A Trust

• Jurisdiction: Bermuda
• Judgment Date: 12 December 2012
• Date: 12 December 2012
• Docket Number: Civil Jurisdiction 2009 No 361
• Court: Supreme Court (Bermuda)

[2012] Bda LR 79

In The Supreme Court of Bermuda

Civil Jurisdiction 2009 No 361

Re A Trust

Mr F Hinks QC and Mr K Robinson for the 2^nd Defendant

Mr N Singla and Mr J Williams for the 9^th Defendant

Mr R Miles QC and Ms N Tovey for the 8^th, 10^th, 12^th, 30^th and 31^st Defendants

Mr S Taube QC and Mr A Collieson for the Guardian ad Litem of the 32^nd and 34^th-37^th Defendants

Mr N Lepoidevin QC and Mr A Potts for the 45^th Defendant

The following cases were referred to in the judgment:

Green v JerniganUNK (2003/4) 6 ITELR 330

Koonmen v BenderUNK (2003/4) 6 ITELR 568

Nabb Brothers Ltd v Lloyds Bank International (Guernsey) Ltd [2005] IL Pr 37

Helmsman Ltd v Bank of New York Trust Co (Cayman) LtdUNK (2010/11) 13 ITELR 177

Re the Representation of AAUNK (2010/11) 13 ITELR 690

Schmidt v Rosewood Trust LtdELR [2003] 2 AC 709

In re Remnant's Settlement TrustsELR [1970] 1 Ch 560

Gomez v Gomez-Monche VivesELR [2009] Ch 287

Will trust — Disclosure of information regarding underlying company — Confidentiality — Breach of settlement terms — Trust jurisdiction clause — Forum for administration

JUDGMENT of Kawaley CJ

Introductory

1. On November 14, 2011, Ground CJ approved the settlement of a dispute between D9 and, inter alia, his father D2 in relation to the terms of, inter alia, an offshore trust (‘the Trust’) established for the benefit of D2's children and their issue (‘the November 14, 2011 Order’). This formed part of a wider distribution of the testamentary trust established by D2's father (‘the Testamentary Trust’), the authorisation for which was sought by the Trustees of the Testamentary Trust in the present action which was commenced on November 2, 2009. A Confidentiality Order was made herein on December 8, 2009, which continued in force under the terms of the November 14, 2011 Order. The substance of the settlement was contained in ‘Proposal No.4’. However, important supplementary provisions were contained in the ‘Settlement Terms’.

2. That Order gave liberty to apply to enforce the terms of the settlement. D 2 applies by Summons dated June 5, 2012 to enforce the settlement embodied in the November 14, 2011 Order. He primarily seeks injunctive and declaratory relief against D9 in respect of his threat to bring proceedings in the Onshore Court (‘the Onshore Application’) to compel the Trustee (D45) to disclose information about the underlying operating company which is the principal Trust asset (the ‘Onshore Operating Company’). However, he also seeks a variation of Proposal No 4 to set aside 80% of a preferential payment1 made to D9 and a direction that the Trustee should remove D9 as a director of two “Family Holdcos’, as a penalty for D9's alleged breach of the Settlement Terms.

3. At the end of the hearing there was no serious dispute that D2 was entitled to an injunction restraining D9 from pursuing a claim against the Trustee before the Onshore

Court because the pursuit of such threatened claim would entail a breach of clause 18 of the Trust Deed, which selected Bermuda as the administrative forum for the Trust.

4. However, D2 (supported by the Trustee, the majority of D9's siblings and the Guardian) also sought a wider injunction in respect of any similar claims seeking to challenge Proposal No 4 (including claims against onshore companies and directors linked to the Trust). This wider injunction was sought on the basis of, inter alia, the cross-examination over two days of D9 and the assertion that he was, in effect, committed to tearing apart the structure which he had reluctantly agreed to, having been unable to secure recognition for his most exorbitant distribution demands. Both the precise scope of the factual findings to be made and the scope of any such further injunctive relief to be granted required careful consideration, notwithstanding the compelling policy arguments in favour of upholding the integrity of the settlement embodied in the November 14, 2011 Order.

5. The Trust assets are worth some $1 billion. They represent roughly one-third of the global estate distributed by the Trustees of the Testamentary Trust. That wider distribution was said to have been arranged at a global legal cost in the region of $100 million. Establishing the Trust to which the present application relates, for the benefit of D2's branch of the family, was not inexpensive. Nor was it uncontroversial. The central controversy centred on D9's expectation that his unique contribution to the value of the Onshore Operating Company which he worked for at a senior level for several years should be recognised in the distribution plan of the Trust. When he discovered that his father intended to treat D9 and his siblings equally, his relationship with his father broke down, he suffered a mental breakdown and his relationship with both the Company and his family was severed2.

