St John's Trust Company (Pvt) Ltd v James Watlington

JurisdictionBermuda
JudgeJustice Narinder Hargun,Chief Justice Narinder Hargun
Judgment Date26 March 2020
Neutral Citation[2020] SC Bda 19 Civ
Date26 March 2020
Docket NumberCIVIL JURISDICTION 2019: No. 447,CIVIL JURISDICTION
CourtSupreme Court (Bermuda)

[2020] SC (Bda) 19 Civ

In The Supreme Court of Bermuda

Before:

Hon. Chief Justice Narinder Hargun

CIVIL JURISDICTION

2019: No. 447

Between:
St John's Trust Company (PVT) Limited
Plaintiff
and
(1) James Watlington
(2) Glenn Ferguson
(3) Cabarita (PTC) Limited

(Sued in its personal capacity and in its capacity as trustee of The Waterford Charitable Trust)

(4) The Attorney General
Defendants
Appearances:

Dakis Hagen QC, Jeffrey Elkinson and Benjamin Adamson, Conyers Dill & Pearman Limited, in the name of the Plaintiff

Mark Diel, Katie Tornari and Christina Herrero, Marshall Diel & Myers Limited, for the 1 st and 2 nd Defendants

David Brownbill QC, and Paul Harshaw, Canterbury Law Limited, for the 3 rd Defendant

Application for strike-out of proceedings for lack of authority; application of the Duomatic principle to the appointment of directors; scope of exceptions to the Duomatic principle; locus standi to enforce a charitable trust; scope of section 47A(5)(d) of the Trustee Act 1975; whether leave should be given under section 47A(5)(d)

The Applications
1

Over a period of three days I heard two applications on behalf of the Defendants. The first application was made on behalf Cabarita (PTC) Limited (“ Cabarita”) seeking an order that the Amended Generally Endorsed Writ of Summons issued in the name of St John's Trust Company (PVT) Limited (“ SJTC”) be struck out on the grounds that the proceedings were commenced without the named Plaintiff's authority and/or pursuant to RSC O. 18, r.19. The second application, made on behalf of the First to Third Defendants, sought to set aside or vary the ex parte Order made by the Court on 6 November 2019 restraining Mr James Watlington, the First Defendant, and Glenn Ferguson, the Second Defendant, from acting as directors of SJTC.

The Background
2

On 6 November 2019 I heard an ex parte application in the name of SJTC seeking an interim injunction against Mr Watlington and Mr Ferguson to prevent them from acting as directors of SJTC or holding themselves out as such. Mr Adamson and Mr Elkinson purported to appear on behalf of SJTC at the ex parte hearing.

3

Counsel explained that SJTC is a private trust company and is a corporate trustee administering a very valuable trust, the A. Eugene Brockman Charitable Trust (“ the Brockman Trust”). SJTC's sole shareholder is another private trust company, domiciled in Nevis, called Cabarita. Cabarita is also a corporate trustee of a charity called the Waterford Charitable Trust, a Bermudian charitable trust. The shareholding in SJTC is a trust asset of the Waterford Charitable Trust.

4

Mr Adamson advised that SJTC has commenced litigation against a Mr Evatt Tamine, a former director of SJTC, for, in part, stealing trust assets of the value of more than $20 million and SJTC is currently seeking, in separate proceedings pending in this Court, a full accounting to determine whether Mr Tamine has stolen additional trust assets. Mr Tamine, counsel explained, is also a shareholder and director of Cabarita and recently, more than a year after resigning his position with SJTC and the week before his defence to the litigation against him in the Bermuda proceedings was due, has used his position with Cabarita to appoint Mr Watlington and Mr Ferguson as directors of SJTC. The expanded board of directors of SJTC would now consist of Mr James Gilbert, Mr Watlington and Mr Ferguson. Mr Adamson explained that SJTC's fear is that the appointment of additional directors is an attempt by Mr Tamine to derail the investigations into his activities and/or to obtain information about SJTC's litigation strategy against him.

5

Mr Watlington and Mr Ferguson were appointed directors of SJTC by a unanimous written resolution of the sole member of SJTC. Mr Adamson submitted that while the bye-laws do contemplate and provide for written resolutions of the members (bye-law 27), the wording of the bye-law is narrowly drawn. Bye-law 27, submitted Mr Adamson, only permits members to use written resolutions where the members were entitled to attend “the Meeting and vote on the resolution”, so that “the Meeting” must be convened before the written resolution process can be utilised. And only the company (acting through directors and secretary) can convene a meeting/circulate the resolution.

