM in regard to English proceedings) and CG, both then at S&S, and his three other professional advisers known within the family as the Three Musketeers.
110. We have seen several documents prepared by these professional advisers in which some evidence of OM's wishes can be deduced. But in assessing all of this evidence, including documents emanating from S&S, we have found it necessary to draw a distinction between OM's own assets and those of the foundation. And although some of the evidence mentioned the foundation, almost all of the material to which MC has referred related to OM's own property. There was comparatively little material dealing explicitly with the foundation. In one way this is not surprising, because the foundation had already been in existence since 1987 and its terms were already in full force and effect at the time when OM undertook his effort at restructuring.
111. In the summary of MC's evidence which follows, therefore, we concentrate on those parts which appear to relate specifically to the foundation.
112. OM's aim was, she said, to ensure that his intentions and wishes would be respected and followed after his death, and that his principles would be applied to all dealings concerning his assets under a system with proper governance. And she recorded her understanding of some of those principles. However, she did not state that her father expressed these wishes to her, being careful to state more precisely, "I understood from my father that his re-structuring exercise had the following purposes . . .", without revealing the basis of that understanding. Be that as it may, the purposes which she did identify were, in brief, to simplify the structures in which his assets were held, to eradicate difficulties such as breaches of Singapore law, to make the bulk of his assets available for charitable purposes, and to equip his new structure with appropriate checks and balances. In regard to charitable purposes she stated:-
"He wanted to ensure that the bulk of his assets would be made available to generate income to fulfil charitable purposes on a perpetual basis. In keeping with this objective, he wanted his capital to be preserved."
113. This conclusion, though, in our judgment needs to be viewed with some caution. Most of the material exhibited to MC's evidence did not deal specifically with the foundation, and the same can be said of her conclusions in respect of that evidence. Instead OM's main focus appears to have been the reorganization of the rest of his estate. One of his aims during this period was to collect those assets into one entity, sometimes called a Big Junk, Big Ship or Big Boat. At other times during the year his emphasis was on not putting all his eggs in one basket, and the talk was about several Big Boats or sometimes mini-boats. The principal idea was to have an entity (or more than one) which would perpetually be entitled to distribute income for both individual beneficiaries and purposes, as well as meeting administrative costs. S&S advised that the best way to achieve these aims was to establish a STAR trust under Cayman law. But they also advised that the foundation would have to be kept separate from the STAR trust or from any big boat. The reason was that the foundation was already held on exclusively charitable trusts, so that any merger with a big boat or STAR trust (being at least partly intended for individual beneficiaries) was not feasible.
114. Of the 100 paragraphs of MC's affirmation a large majority relate to the big boat or STAR trust. In regard to this MC is correct that OM's emphasis was on the distribution of income only and the retention of capital in perpetuity. But in regard to the foundation, meaning JY, there are comparatively few references in the exhibits:-
(i) The first is a fax of 6th April, 2001, from OM's accountant (one of the Three Musketeers) which explicitly stated that it was JY's policy and the wishes of OM to spend the income only and to keep capital intact.
(ii) The second is a letter of 2nd May, 2001, from DW to CG, discussing proposed changes to the articles of a company: "He is thinking particularly of dividend policy, and of requiring that a company can only distribute income and not capital profits." Two days later DW wrote, internally at S&S, describing OM's wish to amend the articles of a company (presumably the same one) so that surplus profits and capital profits should be transferred to a capital reserve account. However, we doubt whether the company mentioned in these passages was JY as MC claims, because at almost the same time other plans were being discussed for JY, as appears in the next sub-paragraph.
(iii) Later in May 2001 there was a proposal to liquidate JY and to transfer its assets to a new charitable settlement, but the details were not mentioned.
