Stiftung Salle Modulable and Rutli Stiftung v Butterfield Trust (Bermuda) Ltd (Costs)

• Jurisdiction: Bermuda
• Court: Supreme Court (Bermuda)
• Judgment Date: 28 May 2014
• Docket Number: Civil Jurisdiction 2012 No65
• Date: 28 May 2014

[2011] Bda LR 53

In The Supreme Court of Bermuda

Civil Jurisdiction 2012 No65

Between:

Stiftung Salle Modulable

Rütlistiftung

Plaintiffs

and

Butterfield Trust (Bermuda) Limited

Defendant

Mr A Layton QC and Ms L Zuill for the Plaintiffs

Mr M Cran QC and Mr J Woloniecki for the Defendant

The following cases were referred to in the judgment:

Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries LtdUNK [1951] 1 All ER 873

Williams v Bermuda Hospitals BoardBDLR [2013] Bda LR 14

Binns v BurrowsBDLR [2012] Bda LR 3

First Atlantic Commerce Ltd v Bank of Bermuda LtdBDLR [2009] Bda LR 18

Re BucktonELR [1907] 2 Ch 406

Schmidt v Rosewood TrustELR [2006] 2 AC 709

IBM UK Pensions Trust Ltd v Metcalfe [2012] EWHC 125

The Bernisse and The ElveELR [1920] P 1

Comitato Portuariod' Importazionedei Carboni Fossili di Genova v Instone& Co [1922] WN 260

Tristan Investments Ltd v methdrell Industries et al [1965] EWCA Civ J0111–3

Costs — Amendments to draft Order — Deductions — Plaintiffs' conduct — Indemnification for costs to be paid from trust fund

RULING on Costs and Terms of Final Order of Kawaley, CJ

Introductory

1. On February 21, 2014, I delivered Judgment following a trial which ran for approximately five weeks from early November to mid-December 2013. I summarised my main findings in the following terms:

‘Contractual claims

Swiss law

348 The putative contract was governed by Swiss law. The parties entered into a donation contract under Swiss law pursuant to which the Trustee agreed to fund the preliminary costs and construction of the Salle Modulable opera house in Lucerne, subject to a condition subsequent with two core elements. The donee had to establish feasibility in terms of both construction and operating costs in light of the maximum commitment of the donor: CHF 120 million. Although Rütliaccepted the offer, it did so for the benefit of the subsequently formed SMF which was the ultimate donee. As between the Trustee and Rütli, there was a subsidiary or supplemental mandate agreement, primarily evidenced by the ISA, under which Rütliagreed to receive donated cash, pay the project expenses and ensure the monies paid were properly applied, with minimal reporting obligations to the Trustee.

349 The Trustee was not entitled to terminate the donation contract for breach of implied accounting/reporting duties and/or for failure by Rütli rand/or SMF to comply with an implied requirement to establish feasibility within a reasonable time. These were not fundamental terms of the contract or conditions but merely provisos which could only constitute valid grounds of termination (a) if breaches were proved and (b) the offending parties were afforded a grace period to cure the relevant breaches. The provisos were not breached and, in any event, no or no sufficient grace period was afforded to the Plaintiffs to cure the breaches. The Trustee's Counterclaim (which broadly mirrored its rejected breaches of contract justified termination pleas) is dismissed.

350 The Plaintiffs failed to prove that the Trustee acted in bad faith to prevent them from satisfying the feasibility condition so as to trigger the presumption that the feasibility condition was in fact met. On the facts found by this Court, the Trustee's unlawful termination of the donation contract did not prevent the Plaintiffs from establishing feasibility and, in any event, the Trustee did not act in bad faith although the manner in which a difficult decision was implemented was inelegant in the extreme. The Plaintiffs had simply not been afforded a reasonable amount of time within which to adjust the designs in order to fit the financial and political requirements of construction and operating feasibility. These findings are not undermined by the fact that the project managers appear in hindsight to have spent too long pursuing unrealistically grand plans and seeking to persuade the Settlor to persuade the Trustee to increase the level of the already generous donation; pursuits which may well have unwittingly helped to unravel vital beneficiary support for the project.

