Representation of C re P Trust (Royal Court : Hearing (Civil)) [2025] JRC 028 (3 February 2025)

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Cite as: [2025] JRC 028, [2025] JRC 28

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Trust - reasons for the decisions made on 16 May 2024

[2025] JRC 028

Royal Court

(Samedi)

3 February 2025

Before     :

M. J. Thompson Esq., Commissioner, sitting alone

 

Between

C

Representor

And

Fenlight Trustees Limited

First Respondent

 

D

Second Respondent

 

G

Third Respondent

 

Advocate Craig Swart (in his capacity as guardian ad litem for the Minor and Unborn Beneficiaries of the P Trust descending from D)

Second Party Cited

IN THE MATTER OF THE P TRUST

AND IN THE MATTER OF ARTICLE OF 51 OF THE TRUSTS (JERSEY) LAW 1984 (AS AMENDED)

Advocate S. C, Thomas for the Representor

Advocate J-M. Renouf for the First Respondent

Advocate F. B. Robertson for the Second Respondent

The remaining Respondents not appearing

judgment

the commissioner:

Introduction

1.        This judgment contains my reasons for the decisions I made on 16 May 2024 when I granted some applications for specific discovery made by the Representor, refused some applications and, in respect of certain applications, adjourned the same, pending determination of any application to amend the Amended Representation brought by the Representor.  Such an application was brought by the Representor and was determined on 26 June 2024 when I granted one category of applications to amend and refused the remainder.  This decision led to the dismissal of certain applications for specific discovery which I had adjourned on 16 May 2024.  This judgment contains my reasons for all these decisions.

Background

2.        This judgment follows on from my judgment in this matter dated 29 July 2024, where I refused to hold the present proceedings in public, as well as determining the scope of what evidence the Representor could file by way of reply ("the Privacy Judgment").

3.        The background to the present proceedings is therefore set out at paragraphs 2 to 4 of the Privacy Judgment which I adopt for the purposes of this judgment. I also adopt the same definitions used in the Privacy Judgment.

4.        I also rely and adopt the summary of the pleadings at paragraphs 5 to 18 of the Privacy Judgment. It is not necessary to set out again the relevant parts of the pleadings as they currently stand for the purposes of this judgment. 

5.        At paragraphs 19 to 28 of the Privacy Judgment I set out the procedural history of this matter, which I again adopt for the purposes of this judgment. At paragraph 27, I referred to the application for further information and the summons for specific discovery which was heard on 16 May.

6.        At paragraph 3 of the Act of Court of 16 May, I adjourned certain of the applications made by the Representor, which are set out in more detail later in this judgment, until determination of any application to amend the Representor might bring. I gave the Representor seven days to make such an application, and the Respondents a further seven days to indicate whether they agreed to the proposed amendments or not (see paragraphs 1 and 2 of the Act of Court of 16 May 2024).

7.        The re-amendments proposed by the Representor, which are also set out in more detail later in this judgment, were not agreed. Accordingly, the Representor's application to re-amend the Amended Representation was heard on 26 June 2024.

8.        In this judgment, I deal with each of the applications in turn. 

The specific discovery application

9.        The summons returnable on 21 May sought both requests for further information and specific discovery from both the First and Second Respondents. The requests for further information were resolved by agreement and I therefore ordered that these be provided within fourteen days.

10.     The documents sought from the First Respondent were set out in Schedule 1 to the fifth affidavit of the Representor as follows:

"Schedule 1 - Documents to be discovered by Fenlight

1. The [Company 1] Accounts Documents as defined at paragraph 30 above.

2. Fenlight's communications with [Company 4], including any attendance notes and documents resulting from such communications, between January 2020-April 2020.

3. Fenlight's communications with [Country 1] professional and financial services providers in connection with the administration of P and the Structure, including any attendance notes and documents resulting from such communications, for the period between January 2020-April 2020.

4. [K's] correspondence with [Company 5] leading up to the [Company 5]  Advice, including his letter to [Company 5] of 13 June 2023, [K's] note of his call with [Company 5] on 17 June 2013, together with associated letters of engagement and fee notes.