(iv) In July 2001 the thinking was to convert the foundation into a sixth Big Ship: "With regard to YT, he [OM] would like this structure to be liquidated and the assets transferred to the charity Ship except for the properties. The properties would need to be dealt with separately." In August 2001 a fax from OM's legal adviser PT (another of the Musketeers) recorded the thinking that the 'Charity Big Ship' was to take over the trust assets of the foundation, but again the details of the Charity Big Ship were not described. At this time the idea of a single Big Ship trust had superseded the idea of several Big Ship trusts, but the foundation was recognised as separate. On 31st August, 2001, DW set out his advice to OM that his main wishes could be achieved only by a STAR trust, and he went on to write:-
"You will remember that the Jersey Charitable Trust arrangements (transferred, as they were, from HK), cannot be inserted into the Big Trust arrangement - because they are and must remain exclusively charitable. But of course, they could become subject to the same trustee."
(v) On 27th September, 2001, CG prepared a memorandum of a meeting held with OM at that time. There was an agenda for this meeting, dated 25th September, which MC claimed to represent OM's views, and it mentioned a proposal to amend the foundation. MC regards this as important, but we are not persuaded that it is. CG's memorandum, produced after the meeting, recorded that he understood that YT would need to form a separate charity independent from the Big Ship, and that separate documents would be necessary. CG recorded that OM appreciated that he would not be the settlor of the new charity since this would, out of necessity, have to come as an appointment from the existing Jersey charity.
(vi) In November 2001 the accountant (and Musketeer) known by the initials RS appears to have been trying to find a way, despite the advice of S&S, to include the assets of the foundation within the proposed STAR structure. But nothing came of that.
(vii) Finally CG wrote a memorandum in early 2002, some three months after OM's death, summarizing the recent past for the purpose of a family meeting to be held in March 2002. Again, some of this related to the Big Ship, but JY and the foundation were also mentioned. The memorandum stated that the foundation had been established in 1987 and that clause 6 of OM's will dealt with his shares in JY and YT. Then under the heading [JY] Group, CG wrote:-
"OM wanted to liquidate [JY and YT] and to terminate the [foundation] and transfer the assets held by these entities to a new charitable entity in Jersey."
115. At paragraph 43 of her affirmation MC expressed her own analysis of the exhibited material:-
"It is also clear to me that, in regard to the YT foundation, my father intended that its capital should likewise be preserved for as long as possible with only the income to be applied to philanthropic projects. I say this because it is clear from the documents discussed below that my father had an overarching predominant wish that applied to the assets of the YT Foundation that only income should be distributed as between any beneficiaries of whatever type with the capital to be retained for as long as possible. This wish seems to have been made clear in documents that date from mid-2001 in particular."
116. In our judgment this conclusion (which is a more-strongly worded echo of earlier evidence to the same effect) is overstated. We accept that OM's intention in regard to the Big Ship, whether in the form of a STAR trust or some other form, was that the capital should indeed be retained perpetually or for as long as possible, and that only income should be distributed. It may be reasonable to infer that what OM appears to have wanted for his free estate he may also have wanted for the foundation. The same inference seems to have been made in the note of 6th April, 2001, (paragraph 114(i) above). But to describe this as clear or overarching or predominant is in our judgment tendentious. Moreover it is striking that in the whole of MC's written evidence there is no single document or statement emanating from OM himself stating any view or intention about the future control of JY or the foundation. The only statement on the subject of definite authenticity emanating from OM himself is the text of the trust instrument of the foundation itself, and that plainly authorised the trustees to distribute both income and capital.
117. During a fairly rigorous cross-examination by Advocate Sinel, MC did add something about direct communications from OM during his lifetime, but these did not greatly assist our search for specific statements or instructions representing his wishes in regard to the foundation. Amongst other passages, she said this by way of explanation of her motives in following what she saw as his wishes:-
"I think I just said he wanted to have an organised, systematic structure, a structure that - to have professionals and family who are clear with his vision to administer...
His vision is to have an open and transparent system, so that there would be proper accountability, so that everyone will be - every decision will be on a very fair basis. Everything has to be reasonable...
My father told me that he wanted everyone to feel that he was giving gift to all these beneficiaries and they are not entitled to change his wishes. They are gift. They have no entitlement. He didn't want the trustee or any beneficiary to have more than a power than they can - they have, so that his wishes will be altered."
As with other statements of OM's wishes, it was sometimes difficult to distinguish thoughts about the foundation from thoughts about OM's own estate.