351 The result is that the Plaintiffs are entitled to perform their rights under the contract and to compel the Trustee to perform its obligations under the contract, performance being the primary remedy under Swiss law for a breach of affirmative contractual rights. The Plaintiffs are entitled to a reasonable period of time (possibly 12 months) within which to demonstrate through a credible feasibility study that the core Salle Modulable concept can be achieved meeting both the construction and operating expenses feasibility tests and taking into account the monies advanced by the Trustee thus far. The Plaintiffs' claim for judgment in the amount of CHF 114.25 million (approximately US$ 127.9) is refused. I will hear counsel to the terms of the final order required to give effect to this Judgment.

Bermuda law (alternative findings in case primary findings are held to be wrong)

352 I was asked to record my alternative findings in case I am held to be wrong in my choice of law findings as to the governing law of the contract. Under Bermudian law I would find that the parties did not enter into any contract at all in relation to the funding of the construction costs. From a Bermudian law perspective, I would be bound to take into account the strong reservation of rights contained in the Trustee's crucial 23 August 2007 letter and the lack of any sufficient consideration being offered by Rütlirelevant to the putative donation promise.

353 It was conceded that there was a binding legal agreement as regards the preliminary phase of the project alone. In respect of such a limited binding commitment, I would find that the parties must be deemed (by necessary implication to give business efficacy to such an arrangement) to have agreed that the Trustee reserved the right to terminate the funding arrangement in its discretion in circumstances where (as I find occurred) the majority of the beneficiaries opposed continuing with the project. However, I would for similar reasons as in the case of the Swiss law claim find that the Trustee was not entitled to terminate on the breach of essential terms grounds it relied upon, and would accordingly still have dismissed its Counterclaim.

Trust claims

354 In light of the findings reached in relation to the Plaintiffs' contractual claims and in any event, the alternative trust claims are dismissed.

Harbour Funding Agreement

355 I reject the Trustee's arguments as to the invalidity of the Plaintiffs' English law governed funding agreement on traditional common law principles prohibiting maintenance and champerty. However, I also reject the Plaintiffs' claim that any amounts payable by way of litigation funding are recoverable as damages under Swiss or Bermudian law. Litigation expenses, absent new statutory rules, properly fall to be dealt with under the taxation of costs regime under Bermuda law as the procedural law governing the present proceedings.

Costs, etc.

356 I will hear counsel as to costs and as to the terms of the final order to be drawn up to give effect to the present Judgment.’

2. For personal reasons, I was unable to afford the parties the scheduled two full days requested to settle the terms of the final order and costs. In addition to these issues, an application by the Defendant for a stay of Judgment pending appeal was listed for hearing. Nevertheless, I considered that the time made available to the parties should have sufficed to deal with all outstanding issues had time not been wasted by unnecessary spats. Accordingly, I gave directions for the filing of skeleton arguments to deal with the narrow issue of what conditions should be attached to the stay pending appeal which it was common ground the Defendant was entitled to seek.

3. Settling the terms of the final Order was complicated by two factors. Firstly, both sides, to lesser and greater extents, appeared to me to wish the Court to police implementation of the Order to a greater extent than I had initially envisaged to be necessary. I had assumed that, provided of course that the Judgment was not overturned on appeal, the parties would cooperate to comply with any Order of this Court. The Plaintiffs are both charities; the Defendant is a licensed trust company owned by a leading bank which, at trial, positively insisted that as Trustee it exercised independent judgment and was not simply an open channel through which the wishes of the settlor and/or the beneficiaries were expressed.

4. However, the draft Orders tendered seemed to me, in part, to be based on the premise that the parties would, like their counsel, continue to fight in the cat and dog fashion which intermittently undermined the dignity of the latest chapter in the present saga. In this respect, it must be noted, the Plaintiffs' counsel was, quite clearly, more sinned against than sinning.

5. Mr Cran complained that I did not afford counsel the opportunity to address the Court at trial on the potential finding that the Plaintiffs were entitled to enforce a Swiss law donation contract by way of alternative relief to the expressly pleaded damages claim. Further, it was contended that neither side had an opportunity to address the scenario reflected in the Court's key findings. Counsel pointed out that the appropriateness of ordering specific performance would be a ground of appeal. I reminded him that, at the end of the evidence, I had asked counsel to address me on various possible scenarios1. Mr Woloniecki addressed the notion of premature termination of the hypothetical Swiss law contract in closing, and, quite pertinently for present purposes, submitted as follows2:

‘5 What happens if you unlawfully or wrongfully purport

6 to resile from that donation contract?

7 Well, there's no controversy about this. The

8 primary remedy under Swiss law,...