Re the B Trust; Medlands (PTC) Ltd v Attorney General

• Jurisdiction: Bermuda
• Judgment Date: 12 May 2021
• Docket Number: Commercial Jurisdiction 2018 No 376
• Court: Supreme Court (Bermuda)

Re the B Trust

Medlands (PTC) Limited

Plaintiff

and

Attorney General

Dorothy Kay Brockman

Martin Lang

Defendants

[2021] Bda LR 106

Commercial Jurisdiction 2018 No 376

In The Supreme Court of Bermuda

Application for directions for appointment of plaintiff to appear — Removal of trustee and appointment of new trustee — Application by outgoing trustee to retain trust assets to meet actual and contingent liabilities — Effect of contractual indemnities — Court's supervisory and equitable jurisdiction to sanction indemnities

The following cases were referred to in the judgment:

Re the ESD Trust and the Marlborough Trust [2017] Bda LR 145

Re Pauling's Settlement Will Trusts [1962] 1 WLR 86

Re Pauling's Settlement Will Trusts [1964] Ch 303

Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWC 1344

Public Trustee v Cooper [2001] WTLR 901

Cotterell v Beaumont [2020] EWHC 2234

Re Downshire Settled Estates [1953] 1 Ch 216

Letterstedt v Broers (1884) 9 App Cas 371

Turner v Hancock (1992) 20 Ch D 303

Mr F Trgear QC and Ms S Hurrion for the Plaintfff

Mr Mr R Ham QC and Mr M Mason for the 1^st Defendant

Ms S Dill-Francois and Ms L Sadler-Best for the 2^nd Defendant

Mr J Machell QC and Mr L Preston for the 3^rd Defendant

Mr K Robinson for the 4^th Defendant

RULING of Subair Williams J

Introduction

1. The present applications sample a cluster of Court proceedings which swarm over a charitable trust holding assets worth billions of dollars. The history and factual background to these proceedings is well known to the Courts and to the parties. (See St John's Trust Company (PVT) Ltd v Watlington and Ors[2020] Bda LR 25, per Hargun CJ; Medlands (PTC) Ltd and Ors v Commissioner of the Bermuda Police Service[2020] Bda LR 26, per Harjun CJ; Re the B Trust, Medlands (PTC) Ltd v Attorney General et al[2020] Bda LR 42, per Subair Williams J).

2. Suffice to say, if the tale of the Brockman Trust proceedings was theatrically narrated in English monarchical terms, the 376 proceedings could be featured in the era of the 9th century King “Alfred the Great” of both Wessex and Mercia while the 476 proceedings might sooner be cast in the later scenes spotlighting the 1066 reign of the Duke of Normandy, William the Conqueror. To put it in more colloquial terms, the 376 proceedings have aged out while the 476 proceedings shows the promise of a new era.

3. The 376 proceedings originated in the Trust Administration and Beddoe jurisdiction of the Court in respect of a trust established in 1981 as an irrevocable discretionary settlement under Bermuda law (“the B Trust”/ “the Brockman Trust” / “the Trust”). (The anonymity and confidentiality orders previously made by this Court in the 376 proceedings are no longer capable of effectively shielding the identity of the Trust as the Brockman Trust nor the names of the settlor or the human beneficiaries.)

4. The present applications are made in the 476 proceedings which invoke the Court's supervisory and equitable jurisdiction. These applications arise out of an appeal from the 376 proceedings (Civil Appeal No. 8 of 2020) wherein St John's Trust Company (PVT) Limited (“SJTC”) sought to impugn my Orders of 1 November 2019 and 19 December 2019 in an attempt to reverse, inter alia, my appointment of Medlands as the then new trustee of the Brockman Trust. That appeal was dismissed and my order removing SJTC as a trustee de son tort was left undisturbed.

5. It was also determined by the Court of Appeal that a new trustee, namely BCT Limited, would be appointed to replace Medlands (PTC) Limited (“Medlands”). In a communication made on behalf the Court of Appeal, dated 2 February 2021, the parties were informed:

“…The appeal in relation to Civil Appeal No. 8 of 2020 is dismissed with reasons to follow.

The Court is, however, satisfied that a new independent institutional trustee should be appointed and that this Court has power to, and should, make that appointment by this Order.

Accordingly, Medlands (PTC) Ltd shall be discharged as trustee of the B Trust and replaced as trustee by BCT Ltd., a subsidiary of Maples FS, with effect from a date and on such terms as to BCT Ltd's appointment as may be directed by Subair Williams J, upon hearing from such of the 1st, 2nd, 3rd, 6th and 9th Respondents and BCT Ltd as wish to appear on such application (but with no other party to this appeal having standing to appear or present evidence or submissions in relation to the matter) at a hearing to be fixed at a time as soon as practicable which is convenient to Subair Williams J.”

