Trustees 1-4 v Attorney General and Respondents 1-2

• Jurisdiction: Bermuda
• Judgment Date: 05 June 2014
• Docket Number: Commercial Jurisdiction 2013 No238
• Date: 05 June 2014
• Court: Supreme Court (Bermuda)

[2014] Bda LR 56

In The Supreme Court of Bermuda

Commercial Jurisdiction 2013 No238

Between:

Trustee 1

Trustee 2

Trustee 3

Trustee 4

Plaintiffs

and

The Attorney General

Respondent 2

Respondent 3

Respondents

Mr A Boyle QC and Mr C Luthi for the Plaintiffs

Ms S Warnock-Smith QC, Mr R Attride-Stirling and Mr S Dyer for the 2^nd Defendant

Mr D Kessaram and Ms L Zuill for the 3^rd Defendant

The following cases were referred to in the judgment:

Schmidt v Rosewood Trust LtdELR [2003] 2 AC 709

Hartigan Nominees Pty Ltd v Rydge 29 NSWLR 405

Virgin Atlantic Airways Ltd v Zodiac Seats UK LtdELR [2014] AC 160

Henderson v HendersonENR 3 Hare 100

Hoystead v Commissioner of TaxationELR [1926] AC 155

Yat Tung Investment Co Ltd v Dao Heng Bank LtdELR [1975] AC 581

Price v NunnUNK [2013] EWCA Civ 1002

Thyssen-BornemiszaiBDLR [1999] Bda LR 14

Steliou v ComptonWLR [2002] 1 WLR 2558

Nominal Defendant v Manning [2000] NSWCA 80

Marley v Mutual Security Merchant Bank & Trust Co LtdUNK [1991] 3 All ER 198

Public Trustee v Cooper [2001] WTLR 901

In the matter of the A and B Trusts [2007] JLR 44

Trust — Beddoe proceedings — Disclosure — Production of documents — Whether direct allusion — Res judicata — Surrender of Trustees' discretion

RULING of Hellman J

Introduction

1. On 26th February 2014 the Court ruled (‘the 26th February ruling’) on two applications for disclosure made by the Second Defendant (‘D2’) in the course of Beddoe proceedings commenced by the Plaintiffs (‘The Trustees’). The ruling sets out the background to those applications, which I need not repeat.

2. I am now asked to rule on two further applications for disclosure by D2.

• i. By a summons dated 4th April 2014 (‘the First Summons’), he seeks inspection of a number of documents said to have been mentioned in the Trustees' evidence in reply served at the end of January.

• ii. By a summons dated 9th April 2014 (‘the Second Summons’), he seeks the production of various categories of document pursuant to the Court's supervisory jurisdiction to administer trusts. Alternatively, he invites the Court to indicate that it would be assisted by the production of those documents.

3. I have had the benefit of extensive submissions from leading counsel. As I am concerned with a practical question – whether to order the production of any further documents, and, if so, which ones – I trust that the parties will forgive me for, in the main, addressing only those submissions that have been central to my reasoning in resolving that question.

First Summons

Order 24, rule 10

4. I dealt with the relevant law in the 26th February ruling. The request must relate to a document to which ‘reference is made’ in the affidavit in the sense of a direct allusion. However, the court will not order the production of a document unless it is of the opinion that its production is necessary either for disposing fairly of the cause or matter or for saving costs.

5. The purpose of the court ordering the production of documents referred to in an affidavit is to enable the court and the requesting party to understand the meaning of the sworn statement – rather than the exhibits – and establish that any documents to which it refers, irrespective of whether they illuminate the meaning of the sworn statement, exist and have been represented fairly and accurately. However, the court may more readily conclude that the production of a document which does illuminate the meaning of the sworn statement is necessary for disposing fairly of the cause or matter or for saving costs than one which does not.

6. The first batch of requests relates to paragraphs 86 – 88 of the English language translation of the first affidavit of W1, which is dated 24th January 2014. I am satisfied that, with one exception, none of these requests contain direct allusions to particular documents. They refer either to a generic type of document with which W1 was involved, rather than being a compendious description of a number of particular instances of that document, or merely to information rather than documentation.

7. The exception occurs at para 88, where W1 states:

‘I am not aware of any payments made by the companies owned by the Trusts other than as properly recorded in the accounts by me or my colleagues under my supervision (or [name] before me) and as approved by the BMC. I do not have any information or knowledge that would support an allegation by [D2] that the directors of the PTCs used the funds of the Trust companies for their own benefit.’

8. The passage contains a direct allusion to payments properly recorded in the company accounts. D2 wishes to inspect all of the said accounts to ascertain whether the Trustees have benefited from any payments made by the companies. This, his counsel Ms Warnock-Smith QC submits, is relevant to the issue of who has benefited from the Trusts and hence who has a real interest in their enforcement. D2 also wishes to test the veracity of W1's claim that the payments recorded in the accounts were recorded ‘properly’.

9. Mr Boyle QC, counsel for the Trustees, resists this application. He submits that the Trustees have made clear that they will produce up to date accounts for each of the Trusts and that these will set out the value of the Trusts' underlying assets. Beyond, that, he submits, the companies' accounts are not relevant to the issues in the Beddoe application. He refers the Court to passages in the affidavits filed by A and other members of her family who are involved in running the Plaintiff Trust Companies in which they state that they have not received any financial benefit from this involvement.

10. The production of the accounts, Mr Boyle submits, would not allow the Court to test W's evidence as to whether there were any payments made other than as recorded in the accounts, nor enable the Court to determine whether the payments in the accounts were recorded ‘properly’. The issue of proper recording is in any case, he submits, of only marginal relevance to the Beddoe application.

11. In the premises, Mr Boyle submits, the production of the accounts is not necessary for disposing fairly of the Beddoe application and, far from saving costs, would be onerous and disproportionate to the points in issue.

12. I agree with Ms Warnock-Smith that it is relevant to ask ‘cui bono?’ when deciding how the main action should be funded. However I am not of the opinion that ordering the production of the accounts of all the underlying companies from 2005 to 2014, which is the relevant period, is a necessary or proportionate step towards answering that question. It can be addressed in a more focused way.

13. D2's attorneys complain that the affidavits filed by A et al say nothing about non-beneficial payments and capital transfers which, it is submitted, a lawyer would not technically call a benefit but which a layperson would regard as benefits, such as loans and expenses. The running costs of the trusts, and to whom they are paid, are also, it is submitted, matters which of which the Court should be apprised.

14. Insofar as it has not already been provided, I should be assisted by information from the Trustees on these matters. However I shall leave it to them and their legal advisors as to how they respond to my request.

15. D2 has one further request outstanding. This relates to para 74 of the English language translation of the first affidavit of W2 dated 15th January 2014. W2 states:

‘After 2012, following directions given by [name] as the representative of [name], those companies were transferred into a formal Bermuda purpose trust structure.’

16. D2 seeks production of the trust structure. His request is denied as although the existence of a trust instrument or instruments can be inferred from the reference to a trust structure, that reference is not a direct allusion to them and the structure is not itself a document.

Decision

17. The First Summons is dismissed as D2's requests do not relate to documents to which a direct allusion is made, save in one case where...