Mackie and Others v BCB Trust Company Ltd and Bermuda Commercial Bank Ltd

• Jurisdiction: Bermuda
• Judgment Date: 29 April 2005
• Date: 29 April 2005
• Docket Number: Civil Jurisdiction 2003 No. 494
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Ground, CJ

Civil Jurisdiction 2003 No. 494

BETWEEN:

Thomas Louis Mackie and others

Plaintiffs

and

BCB Trust Company Ltd

1st Defendant

and

Bermuda Commerical Bank Ltd

2nd Defendant

Mr. N Hargun for the Plaintiffs

Mr. S Froomkin, QC and Mr A Martin for the Defendants

The following cases were referred to in the judgment:

Re Cooper (1939) 160 LT 453

In re Duke of Norfolk's Settlement TrustsELR [1979] 1 Ch 37

Investors Compensation Scheme Ltd v West Bromwich Building SocietyWLR [1998] 1 WLR 896

Hughes v Metropolitan Railway CoELR (1877) 2 App Cas 439

Central London Property Trust Ltd v High Trees House LtdELR [1947] 1 KB 130

Rowlandson v National Westminster BankWLR [1978] 1 WLR 798

Trust's liability to pay fees — Professional services — No increase in fees was agreed — Termination or withdrawal fee — Whether trust company could help itself to fees without authorising signatory — Breach of bank mandate

JUDGMENT of Ground, CJ

Introduction

The plaintiffs are the present trustees of the T.L. Mackie 1981 Settlement (“the Trust”). The first defendant (“the trust company”) is a wholly owned subsidiary of the second defendant, and is in the business of providing services as a professional trustee. The second defendant (“the bank”) is a licensed bank. From 13^th March 1987 until on or about 12^th September 2003 the trust company was a trustee of the Trust. Initially the trust company was sole trustee, but by Deed of Appointment of 19^th January 1998, the second and third plaintiffs were appointed as additional trustees, to act jointly with the trust company.

By this action the plaintiffs seeks various declarations as to the Trust's liability to pay certain fees claimed by the trust company in respect of the provision of its professional services while trustee, and related relief, including the return of $196,483.49 debited against the trust company's account with the bank in respect of those fees. The defendants counterclaim $238,972.84 in respect of annual fees, and $475,651.01 in respect of a 1% withdrawal fee.

Background

The background and history of the Trust is set out in the witness statement of Mr. Kevin Barnett, who is the Mackie family's senior accountant, responsible for managing their business affairs worldwide. He is based in Switzerland. He explains that the Trust was originally established in 1982 in Liechtenstein, but in 1987 it was moved to Bermuda, when the first defendant (then called International Trust Company of Bermuda) was appointed corporate trustee. It is Mr. Barnett's evidence, which I accept, that at that time a fixed annual fee was negotiated with the Trust Protector's English attorneys, Nabarro Nathanson, in the sum of $3,000 p.a. That is important and I will return to it later. The fee of $3,000 was paid annually at the end of the Trust's financial year against an invoice submitted to Mr. Barnett from the trust company.

The trust company had an account with its parent bank in respect of the Trust. The account was in the trust company's name ‘as Trustee of The Mackie 1981 Settlement’. At the material time the bank mandate stipulated two signatories for ‘cheques and other orders for payment on the account’, with one signatory from each of two groups of authorized persons. Group A comprised Mackie family members, and Group B employees of the trust company. Any transaction involving the bank therefore required a signatory from each group, and it is said that this was to enable the Mackie family to keep control of all payments.

After about 12 years the trust company, in the person of a Mr. Tony Keywood, sought to renegotiate the annual fee. He proposed $4,500 p.a. but this was negotiated down by Mr. Barnett to $4,000 to be charged from 1999. However, for some unknown reason this fee was never invoiced to Mr. Barnett and was not therefore paid, although he booked the liability as a debt due.

