Before : |
Sir William Bailhache, Commissioner, sitting alone |
Between |
Y |
Representor |
And |
(1) Church Street Trustees Limited |
|
|
(2) W |
|
|
(3) V
|
Respondents |
Advocate R. D. J. Holden for the Representor.
Advocate J. M. Dann for the First Respondent.
Advocate J. S. Dickinson for the Second Respondent.
judgment
the COMMISSIONER:
1. On 31 January 2025, the Court handed down judgment in respect of the Representation of Y granting him the relief which he sought, which essentially confirmed that there was nothing to suggest that the Trustee took its decision to endorse the sale of a hotel in the United States by Company D other than in good faith; the decision was not vitiated by any conflict of interest; and the Trustee's Resolution showed that the Trustee was well informed about the material considerations. The Court was satisfied that the decision to give consent to the sale of the hotel by Company D was not irrational and fell within the band of decisions a trustee could reasonably make on the material before it. Following delivery of the judgment, the Act of Court confirming its decisions has been issued. At the convening hearing, the Court ordered that the proceedings should be heard in private, and on 10 and 11 December 2024 when the substantive application was heard, the Court ordered that the privacy orders should continue, subject to sufficient variations of those orders as would enable third parties closely connected with the disposal of the hotel to be able to proceed with confidence that the Trustee was not acting in breach of trust by making the decision it had, namely to consent to its sale.
2. I sat on 24 April to resolve the outstanding questions of costs of and incidental to the proceedings. The rival contentions were from Y on the one side and W and V on the other. Y submitted that costs should follow the event. He had succeeded in his Representation to establish that the Trustee had not committed a breach of trust when it consented to the sale of the hotel. Y contended that this was hostile litigation which fell within category 3 as envisaged by Kekewich J in Re Buckton v Buckton [1907] 2 Ch 406. The beneficiary parties - Y on the one hand and W and V on the other - were adverse litigants testing the contentions of W and V that the Trustee was in breach of trust. Recognising that hostility in family relationships did not of itself convert otherwise administrative proceedings into hostile or adverse proceedings in the technical sense envisaged in Buckton, it was nonetheless submitted that the family hostility was a backdrop to the Court's consideration of the nature of the challenge bought to the Trustee's decision by W and V, who had expressly threatened the Trustee with proceedings for breach of trust.
3. Thus it was submitted that while this was in form a Buckton category 2 application, in substance these were hostile proceedings and costs should be awarded against W and V in the usual way. It was furthermore submitted that W and V had made grossly exaggerated allegations against the Trustee and had repeated those allegations not only to the Trustee but also to the prospective purchaser of the hotel, the allegations being made to thwart the sale by preventing the condition precedent, namely the issue of title insurance. In those circumstances, the claim to indemnity costs was made.
4. W and V submitted that this was a Buckton category 2 case. The proceedings were brought by Y as a beneficiary in effect seeking to have the Court support a decision of the Trustee as a momentous decision. It was said these were proceedings which could have been brought by the Trustee seeking that support, but in substance, as the Court had found, this was an application seeking to justify the Trustee's decision in the usual way.
5. The fact that the proceedings were held in private was an additional indication that this was a retrospective review of a trust decision as a momentous decision - a trust administration application which was covered by the usual rules, and the costs of the beneficiaries should be paid from the Trust fund. It was also pointed out that the Representation by which Y had commenced proceedings did not make it clear that W and V were a target for costs. It sought merely that the Court make provision for the costs of the proceedings, from which it could be inferred that at that stage at least the proceedings were considered to be trust administration proceedings. In support of the view that this was not a Buckton 3 type case, the beneficiaries were not seeking to claim the entire fund on the basis of some construction or similar argument. The fund itself was not under attack - merely the administrative decision which the Trustee had taken.
6. The Trustee's position in relation to costs was that it should have its costs out of the fund on the Alhamrani basis - in other words, the Trustee would take its costs on a full indemnity basis from the Trust fund, and it would be open to the parties to apply for an Alhamrani assessment in the usual way if they considered that the Trustee was over indemnifying itself. As far as the costs of the beneficiaries were concerned, the Trustee adopted a neutral stance.
7. In my judgment this was clearly a Buckton category 2 type case - the proceedings were raised by a beneficiary rather than the Trustee, but they could have been raised by the Trustee to enable the sale of the hotel to go forward. They were, properly categorised, administrative trust proceedings, and therefore the starting point is that the beneficiaries are entitled to their costs from the Trust on an indemnity basis - see for example the judgment of Commissioner Sir Michael Birt in The Matter of the Piedmont Trust and Riviera Trust [2021] JRC 250 at paragraph 15.