118. Turning to the question of MC's alleged intransigence, it has been pointed out, on behalf of Mrs C as it happens, that most of the specific criticisms of MC relate to decisions taken some years ago between 2004 and 2007. It is suggested that these might have been relevant to the issues before this Court if the criticism had been made nearer the time, but that they are of little or no relevance now that so much time has passed. This might have been a more persuasive point if MC had, for example, now demonstrated a change from her previous approach, but on analysis her views are remarkably unchanged. When asked in cross-examination why she had joined in the board's decision to apply the PTP distribution towards the mandatory distribution for 2004 under article 96, she justified it by reference to her view, then and now, of OM's wish to preserve capital. The same answer was given when asked why she would not have been prepared to agree an amendment to article 96 to remove the words "of that year". She gave a similar answer when confronted with the e-mail exchange between Mr Gowar and Mr Moyse which had expressed agreement on behalf of all the executors to deal with "distributable profits" without qualification. She gave the same justification for JY to remain at the heart of the structure, and even for taking no steps towards reversing the effect on distributions of the adoption by JY of the IFRS accounting standard. None of this was on the basis that she regretted positions which she had adopted previously, but implicitly that she maintained them still.
119. Turning to Mrs C, we have mentioned that she was joined as a party to these proceedings principally because, as OM's wife, she claimed to be in a good position to give evidence about his intentions or wishes in regard to the foundation. We have to say that we are disappointed with the eventual content of that evidence. First, as with MC's evidence, there was a great deal about OM's discussions with members of the family about his plans for a Big Boat or Big Boats but little about the foundation, YT or JY. Second, her description of OM's wishes was full of generality but contained little in the way of specific policy. Third, all of her evidence was admitted by way of a hearsay notice, and she did not present herself for cross-examination.
120. We should explain at this point that Trilogy applied at the beginning of the trial to exclude her evidence altogether. The Commissioner refused that application. At the same time he directed her to make herself available for cross-examination. It was known to be impractical for her to travel to Jersey for this purpose, but it would have been possible to arrange for evidence to be given by way of video conferencing. In the event none of that was necessary, because Advocate Journeaux admitted candidly that she would not abide by any direction or order for her to be cross-examined. The Commissioner went on to decide that, even so, her evidence could be admitted as hearsay, though this would undoubtedly have an effect on the weight which the Court would accord to it. The Commissioner issued a separate judgment on this application at the time.
121. We therefore return to the substance of Mrs C's evidence and to her pleaded case. This is most succinctly stated in paragraph 3.10 of Mrs C's Answer, where it is averred that OM's wishes were at all material times prior to his death that:-
(i) The foundation should be perpetual as an endowed charity;
(ii) The foundation's capital should not be eroded and that it should only pay out income;
(iii) The foundation should be controlled by such of those family members as accepted his invitations to give effect to his wishes after his death, together with independent professionals, and
(iv) There should be proper accountability in respect of all charitable distributions during his lifetime to himself, and after his death to his chosen administrators and trustees and their successors.
Advocate Journeaux duly put this case to other witnesses, and in many respects they agreed with it. Apart from number (2), the same could probably be said of many if not most charitable benefactors.
122. Our own analysis of these views and intentions is this. First, in regard to the foundation being perpetual, it is in principle the case that all charities are perpetual in the sense that they are not governed by any rules against perpetuity. And it is therefore feasible to establish a charitable foundation with trusts to distribute income and not to distribute capital. But this particular foundation was not established on those terms. It contained a power to accumulate income, but it provided for the distribution of both income and capital for charitable purposes. Mrs C therefore seems to have been under a misapprehension if she thought that OM literally wanted the foundation to be perpetual. Her own evidence indeed shows that he was considering having it liquidated during his own lifetime, with the assets transferred to a different charitable foundation, with qualities that are unknown to this Court.