5. The [Company 6] Redomiciliation Documents as defined at paragraph 41.3 above.

6. Insofar as not covered by the [Company 6] Redomiciliation Documents, the advice provided by Ernst & Young, [L], [Company 5] (and any other tax or legal advisers), as well as communications with the same, which are relevant to the redomiciliation of [Company 6] to Country 1 and its subsequent maintenance in that jurisdiction; to include letters of engagement, fee notes and communications in respect of the same originating from or addressed to [D], [K], Fenlight/Baccata, Giggs, [Company 6] and [Company 1].

7. The Metadata documents, as defined at paragraph 43 above, which are to be produced for inspection in their native original format, with the metadata preserved.

8. The attachments referred to at paragraph 46 above, which are to be produced for inspection in their native original format, with the metadata preserved.

9. Fenlight's invoices and timesheets/narratives for [P Trust] and each of the companies underlying [P Trust] in respect of the period between January 2020 to March 2024."

11.     Requests 1 to 6 were also sought from the Second Respondent, together with the following additional requests:

"7 The [D] Tax and Matrimonial Documents, as defined at paragraph 52 above.

8 Documents containing statements [B] Senior has made in respect of his assets to [M] and the Court as part of his divorce proceedings.

9 Documents recording the terms and details of [D's] and [B] Senior's voluntary arrangements in the 1990s.

10. [D's] communications with Ms Fiona Waite of RBC for the period March-May 2020."

12.     In respect of Company 1, what was sought was:

(i)        Company 1's quarterly management accounts since the first quarter of 2022;

(ii)       Company 1's financial forecasts for 2023 to 2024;

(iii)      Company 1's human resources reports for 2022 to 2024;

(iv)     Company 1's sales reports for 2022 to 2024;

(v)      Company 1's operational reports, including a report from the managing director and a health and safety report for 2022 to 2024.

13.     At paragraph 41(3) of her fifth affidavit, the Representor listed nine documents or categories of documents which she was seeking in relation to requests 2-6 of Schedule 1.  This led to the following statement at paragraph 42:

"I should also add that I do not believe that I have the totality of the "extensive" advice (see paragraph 40.2.3 above), [D] and Fenlight claim to have taken from EY, [Company 5], or any other tax or legal advisers. A lot of the advice that I have referred to at 41.2 above, especially from the 2013-14 period, are brief emails. I would be surprised if Fenlight took such an important decision as redomiciling [Company 6] (and maintaining [Company 6] in [Country 1]) on the basis of a handful of brief emails. I am certain that further documents exist, which are in the possession, custody or power of [D] and Fenlight, which are relevant to Fenlight's decision to redomicile [Company 6] and which are necessary for considering Fenlight's ability to continue to administer [P Trust]. In particular, there must be other advice provided by EY, [L], [Company 5] (and any other tax or legal advisers), as well as communications with the same, which are relevant to the redomiciliation of [Company 6] to [Country 1] and its subsequent maintenance in that jurisdiction. There must also be letters of engagement, fees notes and communications in respect of such matters. I would have thought that such documents may have originated from or been addressed to [D], [K], Fenlight/Baccata, Giggs, [Company 6], and [Company 1] (all companies on which one of either [D], [K] or a Fenlight representative is a director). I believe these documents are relevant to assessing Fenlight's conduct with respect to the redomiciliation of [Country 1], the tax exposure it has caused, and Fenlight's ability to continue to administer [P Trust]. I therefore ask the Court to order Fenlight and [D] to discover and produce for inspection these documents, together with the documents I have stated at paragraph 41 above."

14.     At paragraph 46(1) of her affidavit, the Representor sought various attachments said to be relevant to the management and administration of the ownership in Company 1, as well as attachments to certain tax advice. 

15.     At paragraph 46(3), she sought attachments relevant to the history of and the intention behind the creation of P Trust. 

16.     Paragraph 46(4) clarified the attachments sought related to the relationship between the First and Second Respondents in 2020 and the decision to distribute funds to the Second Respondent in September 2020.

17.     In relation to the requests against the Second Respondent by reference to paragraph 51.1 and 51.2 of her affidavit, the Representor raised the issue of whether the distribution made to the Second Respondent by the First Respondent had been disclosed to the Country 3 tax authorities.  She also wanted details of disclosures the Second Respondent made in his divorce proceedings about his interest in P Trust.