6

Further, Mr Adamson submitted that sections 79 and 80 of the Companies Act 1981 (the “ Act”) provided detailed statutory mechanism for members to require companies to circulate members' resolutions in advance of general meetings. The statutory mechanism, Mr Adamson submitted, is inconsistent with members having a freewheeling power to circulate resolutions to themselves, by-passing the scheme. The Bye-laws provide that the directors are entitled to receive notice of and attend any general meeting (Bye-law 31). This seemingly renders, submitted Mr Adamson, impossible the by-passing of members of the need to (a) hold any general meeting at all; (b) at the very least provide notice to the director.

7

Mr Adamson also advised the Court that SJTC anticipated an action against Cabarita for seeking to derail the current litigation through, what appears to be, a clear fraud on power/improper exercise of a fiduciary duty for an improper purpose. He submitted that if Cabarita acted in excess of its powers as a trustee in appointing Mr Watlington and Mr Ferguson as directors, as a matter of trust law, their appointment was void in equity.

8

In conclusion, Mr Adamson submitted that there was no prejudice in Mr Watlington and Mr Ferguson standing down. On the other hand, the potential prejudice of allowing Mr Watlington and Mr Ferguson who are, it is to be assumed, funded by Mr Tamine to have control of the litigation against Mr Tamine enormous. The appointment of Mr Watlington and Mr Ferguson is, submitted Mr Adamson, “to be blunt, an attempt to hijack”.

9

In his First Affidavit sworn in support of the ex parte application, Mr Gilbert stated at paragraph 24, that: I ask for an injunction to hold the ring. There is no prejudice to the Defendants if they are prevented from holding board meetings while their authority (and their interactions with Mr Tamine) is scrutinised. There is certainly prejudice to the Trust (which of course is my main concern). The danger of allowing the Defendants to purport to call director meetings, to potentially derail the litigation, and to have the access to the trust funds is extreme”.

10

On the basis that the inter partes hearing in relation to the application for an injunction would take place within the next two weeks and on an expedited basis, I made an Order at the conclusion of the ex parte hearing on 6 November 2019, that Mr Watlington and Mr Ferguson be restrained from acting as directors of SJTC or in any way holding themselves out as such. In order to regulate the affairs of SJTC for the next week or so I also made an order that SJTC may continue to conduct its business in accordance with its bye-laws, as if Mr Gilbert is the sole director.

11

For various reasons the inter partes hearing in relation to the injunction did not take place until 19 February 2020. During this period substantial evidence has been filed in the name of SJTC and the Defendants. In particular, Cabarita has filed an affidavit of Michael D. Padula, an attorney acting for Mr Tamine in the US. Mr Padula states that in the course of 2018, Mr Tamine became aware that the US Department of Justice (“ DOJ”) and the US Internal Revenue Service ( “IRS”) were pursuing a tax and money laundering investigation which concerned SJTC and the Brockman Trust (“ the Investigations”). Mr Tamine is now aware, from his involvement as a co-operating witness in the Investigations, that the Investigations related to the tax affairs of Mr Brockman and the suspected evasion by Mr Brockman of tax in relation to more than USD 2 billion of unreported gains made by entities within the Brockman Trust structure. One of the issues with which the Investigations are concerned is the extent to which Mr Brockman has control over the Brockman Trust. Mr Padula believes that if the Investigations proceed to trial then it will be one of the largest tax evasion cases by individuals in US history.

12

The Bermuda authorities became involved in the Investigations in or about August 2018 and on 29 August 2018 the Bermuda Police obtained a search warrant permitting them to search for the requested materials at Mr Tamine's home address in Bermuda. The search warrant gave authority for any police officer entering the premises to be accompanied by an officer or agent belonging to the IRS.