123. The second point, about the foundation distributing income and not having its capital eroded is essentially similar. Mrs C referred from time to time in her evidence to a phrase which OM favoured, namely "Be mindful of the source" or "Be mindful of the water source". There were occasions in which she maintained that this was an instruction for the distribution of income and not capital. However, in other parts of her own evidence the meaning of this phrase is explained differently, namely as an encouragement to filial piety and obedience. We do not doubt that this was a phrase which OM used from time to time, but we cannot accept it as a binding instruction sufficient to override the express provisions of the relevant governing documents.
124. The original trusts of the foundation did allow for the distribution of capital. More important than that, however, is the fact that the original foundation has now been superseded by the 2004 compromise. We accept, as a question of fact and on the balance of probabilities, that OM's wish to preserve capital extended not only to the Big Boat trusts but also to the foundation. No doubt Mrs C and MC wanted to follow that principle when negotiating the 2004 compromise, and they have explained their own approach to the compromise. But other parties adopted a different approach, and the end result was a compromise, as the name implies.
125. We have explained our own view as to the true effect of the 2004 compromise, namely that in principle it provides for the eventual distribution of all profits and gains of JY and of its subsidiaries to the eight sub-trusts. This applies to capital profits as well as pure income, and it also applies to profits and gains which may have accrued before the making of the compromise and even during OM's lifetime. It follows that, even if it was a principle of OM's in favour of retaining capital, that principle was affected by the 2004 compromise. Any policy in favour of not eroding capital is therefore something to be considered now by the trustees of the sub-trusts, not by the trustee of the foundation.
126. The third point is essentially that the same four members of the family whom OM appointed as his executors should be the only members of the family to be involved with the management of the foundation. We do accept, needless to say, that OM did indeed appoint these four members of the family as his executors. We have not investigated the motives for that choice to any great extent. No doubt he appointed LC as his eldest child, PC and AC as his only sons, and he wanted a fourth. He chose MC. The presence of MC on the board has proved problematic, to say the least, and it is easy to speculate that OM must have realised that it would be. AC even recalled at the beginning of his own evidence before us that he had asked OM about this, expressing concern that there were strong character personalities among the siblings whom he had appointed as executors, and that OM had replied saying that, when the time comes, he will leave it to the judges to decide. On the face of it, this seems to indicate that OM recognised that his choice of executors was not necessarily final or perfect, or at least that it was subject to outside intervention. Besides, his appointment of four executors does not necessarily imply that the same four members of the family would forever be appropriate individuals to populate the boards of the two companies or to be enforcers of a purpose trust.
127. Mrs C's fourth point is accountability, and this again is a point on which MC has placed much emphasis. It is the authority, so to speak, for her insistence that the Trilogy sub-trusts must account to YT and JY for their use of prior distributions as a pre-condition for increased distributions in the future. And we do accept, as a question of fact, that OM did try to impress upon all of his children a need for accountability. (This is perhaps another possible meaning of his encouragement to be 'mindful of the source'.) But again we have to refer to the 2004 compromise having superseded the original trusts of the foundation. There is nothing in the terms of the 2004 compromise to provide for accountability of the type which MC has claimed, and in our judgment, there is no basis for implying it. The compromise provided for the eight sub-trusts to be established as Jersey charities, and they were so established, and this has the inevitable consequence that they are each accountable to the Attorney-General and the Court, not to anyone else.
128. In general we are concerned that so much time has been taken in Court in the course of ascertaining OM's wishes, given that they are in our judgment not of overriding importance in determining the remedies available and appropriate to the case. Even so, we accept that those wishes are relevant, and we now turn to the particular remedies in question.
129. In the face of such dysfunction as we have described it is tempting, pragmatically, simply to order an immediate liquidation of JY. That is what Trilogy submitted, and PC and AC have declared themselves in favour of this solution. Advocate Sinel and Advocate Baker successively point to past breaches of trust and other errors, the general dysfunction amongst the board of YT and JY, and Advocate Baker has submitted that it would be cruel not to wind-up JY. If this were not done, it is said, MC and Mrs C would simply continue with aggressive litigation. The mere appointment of a replacement trustee would not achieve closure. PC and AC, having been co-directors of YT and of JY with MC for about 10 years are perhaps best placed to judge, as they have judged, that dismantlement is the only practical solution to the current situation. They believe that, if the Court were simply to order the appointment of a new trustee, MC would be in a position to continue some kind of rear-guard action so as to prolong the dispute.