18.     The Representor also sought similar disclosure from B in relation to what statements he had made in his divorce proceedings in 2008 regarding his status in relation to P Trust and N Trust and trusts that preceded the settlement of P Trust and N Trust.

19.     The request for details of the voluntary arrangements were set out in paragraph 57. The Representor referred to both the Second Respondent and B being the subject of individual voluntary arrangements in the 1990s. The relevance of this was said to be that they did not have any funds to purchase shares of Company 1. 

20.     The context of the request for communications between the Second Respondent and Ms Waite was referred to at paragraph 59 of the Representor's affidavit arising out of paragraphs 58 and 59 of the Representor's first affidavit and concerned misrepresentations alleged to have been made by K to Royal Bank of Canada about the Representor's mental capacity.  The request sought copies of any documents and written communication in the Second Respondent's possession about any communication between him and Ms Waite of RBC.

21.     Both K, for the First Respondent, and the Second Respondents swore affidavits in response to the fifth affidavit of the Representor.  I have read these affidavits in their entirety as part of reaching my decision, as well as having read the fifth affidavit of the Representor. 

Submissions in relation to specific discovery

22.     Advocate Baker for the Representor contended by reference to an English case Chu v Lau [2020] 1 WLR, that an issue arising out of the commencement of proceedings in a removal claim by a trustee did not need to be pleaded in order to be regarded as relevant. He also emphasised reference to Lewin 20th Edition that the jurisdiction to remove a trustee was ancillary to the Court's principal duty to see that the administration of trusts is carried out properly. The extract relied upon referred to the power of the Court to order removal, even though not expressly asked for in a claim form. 

23.     The issue of the performance of Company 1 was clearly in issue as set out at paragraphs 43(a) of the First Respondent's response, and paragraph 7.2 of the Second Respondent's response. In her second affidavit, the Representor had given evidence that the value of Company 1 had decreased since 2019.  The Representor, in his fifth affidavit, had given evidence in response at paragraph 6.4 and 6.8.  However, this was without supporting documentation.

24.     Advocate Baker accepted that the performance of Company 1 was not raised in the Representation or the Amended Representation as a ground for renewal but that did not matter because it was raised in the evidence. Underpinning this was a failure on the part of the Representor to change the board of Company 1 and a failure to monitor its performance.

25.     In relation to requests 2 and 3 concerning Company 4, this was covered by paragraph 21(h) of the Amended Representation and was also addressed at paragraph 37 of the Representor's fifth affidavit. The Representor's first affidavit at paragraph 106(f)(v) also referred to problems in Company 4. 

26.     The submissions about Company 4 then led into requests 4, 5 and 6 of Schedule 1 to the Representor's fifth affidavit. This was referred to at paragraph 21k of the Amended Representation. The question of withholding tax was also raised in the second affidavit of the Representor served exchanged on 19 January 2024 at paragraphs 50 to 53.  Advocate Baker accepted this went beyond what was pleaded in the Representation.

27.     In relation to the resignation of Company 4, he also referred me to paragraph 129 of K's affidavit sworn on 19 January 2024, which referred to why Company 4 resigned.  The Representor wanted to see the underlying documents in relation to this resignation.

28.     In relation to request 8 and 9 of Schedule 1, ultimately these were not opposed by the First Respondent and so orders were made accordingly.  The First Respondent also had no difficulty in providing metadata documents requested and so it was not necessary to make any order in that regard.

29.     The remaining submissions of Advocate Baker related to the requests concerning the tax returns and matrimonial documents relating to the Second Respondent's divorce. This was all relevant as to what the Second Respondent may have said in relation to his interest in P Trust.  Advocate Baker stressed he was not therefore asking for everything to do with the tax returns filed by the Second Respondent. Rather his request related to the position of the Representor that the P Trust was held for the benefit of the Second Respondent and the statements the First Respondent had made to certain third party banks. In relation to the matrimonial proceedings, what the Representor was looking for was any form of statement of his assets filed by the Second Respondent with the matrimonial court in the Country 3. The Representor also wished to test the evidence at paragraph 10.1 of the Second Respondent's fifth affidavit as summarised at paragraph 39 of the Representor's skeleton argument filed for this application.