6. With all parties ably represented, the present dispute presents superficially as a commercial trust dispute about purely commercial matters. However, it was obvious that the motivations of the main protagonists, a strong patriarch and an equally strong-willed son for whom family and business connections are closely intertwined, were heavily infused with deep-seated emotions of an intensity rarely seen outside of familial relationships. Any sensible analysis of the evidence in this case, as in any other family trust dispute, must take this underlying familial background into account.

The November 14, 2011 Order

7. The November 14, 2011 Order was made, according to its recitals upon the consent of counsel for D2, his children (including D9) and his adult grandchildren, who were defined as the ‘Specified Parties’. Paragraph 8 (‘Settlement Terms’) provides in material respects as follows:

‘8.1 It is declared in relation to the Specified Parties that their consent and agreement extends to the whole of …Proposal No.4 and …Schedules and in recognition thereof that the Settlement Terms shall by virtue of this Order be enforceable as between them in accordance with the provisions of such Settlement Terms.

8.2 Without prejudice to the generality of the liberty to apply conferred below, the Specified Parties shall have liberty to apply to enforce the Settlement Terms…’

8. Paragraph 9 authorised the Trustee of the Testamentary Trust to establish, subject to reasonable amendments and adjustments, the distribution structure contemplated by Proposal No.4. But paragraph 8 of the November 14, 2011 Order both :

• i. embodied the Specified Parties' consent to Proposal No. 4 as a whole; and

• ii. provided that one element of Proposal No 4, the Settlement Terms (Schedule T), was to be enforceable by way of an application under the Order itself.

9. Paragraph 22 of the Order varied the Confidentiality Order to permit the release of confidential information in certain specified contexts. Apart from arbitrations dealing with outstanding issues, the only litigation exception provided for deploying information covered by the Confidentiality Order was:

‘(3) to enable any party to or represented in these proceedings to take all reasonable and proper steps before this Court to enforce the rights and obligations arising under this Order and all transactions effected or to be effected pursuant to the same, provided that the parties will take all appropriate and reasonable steps to seek to maintain the confidentiality of the confidential documents within any enforcement proceedings.’

10. The practical effect of paragraph 22 of the November 14, 2011 Order, in the context of a case where this Court saw fit to take the unusual step of granting an Anonymity Order on November 5, 2009, was apparently as follows. No material protected by the Confidentiality Order could be deployed in litigation otherwise than for enforcement purposes in this Court without first applying to this Court to vary the said Confidentiality Order. It seemed ultimately to be common ground that the Confidentiality Order was sufficiently broad to encompass any information about Proposal No. 4 and the structure implemented pursuant to it with the imprimatur of the November 14, 2011 Order.

Proposal No. 4

11. Section G of Proposal No. 4 sets out the substance of the settlement reached. Proposals 2 and 3 were supported by the Guardian and all of D2's children except D9 and his sister D11. The principle of an equal allocation between all siblings was opposed by them (paragraph 31). The settlement was conditional upon execution of the releases contemplated by the Settlement Terms, and involved D9 receiving a preferential payment (paragraph 32). Other elements of the settlement set out in paragraph 33 included:

• i. ‘dispositive decision making would remain at the level of’ the Trustee (33.3);

• ii. D2 would be excluded from ‘dispositive decision making’ in relation to the Children's Family Accounts (33.4);

• iii. ‘investment decision making would be delegated to the Children's Family Account Holdcos’ (33.5);

• iv. each child of D2 would be a director of his or her Family Account Holdco and the other directors would be directors of the Trustee with the exception of D2 (33.6);

• v. the Children's Family Account Holdcos would be able to make recommendations to the Trustee on dispositive decisions and the Letter of Wishes would request the Trustee to act upon such recommendations (33.7-33.8).

12. Proposal No. 4 also made detailed provisions in relation to the Trust structure including the identity of the initial directors of the Trustee, minimum distributions to the Family Account Holdcos and contingencies relating to the increase or decrease in the value of the Onshore Operating Holding Company. As regards the latter, paragraph 84 provided that a major accountancy firm (“the Accountancy Firm”) would provisionally value the Company shortly before Closing and finally no more than six months after Closing.

13. Paragraph 1.2 of the...