130. Nevertheless the Court needs to examine the precise nature of the jurisdiction available to it. Advocate Journeaux, on behalf of Mrs C, presented us at the outset with an impressive and comprehensive analysis of the juridical basis of the Court's quasi-parental jurisdiction over charities. He successfully made the case that this is not an unregulated or unqualified jurisdiction. Essentially it consists of two elements, first a jurisdiction to direct schemes altering the charitable trusts of a charitable entity, and second a jurisdiction to direct schemes altering the administration of a charity.
131. The first of those jurisdictions is now wholly or partly statutory: article 47A of the Trusts (Jersey) Law 1984, added by amendment in 2006. The conditions which need to be met in order to exercise this jurisdiction are set out in paragraph (2) of the article. Broadly speaking they amount to failure of the charitable purposes. We have already explained that the technical requirements of article 47A have not been satisfied in the present case (there being no application by the trustees of the foundation or the Attorney-General), but in addition there is in our judgment no sustainable claim by Trilogy that the factual conditions are satisfied either. The charitable objects of the foundation are unlimited within the boundaries of charity, and there is no suggestion that those objects have failed and no conceptual reason why they cannot be carried into effect.
132. The second jurisdiction is to make what may be called administrative schemes. This is derived from the customary law of Jersey, though article 51 of the 1984 Law (which is not specific to charities but applies to all trusts) also confers on the Court specific powers to order trust dispositions of an administrative nature. It is this jurisdiction which, on analysis, Trilogy is invoking.
133. The threshold for exercising this jurisdiction has been defined in terms of expediency, or in other words the test is whether it would be expedient to dismantle the existing structure of the foundation. Advocate Journeaux, supported on this point by Advocate Steenson on behalf of the RBC sub-trusts, submitted that this test truly means that the plaintiff must show that the continued operation of the charity as it stands is impractical or impossible. But in our judgment that overstates the requirement of inexpediency.
134. We were referred to the English authority In re J W Laing Trust  Ch 143, a decision of Peter Gibson J, an acknowledged expert in the field of charity law. In that case shares in John Laing & Sons Limited had been settled on charitable trusts, on terms that the income and capital should all be distributed during the settlor's lifetime or within 10 years after his death. The value of the trust assets then increased substantially, and the trustees applied to remove the stipulation about rapid distribution. The settlor had died in the meantime but had indicated before his death that he wished to withdraw the stipulation. The Court held that this could not be done by way of a statutory scheme (broadly equivalent to a scheme under article 47A of the 1984 Law), but that it could be done in the exercise of the court's inherent jurisdiction, that is as an administrative scheme. The test which the trustees had to satisfy was whether the stipulation for early distribution was 'inexpedient', given the altered circumstances of the charity. At page 155 of the report the Judge said this:-
"In my judgment, the plaintiff has made out a very powerful case for the removal of the requirement as to distribution, which seems to me to be inexpedient in the very altered circumstances of the charity since that requirement was laid down 60 years ago. . . . I have no hesitation in reaching the conclusion that the court should, in the exercise of its inherent jurisdiction, approve a scheme under which the trustees for the time being of the charity will be discharged from the obligation to distribute the capital within 10 years of the death of the settlor."
There was no mention there of impossibility or impracticability and, if that had been the test, then the case for a statutory scheme under what is now section 13 of the Charities Act 1960 might have been more persuasive.
135. Given the remedies which Trilogy is seeking in the present case, the first question we need to address is whether to accede to its claim for dismantlement of the present structure. As a matter of practicalities this could be achieved in a straightforward way by directing the trustee of the foundation, whether YT or a replacement trustee, to use its voting control derived from the A shares in JY to resolve to liquidate that company. Then the resulting distribution would be received by the trustee and immediately distributed to the eight sub-trusts. And it is clear from article 51 of the 1984 Law that the Court would have power to make that direction.