30.     Advocate Renouf for the First Respondent emphasised that the present application had come more than two years after discovery was finalised in the proceedings and saw the present attempt as not being in any way genuinely geared towards the resolution of these proceedings. Rather, it was tactical and an attempt to obtain information for other purposes with only the most tentative, if any, relevance to the Representation.

31.     He also reminded the Court that Commissioner Bailhache had limited the scope of discovery for reasons of proportionality in his judgment of 17 March 2021.  The present discovery fell outside those parameters. The wider context of this application was to justify the applications to vary the privacy orders and the requests for further information.

32.     He also contended that the tasks requested, if granted, would be significant and required the First Respondent to obtain information from trustees in Malta.

33.     With these observations in mind, the First Respondent was willing to take a pragmatic approach.  In relation to each of the categories sought, it took the following position:-.

(i)        It did not have any objection in principle to providing the Company 1 accounts documents.

(ii)       It was willing to provide the documents sought in relation to Company 1, but repeated its concerns about the purpose which such disclosure was sought.

(iii)      The requests in relation to the Representor's communications with Country 1 professional service providers were seen as too vague. The same occurred in relation to communications with Company 5.

(iv)     The Company 6 documents were seen as historic.  It would provide such disclosure if ordered to do so by the Court.

(v)      The same concerns applied in relation to the advice requested at item 6 of Schedule 1. 

(vi)     It was willing to provide the metadata documents to the extent it was able to do so

(vii)     It would provide the attachments requested subject to a review of any claims for privilege that might be made.

(viii)    It was also willing to provide the fee notes, but it did not consider that these documents should go any wider than the Representor and the particulars of such fee notes should not be shared with F or E.

34.     Advocate Robertson for the Second Respondent echoed Advocate Renouf's concerns about the Representor's motivation in making the application.

35.     He also emphasised that the overall thrust of the case had not changed. Fundamentally, the case was about the alleged failure of the First Respondent to have regard to the wishes of the Representor, and instead to have regard to the wishes of the Second Respondent by appointing him as a beneficiary and making distributions to him.

36.     The original order made by Commissioner Clyde-Smith on 6 August 2021 at paragraph 1 directed that the obligation to make discovery was not to extend to the personal and financial affairs of the Second Respondent. He also referred to the history of the discovery process. Initially, the discovery previously ordered was limited to how the ownership interest in Company 1 had been run, why the Second Respondent was added to the trust, how this was done and what was taken into account, and whether what has been done had prejudiced the tax position in Country 3.  This disclosure was only to be from 16 March 2018. The discovery was then extended to all matters raised on the parties' pleadings regarding the breach of trust claim. The discovery was therefore extended by a consent order approved by an Act of Court dated 25 November 2022 to "all relevant documents" including all documents relevant to the amendments to the Amended Representation and the amended responses of the First and Second Respondents.  This had led to the Second Respondent filing three discovery affidavits.  The history of the discovery process meant that the Representor had to adduce prima facie evidence that there were documents in the Second Respondent's possession that were relevant to the pleaded issues and which had not been provided.

37.     In relation to distributions made to the Representor, it was important to understand what the Second Respondent's case was in relation to those distributions. The Second Respondent's case was that the current structure was established for the benefit of the Second Respondent and that the Second Respondent was intended to become a beneficiary. There was therefore no need to inform the Country 3 tax authorities that the Second Respondent was an actual beneficiary because he was not. The same analysis applied to F. 

38.     The Second Respondent's position, in relation to distributions during the lifetime of the Representor, was set out at paragraph 8.3 of his amended response.  Distributions made were either made as gifts of virtually the whole amount of the Trust distributions to the Second Respondent and / or F, or else were invested "for their benefit and at their direction". More detail had also been set out in the affidavit of the Second Respondent sworn on 19 January 2024 to paragraphs 67(e)(x) -“ (xii). This evidence was all consistent with the tax advice obtained in relation to the Country 3 and returns made by the Representor to the Country 3 tax authorities.  This was also set out in tax advice from Ernst & Young to the Representor dated 15 April 2014, which included the following statement:

"Any unconditional gifts made by you to [O], [N] and [F] will be regarded as capital and as such free from tax -“ only income generated from the unconditional gifts will give rise to an income tax charge."