8. There is no doubt in this case that the proceedings have been vigorously contested. There was strong disagreement between the beneficiaries as to whether the hotel should be sold. Indeed, as was said in Hawksford Jersey Limited v A and Others [2018] JRC 171 at paragraphs 41 and 42, the fact of that strong disagreement may well lead a trustee to consider the decision taken was a momentous one where it was reasonable to seek the Court's approval. Although in this case the Trustee did not consider it necessary to seek the Court's approval, it was in our judgment reasonable for Y to do so to enable the sale by Company D to proceed.
9. Although there was hostility between the beneficiaries, I am satisfied that this was not hostile litigation, and did not fall into the Buckton category 3 type of case.
10. W and V have to date paid their costs themselves. These are not insubstantial - the schedule to their written submissions shows that costs of approximately £452,000 (it is slightly unclear whether the schedule is entirely costed in £ sterling or includes some figures which are in US$) from 3 September 2024 until 31 March 2025. By contrast, the Trustee's costs appear to be approximately £330,000 and I was informed that Y's costs are considerably more. Y has so far been paid those costs by Company D, on the basis that he was entitled to an indemnity as manager of that company for any costs which he incurred on the company's behalf. The indemnity which Y claims from Company D is governed by the law of Delaware, on which of course I am not competent to opine.
11. Two matters arise therefore. The first is the question of an interim payment on account to W and V. Having heard from the Trustee of the different liquidity considerations which ought to be taken into account, I made orders for the interim payments to be made by instalment.
12. The second matter in relation to Y's costs is that as Company D have paid those costs already, it would obviously not be right for him to recover costs from the Trust fund without accounting to Company D by way of reimbursement of the costs which have been paid on his behalf. Y readily accepted this was appropriate. However, W and V raised the potential issue that if the costs which Y claimed were rejected on taxation as being excessive, it was not obvious why Company D should have paid the balance of costs to Y which had been found on taxation by the Royal Court to be excessive, and by implication, a refund would be due by Y to that company.
13. In my view, this is not a matter for me to address. It is clear that the costs which Y has incurred and in respect of which he has been reimbursed by Company D have been so incurred over a period commencing well before these proceedings could have been contemplated. Whether those costs have been legitimately paid by Company D for or on behalf of Y is a matter to be determined pursuant to the governing law of the indemnity agreement between Company D and Y. It may well be that W and V would not have locus to bring any such claim themselves, although perhaps the Trustee could do so. At all events, this is a matter of Delaware law and procedure.
14. It may not be necessary for there to be further proceedings in relation to this issue in any event. The background to the argument over the sale of the hotel was one which involved argument as to how the various trusts for the entire family could be divided up and resettled. At some point it can reasonably be anticipated, at least on the basis of the disagreements which have existed so far, that the Trustee will, in making its decision on reorganising the trusts, seek the Court's blessing for such a decision, which will of course involve the parties being heard in relation to those proposed arrangements. In reaching its conclusion on the equitable division of the Trust assets, the Trustee may wish to take into account where the incidence of costs lies across the board. Whether it is reasonable to do that or not could no doubt be the subject of argument, and if it is reasonable in principle to do it, the way in which such allocations are made in the ultimate reorganisation might also be the subject of argument. I mention this possibility only as one which exists as a mechanism for a more convenient disposal of the argument in relation to costs taken by Y from Company D than would be apparent in a set of fresh Delaware proceedings.
15. Having regard to these considerations, I made the following orders:
(i) The Trustee should have its costs of and incidental to the proceedings on the Alhamrani basis.
(ii) The beneficiaries - Y, W and V - should have their costs of and incidental to the proceedings out of the Trust to be taxed on an indemnity basis if not agreed. Costs incurred before 24 July 2024, the date of the Trustee decision to approve the sale, would not be regarded as costs incurred of and incidental to the proceedings.
(iii) The costs of and incidental to the proceedings include the costs of and incidental to the costs hearing.
(iv) Y's costs are recoverable from the Trust fund on the basis that, as he has already drawn his costs from Company D pursuant to the indemnity from that company, he must repay the costs recovered from the fund to Company D. It is not part of the order of the Court, but it seems to me likely that this will be achieved in practice by a relevant accounting entry in the books of the Trustee and of Company D rather than an actual payment of funds.
(v) W and V should have a payment on account of their costs from the Trust fund - £125,000 by the end of May, and a further £100,000 as soon as practicable, but in any event by the end of June 2025.
(vi) There is liberty to apply.
Authorities
Re Buckton v Buckton [1907] 2 Ch 406.
Alhamrani v JP Morgan Trust Co (Jersey) Ltd [2007] JLR 527.
The Matter of the Piedmont Trust and Riviera Trust [2021] JRC 250.