136. However, we are persuaded by Advocate Steenson and Advocate Journeaux that Trilogy has not made good that claim. Advocate Baker has argued forcefully, as we have mentioned, that no solution other than total dismantlement would be an adequate response to the current situation, because MC and Mrs C would be free to litigate further. But we are not persuaded by that, however much we deplore further litigation in this context. Indeed, even if we were to order the immediate dismantlement of the structure, it would no doubt be possible for MC and Mrs C to launch fresh litigation if they chose. They would have to do so at their own risk as to costs, but then that will be true whichever relief we do or do not grant in the present proceedings.
137. More importantly, we are persuaded that there is simply no evidence which Trilogy has been able to deploy in order to make good its case for dismantlement. There is no evidence to show that the existence of JY as an investment company has performed badly. Nor is there any evidence of the financial consequences, such as the fiscal consequences, of its liquidation. It could no doubt be said that any such tax consequences could probably be managed quite easily, but the Court can act only on the evidence adduced before it, and the tax consequences of liquidation have simply not been made the subject of any such evidence. Nor has there been any evidence adduced to show how the assets of JY and its subsidiaries would be shared or divided between the eight sub-trusts, nor has there been any comparison in the evidence between the cost of continuing the current structure and the cost of dismantlement.
138. We therefore do not accede to the claim for dismantlement. And we turn to the question whether it is expedient to order the removal of YT as trustee of the foundation.
139. It is the unanimous view of Trilogy and RBC as the trustees of all eight of the sub-trusts that YT should be removed, and even a majority of the board shares the same view. LC is also in favour. The Attorney-General has stated in a letter to the Court that he too is in favour. Only MC is not in favour. Even Mrs C no longer resists the removal of YT.
140. But this is not simply a question of counting heads. We are persuaded that the administration of the foundation is hamstrung by the current situation. We have dealt in this judgment with several specific complaints against YT, and we have found that some of them represent actions or inactions which no reasonable trustee can justify. Some of those complaints might not be enough individually to justify removal, but in combination the complaints which have been upheld are sufficient. In addition our more pressing reason for favouring removal is that there are several features of the current situation which, in combination, have led and will continue to lead to deadlock for the foundation. This has led, and unless remedied will continue to lead, to an improper failure adequately to distribute profits and gains to the eight sub-trusts, for charitable purposes. The features which we have in mind are these: the purpose trust's control over the identity of directors of YT; YT's control over the appointment of JY's board members; the requirement of unanimity for nearly all decisions of the JY board; the presence of MC on the board of JY; her intransigence; the entrenchment of her position, by virtue of the chain of command which we have mentioned from the purpose trust through YT to JY. We could also include article 96 of JY's articles.
141. We acknowledge that all of these features were present in 2004, and were known to those who negotiated the 2004 compromise. They were essentially the reasons for the original position statement of November 2002, and they were the reasons which the Trilogy sisters' deployed to the Court in June 2004. To that extent, we are effectively deciding that the 2004 compromise, as approved by the Court at that time, carried at least the potential for itself to be subverted by MC's single-mindedness or intransigence.
142. It is true that the single-minded pursuit of what a trustee believes to be the correct course of action is often regarded as a praiseworthy quality, not a defect. But in our judgment MC's defence of what she believes were her father's wishes has crossed the line from reasonable firmness to unreasonable obstinacy. This is exemplified by one relatively trivial example, when she was asked in cross-examination what was her justification, and her answer was to point to clause 6 of her father's will. Presumably she meant that she had been one of the original executors, and that clause 6 bequeathed the A shares in JY to those executors. But that is an inadequate response to the question, seeing that clause 6 can have had no effect on the way in which the boards of the two companies would be intended to carry the 2004 compromise into effect.
143. The well-known authority of Letterstedt v Broers (1884) 9 App Cas 371 (a decision of the Privy Council on appeal from the Supreme Court of the Cape of Good Hope) shows that the Court has jurisdiction to replace a trustee if the beneficiaries of the trust have lost confidence in the trustee by reason of its administration and management of the trust. Loss of confidence alone is not, however, without more, enough. Lord Blackburn observed in Letterstedt itself (at page 389) that:-
". . . friction or hostility between trustees and the immediate possessor of the trust estate is not of itself a reason for the removal of the trustees."