6. Directions to this effect were subsequently formalized by the Court of Appeal in its Order dated 2 February 2021.

7. In a letter dated 25 March 2021, Ms Katie Tornari of Marshall Diel & Myers on behalf of SJTC wrote to the Court inviting this Court to adjourn the hearing of the application giving effect to the transfer of trusteeship. It is suggested by that letter that this hearing ought not to proceed before the Court of Appeal's production of a formal Order and its determination of an intended application for a stay of its order. Notwithstanding, I saw fit to proceed as any Order of a stay from the Court of Appeal would likely extend to these ancillary directions in any event. For that reason I proceeded to hear the applications made on the Plaintiff's Originating Summons filed for orders granting relief in the following terms:

“1. The Plaintiff be appointed pursuant to Order 15, rule 13 of the Rules of the Supreme Court 1985 to represent the interest in these proceedings of:

(a) Thomas David Brockman;

(b) Victoria Brockman;

(c) Robert Theron Brockman;

(d) Robert Theron Brockman II and his minor son;

2. The First Defendant, Medlands (PTC) Limited (Medlands) be discharged as the trustee of the trust settled by A Eugene Brockman Trust on 26 May 1981 for the benefit of his children and charities (the Trust);

3. BCT Limited a controlled subsidiary of Maples FS Limited, which is a licensed trust company in the Cayman Islands subject to the regulation of the Cayman Islands Monetary Authority (CIMA) and authorized by CIMA to act as a trustee to be appointed pursuant to section 31 of the Trustee Act 1975 and pursuant to the inherent jurisdiction of the Court as trustee of the Trust in substitution for and in replacement of Medlands;

4. All the property and assets of the Trust be vested in BCT Limited pursuant to Part IV of the Trustee Act 1975 and pursuant to the Court's inherent jurisdiction;

5. The Plaintiff be indemnified out of the assets out of the Trust in respect of these proceedings and in respect of any liability to pay any other person's costs of these proceedings;

6. The costs of and occasioned by these proceedings be paid on an indemnity basis out of the assets of the Trust, to be taxed if not agreed;

7. Such other or further directions be given in respect of the subject matter of these proceedings as the Court considers appropriate.”

8. Broadly speaking, the appointment of BCT Limited is unopposed by Medlands. However, paragraph 2 of the Originating Summons raises issues as to the appropriate indemnities to be granted to Medlands as the outgoing Trustee. The scope of Medlands' entitlement to indemnities together with its request for a retention of trust funds to meet its actual and contingent liabilities is the gravamen of the disputed issues before me.

9. The appointment of BCT Limited was supported by the Protector of the Trust, Mr Lang. He adopted a neutral position in relation to the balance of issues raised by the Originating Summons and asked this Court to take note of his professional relationship and friendship with Mr Stainrod, one of Medlands' two directors. (The particulars of Mr Lang's relationship with Mr Stainrod as co-directors and shareholders of Marbury Fund Services (Cayman) Limited and of how Mr Stainrod came to invite Mr Lang to serve as Protector of the Brockman Trust is set out in Mr Lang's affidavit evidence before this Court.) Notwithstanding, Mr Lang proposed through his Counsel, Mr John Machell QC, that the Court (if minded to grant any of the requested indemnities) authorise BCT Limited to either amend the Trust Indenture accordingly or to enter into a freestanding Deed of Indemnity.

10. With a similar tone of neutrality, BCT Limited confirmed its willingness to abide by any directions which might be ordered by this Court. However, where any such directions involved the granting of indemnities in favour of Medlands, BCT Limited suggested that the Court issue those directions in a Schedule to the Order of the Court rather than direct or authorise BCT Limited to enter into a deed or other formal agreement.

11. The Attorney General, through her Crown Counsel, remained altogether neutral and did not partake in the making of any substantive oral or written submissions to the Court. Notwithstanding, the Court was aided by Ms Lauren Sadler-Best who explained that the interest of the Attorney General was peripheral and more focused on ensuring that the Trust will be administered by a company which has submitted to the jurisdiction of Bermuda and which will be regulated by the Bermuda Monetary Authority.

12. The Originating Summons was supported by affidavit evidence from Ms Dorothy Brockman. That evidence was sworn on 30 December 2020, prior to the Court of Appeal hearing. Mrs Brockman also filed supporting evidence from her US Counsel, Ms Miriam Fisher who is a partner at a global law firm, Latham & Watkins, LLP. Evidence was also filed by Ms Kiernan Bell for Medlands and by Mr Martin Lang, the protector of the trust. BCT Limited, which was joined to these proceedings by a Consent Order, relied on the evidence of its correspondence with Medlands, as exhibited to the evidence of Ms Bell.

13. Having heard oral submissions together with the written submissions of Counsel for the Plaintiff, the Protector, Medlands and BCT Limited, I granted the...