13

After Mr Tamine had been informed about the search warrant, his representatives made contact with the DOJ and Mr Tamine was granted immunity in the US and gave evidence before a Grand Jury. At around the same time that Mr Tamine was discussing these matters with the DOJ he signed a letter dated 28 September 2018 stating that “I hereby resign from my position as director, secretary, trustee, manager and/or any other office of any and all companies, trusts, or other entities”. Mr Tamine was a director of SJTC from 2010 until he resigned on 28 September 2018. Mr Tamine was sole director of SJTC from 2013 until 23 June 2017, when Mr Gilbert was appointed as a second director. After Mr Tamine's resignation on 28 September 2018, Mr Gilbert became the sole director of SJTC.

14

Mr Tamine has expressed the view that he has serious concerns that SJTC is conducting itself in a manner which is designed to improperly obstruct the Investigations, including by means of actions brought against him in England and in this jurisdiction. In paragraph 3 of Mr Tamine's Defence in the Bermuda proceedings he asserts:

This Defence is served without prejudice to the Defendants' case that these proceedings constitute an abuse of process of the Court and ought to be struck out. The...

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4 cases
  • Ali Ganjaei (in his capacity as attorney in fact of Seapack Investment Ltd) v Sable Trust Ltd
    • British Virgin Islands
    • High Court (British Virgin Islands)
    • 15 February 2021
    ...AC 294. 6 [1945] 1 All ER 667, followed by the Supreme Court of Bermuda in St John's Trust Co (PVT) Ltd v Watlington and others [2020] SC (Bda) 19 Civ (Hargun CJ). 7 No 16 of 2004, Revised Laws of the Virgin Islands. 8 See Norwich Pharmacal Co Ltd v Commissioners for Customs and Excise [19......
  • Ali Ganjaei v Sable Trust Ltd
    • British Virgin Islands
    • High Court (British Virgin Islands)
    • 15 February 2021
    ...AC 294. 6 [1945] 1 All ER 667, followed by the Supreme Court of Bermuda in St John's Trust Co (PVT) Ltd v Watlington and others [2020] SC (Bda) 19 Civ (Hargun CJ). 7 No 16 of 2004, Revised Laws of the Virgin Islands. 8 See Norwich Pharmacal Co Ltd v Commissioners for Customs and Excise [19......
  • Evatt Anthony Tamine v Bermuda Press (Holdings) Ltd
    • Bermuda
    • Supreme Court (Bermuda)
    • 24 January 2022
    ...5 (23 January 2008) at para 9 18 [2017] SC (Bda) 50 Com 19 [2005] EWHC 958 (QB) 20 St. John's Trust Company (PVT) Ltd. v Watlington [2020] SC (Bda) 19 Civ and Medlands (PTC) Ltd. v Commissioner of Police [2020] SC Bda 20 Civ ...
  • Vision En Analisis Y Estrategia, S.A. De C.v v Christopher Ronald Erwin, also known as Christopher R Erwin and/or Christopher Erwin
    • Bermuda
    • Supreme Court (Bermuda)
    • 12 August 2022
    ...(ii) the claims against Laureola. Mr. Diel relied on Hargun CJ's Ruling in St John's Trust Company (PVT) Limited v Watlington & Others [2020] SC Bda 19 Civ (“ SJTC Ruling”) where he set out that the Plaintiffs had a continuing duty to return to the Bermuda Court when there had been such a m......
2 firm's commentaries
  • So Say We All? Scope and Risks of Informal Shareholder Consent Clarified
    • United Kingdom
    • JD Supra United Kingdom
    • 22 September 2020
    ...[1] Re Duomatic Ltd [1969] 2 Ch 365. [2] Akierman Holdings Pty Ltd v. Akerman [2019] NSWSC 1486. [3] SJTC v. James Watlington et al [2020] SC (Bda) 19 Civ. [4] [2020] UKPC [5] [2003] EWHC 1507. [6] Re Finch (UK) Plc [2015] EWHC 2430 (Ch). [7] Randhawa and another v. Turpin and another [2017......
  • So Say We All? Scope and Risks of Informal Shareholder Consent Clarified
    • United States
    • LexBlog United States
    • 21 September 2020
    ...[1] Re Duomatic Ltd [1969] 2 Ch 365. [2] Akierman Holdings Pty Ltd v. Akerman [2019] NSWSC 1486. [3] SJTC v. James Watlington et al [2020] SC (Bda) 19 Civ. [4] [2020] UKPC 21. [5] [2003] EWHC 1507. [6] Re Finch (UK) Plc [2015] EWHC 2430 (Ch). [7] Randhawa and another v. Turpin and another [......

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