39.     I was also referred to a letter dated 19 March 2014 from Ernst & Young in Country 3 to the income tax division of Country 3which contained the same statement.

40.     In relation to the Second Respondent's divorce in 2010, his former wife knew of his role at Company 1 at the time of their divorce, which was in 2010 or 2011.  The Second Respondent had received a gift of some £2 million from the Representor which was disclosed in the divorce proceedings. It was also unclear what Advocate Baker was seeking in relation to the divorce and therefore what evidence his client was required to file in response.

41.     In relation to the comments applicable to the requests which overlapped with the requests made against the First Respondent, Advocate Robertson in his written submissions reminded me of the applicable legal tests on specific discovery applications. 

42.     In relation to Company 1, the Second Respondent's position was that it was only management or administration of the Trust' ownership interest in Company 1 that was relevant, not management or administration of Company 1 itself.

43.     The requests in relation to Company 4 and withholding taxes were speculation.

44.     The requests in respect of the re-domiciliation of Company 6 had nothing to do with re-domiciliation itself, but was a further act instigated by F with the aim of damaging the trust structure.

45.     The request in respect of metadata was not relevant to any of the issues pleaded and the Second Respondent referred to the failure of the Representor to identify what issues the metadata was relevant to.

46.     In respect of documents concerning statements by B Senior, these were not in the possession, custody or power of the Second Respondent.

47.     In relation to detail of any individual voluntary arrangements, these were entered into more than thirty years ago and had no relevance to the issues pleaded.  In any event, the Second Respondent did not have any documents in his possession or control.

48.     Likewise, in relation to any documents or any discussions with Ms Waite, the Second Respondent did not have any documents in his possession or control, and he did not receive any documents from Ms Waite. 

49.     Advocate Baker, in reply, indicated it was not difficult for the Second Respondent to disclose what he had said in his divorce and therefore for his case to be tested.

50.     In relation to tax returns, the Representor, in her tax returns to Country 3, had stated that she did not have the power to enjoy the income of a personal association of persons corporate or otherwise not already declared on this return. 

Discussion and decision

51.     The starting point for my decision was the previous discovery orders made in this case.  The first of these was made on 16 March 2021, as follows:

"(1). the Representor, the First Respondent and the Second Respondent shall provide disclosure, verified by affidavit within twelve weeks, of all the documents ("the Documents") relevant to the issues raised in these proceedings which have been placed before the Court to date, with the following clarifications -

(a) the status of the Representor, the nature of her role as settlor or principal beneficiary, such disclosure to be from 24 January 2006, the date when the P Trust was established; and

(b) disclosure in relation to all other issues raised by the Representation including how the ownership interest in [Company 1]. has been run; why was the Second Respondent added to the trust; how was this done; what was taken into account; has what has been done prejudiced the tax position in [Country 3]? Such disclosure to be from 16 March 2018."

52.     In August 2021, for reasons set out in his August 2021 judgment (Representation of C re P Trust [2021] JRC 205), Commissioner Clyde-Smith at paragraph A(1) of the Act of Court of the same date ordered that "until further order of the Court, the obligation upon the First Respondent and the Second Respondent to make discovery shall not extend to the personal and financial affairs of the Second Respondent".

53.     The second Act of Court dated 23 December 2021 required both the First and Second Respondents to explain the discovery exercise they had carried out to comply with the Act of Court of 16 March 2021 and to provide electronic discovery to the extent that they had not already done so.

54.     Subsequently, by consent, as recorded in an Act of Court dated 25 November 2022, discovery was extended in light of the amendments to the pleadings referred to in the Privacy Judgment. The Representor, the First Respondent and the Second Respondent were therefore each required to "give discovery of all relevant documents (including all documents relevant to the amendments in the Amended Representation and the Amended Responses of the First and Second Respondents) ("the Documents") by provision of an additional List of Documents verified by affidavit by 5:00pm on 9 December 2022".  Affidavits of discovery were subsequently provided.