On the other hand, a breakdown in relations between an executor and a beneficiary will be a factor to be taken into account, in the exercise of the court's discretion, if it is obstructing the administration of the estate, or even sometimes if it is merely capable of doing so. This was explicitly apparent in a more recent application of the Letterstedt authority: Kershaw v Micklethwaite  EWHC 506, a decision of Newey J. Translated into the context of the foundation itself, this means that a breakdown in relations between YT and the trustees of the sub-trusts is a factor if it obstructs the carrying into effect of the charitable objects of the foundation (meaning, after the 2004 compromise, the charitable objects of the sub-trusts).
144. We are naturally aware that removing YT from the trusteeship would have the effect of removing control of the foundation from the four individuals who were chosen as executors by OM. That too is a factor which it is right to take into account, along with the other aspects of OM's wishes to which we are enjoined to have regard. But in the end the dominant consideration is whether the trusts are being properly executed, and ultimately OM's selection of executors should not be determinative.
145. We are persuaded that the relevant factual situation is present, namely that the trustees of the sub-trusts have lost confidence in YT, and that this is obstructing their charitable functions, and that this overrides the fact that OM selected most of the board members as his own executors.
146. We are required to consider whether this relief, taken as a whole, is consistent with OM's wishes. We have concluded that, even if it were not, it would still be expedient to grant this relief. But we also conclude that the relief which we propose to give is on analysis, consistent with those wishes. The requirement is not to follow every detail of a settlor's wishes unfailingly, but rather not to depart from them without good reason, and we consider that we are not doing so. OM's desires for perpetuity, the non-erosion of capital, and accountability are all recognised in the continuing operation of these trusts, even in the absence of YT. OM's chosen four executors will no longer have total control, that is true, and no one of them will have a continuing veto on distributions (if indeed that was one of OM's wishes, which we doubt). But we regard those features as major contributors to the present impasse and have concluded that it would be inexpedient, and contrary to the interests of charity, to allow those features to continue.
147. It is said that the Court should depart from a settlor's wishes as little as possible, and we interpret that as meaning that we should depart from them as little as possible while taking account of the need for expediency. We consider that the relief which we propose to give is consistent with that interpretation of the requirement.
148. We are persuaded also that the removal and replacement of YT is capable of being an effective remedy. After that replacement the purpose trust and its control of YT will become irrelevant. The new trustee of the foundation will be in a position to appoint new directors of JY, and those directors can decide to administer JY, or if necessary can be compelled to administer JY, in accordance with the 2004 compromise as now construed by this Court. We emphasise that the board of JY will be able to manage the orderly disposal of the subsidiary companies or their assets, if such disposal is considered by them to be feasible and desirable, and that the boards of the new trustee and JY between them will be in a position to distribute profits, and to realise and distribute gains, for onward distribution to the eight sub-trusts, again in accordance with the terms of the 2004 compromise as construed by this Court. We see no reason why the period for the substantial completion of this process, no doubt leading to the liquidation of JY and the discharge of the foundation's new trustee in due course, should not be measured in months rather than years.
149. It would be irresponsible for the Court simply to declare that there must be a new trustee to replace YT. The Court must be satisfied as to the identity of the new trustee, and the new trustee must be given the opportunity of conducting an appropriate due diligence, and to accept the trusteeship armed with a proper knowledge of the facts, including a summary of the background facts of the last 10 years. During the trial the names of two potential corporate trustees were ventilated, but it was clear that neither of those companies had had an opportunity for due diligence or for considering the whole of the facts.
150. In addition to declaring that YT should be removed, therefore, we will also give directions for its replacement. These directions will need to be discussed in court. It would not be right for this process to be left under the control of Trilogy, which has already expressed its opposition to the mere replacement of YT, nor would it be right to direct RBC to manage the process. There is no real alternative but to direct YT to manage the process of finding its own successor, within a given period, and to return to this Court at the end of that period for an order for the appointment of that successor and the giving of appropriate directions. YT has taken no active position in the trial, but it has been directed to give the Court such assistance as it requires, and it is this assistance which the Court will now require. Details of the directions will be a matter for a further mention.