In March 2000 a Mr. Paul Tucker joined the trust company as general manager. It was under Mr. Tucker's management that things went awry. I will come to the detail later, but in broad terms Mr. Tucker sought to further increase the fees. Mr. Barnett says that no increase was ever agreed, but nevertheless the trust company debited the bank account $160,000 in respect of fees on 16^th September 2002. This was done without an “A” signatory, and that is said to be in breach of the mandate. Mr. Barnett protested and eventually the original debit of the fees was reversed, but the trust company, relying on its published scale fees, continued to assert its demand for $160,000 fees.

Under the trust deed the power to remove and appoint trustees is vested in the Protector. The Protector is the settlor, and he is also, in his capacity as present trustee, the first plaintiff. By letter of 25^th August 2003, the Protector removed the first defendant as trustee and appointed the fourth plaintiff, Harrington Trust Limited in its stead. The notice was received by the Trust Company on 12^th September 2003, and it executed a formal deed of retirement on or shortly before 17^th November 2003.

However, on 7^th October the trust company asserted that they were entitled not only to their annual fees according to the published scale, but also to a termination or “withdrawal” fee calculated as 1% of the trust assets. Eventually the trust company debited $196,483.49 from the trust account in respect of some of the annual fees “for the years 2000–2003” without the consent of Mr. Barnett, and again without an “A” signatory.

The original fee arrangement

In asserting their fees and debiting the account the defendants now rely upon the provisions of the trust deed governing fees. They say that, in default of agreement, the deed allows them to charge fees for the items and at the rates set out in their published scale, which they assert to be industry standard fees. The plaintiffs argue that they have misconstrued the Deed.

The original trust deed was dated 22^nd April 1982, and it appointed two trust companies (one in Liechtenstein and on in Bermuda) as the original trustees, and established the situs of the trust as Liechtenstein. By a subsequent deed of 13^th March 1987 the situs was moved to Bermuda; the governing law of the trust was changed to Bermudian law; and the trust company, under its then name of International Trust Company of Bermuda Limited (“ITCOB”), was appointed sole trustee.

By a letter of the same date, 13^th March 1987, the trust company wrote to Nabarro Nathanson, who were the English solicitors acting for the Protector, enclosing the documentation relating to the change of trustees and forum. In that letter the trust company dealt with their fees as follows:

‘So far as our fees are concerned, it seems appropriate that the originally agreed fee of US $3,000 per annum will continue to apply, although if there are any significant changes in trust [sic]or there is increased activity, we would have to review this. We presume that you will make arrangements to let us have the Annual Fee direct and as there have been no fees paid for some while we could use the 1^st April as the date when the coming year's fees become payable and would be grateful for a remittance as soon as possible, either on an annual or half-yearly basis.’

It is Mr. Barnett's evidence, which is unchallenged on this and which I accept, that there was no mention of a termination fee at that time, nor was he given any copy of or other notice about the existence of published scale fees.

The trust deed provided as follows in respect of the trustee's fees:

‘10. Reimbursement, Indemnity and Remuneration of Trustees

Subject to the provisions of clause 15 hereof the Trustees are entitled to reimburse themselves out of the Trust Fund (whether income and/or capital) for all expenses costs etc. properly incurred in the execution and management of this trust and all liabilities properly incurred (including liabilities to pay damages) may be paid directly out of the Trust Fund.

The Trustees are entitled to charge and be paid out of the Trust Fund (whether capital and/or income) such remuneration as at or prior to their appointment may have been agreed upon in writing between the Trustees and the person or persons making such appointment.

Notwithstanding the foregoing it is expressly declared that any corporate body which by its constitution is entitled to undertake the office of Trustee may as such Trustee as aforesaid act on its terms and conditions (including the right to remuneration and the incidence thereof) in force at the date hereof as if such terms and conditions were set out herein provided always that if and so often as the Trustee shall from the date hereof publish new terms and conditions in which its rates or modes of charging remuneration or both shall be different from those in force at the date hereof the Trustee shall thereafter be entitled to remuneration in accordance with such new terms and conditions in substitution therefore (only so far as concerns remuneration for those previously in force).

Notwithstanding the foregoing any Trustee engaged in any profession or business shall be entitled to charge and to be paid out of the Trust Fund (whether capital and/or income) all usual professional or proper charges for business transacted time expended and acts done by him or his firm in connection with the trusts powers and provisions hereof including acts...