55.     I have referred to these discovery orders because I accepted the submissions made by the Respondents, in particular by Advocate Robertson for the Second Respondent, that the relevant law in relation to the Representor's requests is as set out in Hanby v Oliver [1990] JLR 337 and Vilsmeier v AI Airports International and Another [2014] 1 JLR Note 26. where I summarised the test as follows:

"On an application for specific discovery, an applicant is required to show (a) a prima facie case that the defendant has, or has had, documents that have not been disclosed; (b) that the documents in question are relevant to matters in issue in the case-relevance is determined, primarily, by reference to the issues pleaded; and (c) that an order for specific discovery is necessary for disposing fairly of the case (Victor Hanby Associates Ltd. v. Oliver, 1990 JLR 337, Ltd. v. Barclays Private Bank & Trust Ltd ., 2007 JLR N [24]."

The onus was therefore on the Representor to satisfy me that these tests have been met for each of its applications.

56.     In relation to the argument that some of the issues which led to the requests were referred to in affidavits and that a Representation is not the same as an Order of Justice as a pleading, while I accepted that a Representation was not necessarily the same as an Order of Justice, in this case the parties had agreed that what was relevant would be determined by pleadings by reference to the Act of Court of 25 November 2022. Secondly, in removal proceedings where there are serious allegations made about a trustee's conduct and that a trustee should be removed as a consequence, a trustee is entitled to know the allegations being made against it.  In my judgment, the proper place for such allegations is a representation or in a subsequent pleading where a trustee may file a pleading in response.  Such types of disputes, although they are administrative for the reasons set out in the privacy judgment, often involve significant hostility between the parties, as well as the making of serious allegations.  Where serious allegations are made, they should be made clearly on the face of some form of pleading, and it is the pleading that should then determine what discovery is ordered. Ultimately, it will be the pleadings that will also determine the issues to be resolved at any trial of a removal application. It is therefore not enough simply to make assertion in the evidence in such cases without a party setting out what its case is in some form of pleading. Without this discipline, cases brought by representation seeking removal of a trustee based on misconduct could become unmanageable and could be conducted on the basis of trial by ambush. That is no longer appropriate in these days of active case management and the overriding objective. The reliance on references in affidavits was not therefore enough of a foundation to determine what the issue were between the parties where specific discovery was sough unless that evidence flowed from a pleaded issue. 

57.     I have set out this conclusion because in relation to requests 1 to 6 of Schedule 1 attached to the Representor's fifth affidavit, which were replicated for the Second Respondent, I was not satisfied that there was a pleaded issue identified to justify these requests :-

(i)        In relation to Company 1, the issue was about the administration of the ownership structure of Company 1, not the management or administration Company 1 itself. This was clear from paragraph 21(k) of the Amended Representation. However, there was no allegation anywhere by the Representor of any failure to monitor the performance of Company 1, or no allegation that the First Respondent should have taken steps to alter the composition of the board of Company 1.

(ii)       In relation to Company 4, this was also not raised either in the Representation or the Amended Representation. The reference at paragraph 21(h) was a reference back to the matters pleaded at paragraph 13b which did not concern the resignation of Company 4.  The same applied to request 3 of Schedule 1. 

(iii)      Requests 4, 5 and 6 appeared to be directed at the decision to re-domicile and the implementation of that re-domiciliation.  As both Respondents noted, the information sought went back many years because the re-domiciliation took place in 2014.  The only reference in the Amended Representation to this was arguably paragraph 21(k) which alleged that K took undue tax risks in making key management decisions in Jersey on behalf of non-Jersey resident companies.  However, that reference was not a general allegation concerning the decision to re-domicile or whether it was implemented properly.

58.     However, because these issues had been touched upon in affidavits, as is set out in in more detail later in this judgment, at the hearing on 16 May, I allowed the Representor an opportunity to make a further amendment if it wished to do so to its pleadings in relation to these requests.  I further directed that if the amendments were refused then the applications would be dismissed.

59.     In relation to the remaining requests, I made no order in relation to the metadata documents because I was not satisfied that these documents were relevant.  No evidence had been adduced by the Representor to explain why they were relevant.

60.     In relation to request 8 of Schedule 2 concerning documents made by B Senior in his divorce proceedings, I refused these because I was not satisfied that those documents were in the possession, custody or power of the Second Respondent.