151. We have considered whether it would also be appropriate to make any specific directions, in exercise of the powers conferred by article 51 of the 1984 Law, in order to assist or promote the future disposition of the foundation's assets, on the basis that such directions would equally be expedient and necessary in the interests of charity. Having considered the written and oral evidence before us we have concluded that there are two particular provisions which, in all the circumstances, have rendered the administration of the foundation impracticable or impossible and we have decided to give two directions accordingly, namely that YT shall within a stated period and in exercise of its powers as holders of shares in JY, procure two amendments of the articles of association of JY, namely:-
(i) To remove the requirement for unanimity contained in article 76; and
(ii) To remove the words 'of that year' from article 96.
Neither of these will be strictly necessary in the long term if the new trustee finds itself free to act unhindered in the administration of the foundation having regard to the terms of this judgment, but we have concluded that these two amendments are necessary and expedient in the short term in the interests of charity.
152. If it turns out that literally no replacement trustee can readily be found, then the Court will need to consider what other course to take. With reluctance we would take the course of directing the foundation to be administered by the Court. This would in the first instance involve directing the parties to submit proposals for the substance of this judgment to be carried into effect with all deliberate speed. The Court is not by any means the ideal body to effect this function, because it can act only on evidence and submissions provided by the parties, and the costs of such an administration would be increased. And we express the hope that this will not be necessary. But if no other trustee can be appointed, we see no other practical alternative.
153. We do not therefore need explicitly to consider the merits of the third choice of making no order on Trilogy's representation, which was essentially the choice of MC and Mrs C, except to say that this would not have been an acceptable or expedient outcome from the proceedings.
154. We also wish to record two incidental comments, the first dealing with the presentation of the compromise in 2004, and the second relating to the administration of the Trilogy sub-trusts.
155. First, some of the bad feeling which has been generated within OM's family has been caused by the addition of the words 'of that year' in the resolution to amend article 96 of JY's articles. This is not the only cause of that bad feeling, and we have already explained that in our view the importance of article 96 has, for understandable reasons, been greatly exaggerated in the course of this litigation. But it is one cause. And we cannot help reaching the conclusion that the addition of those words has significantly altered the nature of the compromise as it had been presented to the Court on 10th and 11th June, 2004.
156. In principle the merits of a compromise of this kind do not depend solely on the general shape of that compromise, but also on the precise detail of the words in which it is expressed. In short we comment that the terms of the compromise in the present case, including the proposed schedules to the Act of Court, should have been the subject of a restored hearing before the Bailiff, in order for the parties (including for this purpose the Trilogy sisters whose advocate had been heard at the hearing at which the proposals had been approved in principle) properly to consider the final language of all the effective documents, and to take the Court through the important documents, drawing all proper attention to any changes to the text which were or might be significant. The discipline of parties and their advocates justifying the detail to the Court is an important one. We do not know whether in this case any of the parties to the proceedings in 2004 (other than any of the parties who instigated the addition of the fateful three words) would actually have spotted the addition, but our comment is that best practice ought in principle to include a consideration in court of the final language of the documents.
157. Second and finally, during the cross-examination of MWH by Advocate Steenson it emerged that the Trilogy sub-trusts appeared to have arranged their affairs in such a way that fees or remuneration had in recent years regularly but indirectly been extracted from those sub-trusts, apparently for the benefit of MWH. That would be at odds with each of the relevant trust instruments, which do not provide for the remuneration of the sub-trusts' Guardians, MWH having been originally one of their number. MWH stoutly maintained that this remuneration is justified, but we make no finding to that effect. This does not affect any of our findings in the proceedings. But we do intend to recommend the Attorney-General to investigate the matter.
Trusts (Jersey) Law 1984.
In re J W Laing Trust  Ch 143.
Charities Act 1960.
Letterstedt v Broers (1884) 9 App Cas 371.
Kershaw v Micklethwaite  EWHC 506.