61.     In relation to item 9 of Schedule 2 and the individual voluntary arrangements, I refused these applications because I was not satisfied they were relevant to the pleaded issues between the parties. The origin of funds to acquire Company 1 was not relevant to why the Representor was seeking the removal of the First Respondent as trustee

62.     In relation to request 10, this was also refused as I was not satisfied that the Representor had persuaded me that the Second Respondent held any such documents. The material referred to was an enquiry from RBC.  Any records held by RBC were therefore not within the possession, custody or power of the Second Respondent.

63.     In relation to the request for discovery of the Second Respondent's tax documentation, this was refused.  The Representor has the benefit of the tax returns filed in Country 3 and Country 3 tax advice.  The Representor also has the benefit of a number of documents referred to in the affidavits which can be put to the Second Respondent in cross-examination.  Given the clear tax advice from Country 3, I did not see why other tax returns are going to assist given the documentation already referred to on the question on whether the P Trust was held for the Representor or for the benefit of the Second Respondent. 

64.     In relation to matrimonial documents, I accepted that the Representor wishes to test the Second Respondent on what he said in his divorce which took place some twelve years ago.  However, I limited this to anything he said about his status as an "ultimate intended beneficiary of [P Trust]", but directed that the Second Respondent was not required to file any other material because this was not relevant to the issue the Court will have to determine.

The application to re-amend

65.     Advocate Thomas for the Representor sought four categories of proposed re-amendments which he described in his Skeleton Argument as:

(i)        The false KYC representation issue (paragraphs 21H, 24 and 24A);

(ii)       The withholding taxes issue (paragraphs 21(kk) -“ (kkk);

(iii)      The resignation of Company 4 (paragraph 21kkk); and

(iv)     Company 1's performance (paragraph 21(ll).

66.     The paragraph numbers referred to are those in the draft Re-Amended Representation filed with the Court and the parties as part of the application to amend. 

Submissions

The Representor's submissions

67.     Advocate Thomas (who was present throughout the hearing leading to the Privacy Judgment, but not the specific discovery application) made the following submissions.

68.     The false KYC representations all flowed from the representations pleaded at paragraph 13b of the Amended Representation where, on the First Respondent's own case it had made statements to banks consistently identifying and treating the Representor as the Settlor of the P Trust and the N Trust (consistent with the Representor's case) but now inconsistent with the case advanced by the First and Second Respondents.  This led to the Representor contending that the First Respondent was not capable of administering P Trust for the welfare of its beneficiaries and that its continuance as trustee would be detrimental to P Trust and its beneficiaries.  These were matters in the alternative, both of which justified the First Respondent being removed.  The fact that the amendments might lead to regulatory misbehaviour being identified did not preclude the amendment being made.  This amendment was made on the basis of the pleadings only and therefore did not give rise to any additional evidence.

69.     In relation to second amendment at paragraphs 21(kk) and (kkk), (the withholding taxes issue), this allegation raised both that the First Respondent provided incorrect instructions to tax advisers or alternatively failed to properly implement the advice received when re-domiciling Company 6 to Country 1 in 2014.  The first of the allegations related to the decision to re-domicile Company 6; the second part related to the decision to maintain Company 6's domicile in Country 1.

70.     Advocate Thomas contended that the amendments did not involve allegations of a breach of duty which therefore avoided issues of prescription.  Rather, his focus was what the trustee said at the time to justify the re-domiciliation and whether the trustee was making true statements.  That led him to other statements which the Representor was alleging were misrepresentations made by the First Respondent.

71.     Advocate Thomas emphasised paragraph 4.1 of the corporate tax review carried out by Ernst & Young in Country 2 dated 6 February 2018 which stated:

"We understand that [Company 7] changed its residency and in consequence tax residency because the primary intention of key management / important stakeholders / important employees was that they move personally to [Country 1]. Further reason to reallocate the main holding was to achieve a stronger and more sophisticated preferential investment protection which we understand [Country 1] offered compared to the [Country 3]."

72.     This was an example of the broader approach that applied in relation to the removal of trustees discussed in Erinvale Ptc Limited [2021] JRC 241 at paragraphs 33 and 34.

73.     Even if therefore a claim for breach of trust in relation to withholding taxes was arguably prescribed, Erinvale permitted the Court to remove a trustee based on misconduct. 

74.     When the Court was exercising a power of removal, it was also not necessary for the Court to make adverse findings and it was only sufficient for a party to make out a good arguable case about the issues raised (see Re Trafalgar Trust [2021] JRC 327 at paragraphs 111 to 113).

75.     In respect of the withholding taxes issue, Advocate Thomas also argued that the issue was not a new one.  The issue had been raised by K in January 2020, as referred to in the first affidavit of the Representor at paragraph 106(e)(iii). The issue was also raised at paragraphs 50 to 53 of the second affidavit of the Representor.  Evidence in response had also been filed by The First Respondent, through K, at paragraph 49 and by the Second Respondent in his affidavit sworn on 19 January 2022, and in his fifth affidavit at paragraph 7. The parties had therefore already been addressing the case by reference to Toucan Energy Holdings Limited v Wirsol Energy Limited [2021] EWHC 895 at paragraph 9.

76.     Advocate Thomas contended it was not therefore necessary to go behind the factual evidence; nor was expert evidence necessary.  The role of the Court was simply to look at the instructions given, the advice received and whether it had been followed.

77.     In relation to the resignation of Company 4, the issue behind the application was why they had resigned, as referred to at paragraph 129 of K's affidavit of 19 January 2024.  The fact that this allegation was arguably time barred did not prevent the Representor from relying on it as a ground for removal. The case of the Representor was that the Respondent was responsible for the resignation based on contemporaneous evidence that the First and Second Respondents were meeting with Company 4 around the time of their resignation. 

78.     The fourth category related to the performance of Company 1. The allegation made at paragraph 21(ll) of the draft pleadings was a failure to monitor or properly monitor the poor performance of Company 1, to take such steps as where necessary to rectify performance, including by causing the board of Company 6 to remove the present directors and management team. The justification for the removal was the decline in net profit between 2018 and 2022.  Advocate Thomas submitted that K for the First Respondent and another director of Company, Q, had the power between them to change the board of Company 1 but had not done so. The Representor was entitled to raise the issue, even if it could also be raised by the N Trust.

79.     In respect of the general principles on an application to amend, Advocate Thomas contended that the relevant principles were summarised in Financial Technology Ventures 2 (Q) LP v ETFS Capital Limited [2020] JRC 152 at paragraph 11. Insofar as questions of lateness were raised, this was to be applied on a case by case basis. Consideration in particular should be given to whether the amendments had already been raised on the evidence or on the basis of existing facts.

Submissions for the First Respondent

80.     Advocate Renouf for the First Respondent emphasised the applicable legal test on an application to amend as set out in Cunningham v Cunningham [2009] JLR 227, and subsequent cases which have applied that judgment.

81.     He also emphasised the importance of the overriding objective.

82.     In relation to the present case, he contended that the application was undoubtedly brought late.  This was because the matters in dispute had been the subject of dispute for nearly five years, with proceedings on foot for almost four years. The Representation had been amended once already, with discovery being completed two and half years ago. He also emphasised that the trial of the matter had twice been delayed and if the amendments were granted there was a risk of the trial dates being further adjourned. This was because any amendment of pleadings was likely to lead to pleadings in response, further discovery and possibly other evidence.

83.     It was therefore important that the Representor explained why the matters now pleaded had not been pleaded before, which the Representor had not done. 

84.     It was also not enough simply to say that matters had been referred to in evidence.  The functions of pleadings was so that a party knew the case against them (see Patel v JTC [2022] JRC 150 at paragraph 85).

85.     A continuation of the proceedings also had to be looked at in the context of the First Respondent not seeking to want to continue as trustee.  Rather, it was caught between two beneficiaries who could not agree.  The First Respondent would be willing to step aside if all agreed that it could do so, but otherwise the First Respondent remained in office and subject to its obligations as trustee for what was a complex structure.  It was therefore important for the First Respondent to reach a conclusion. 

86.     Any compensatory costs for allowing the amendment was not sufficient to address the First Respondent's concerns.  Nor did a compensatory costs order assist in relation to what was a war of attrition. He therefore expressed his client's view that what was occurring here was that the N Trust was being used to fund litigation to attack the First Respondent and the Second Respondent.

87.     In relation to each of the categories put forward by the Representor, Advocate Renouf made the following submissions.

88.     Firstly, he accepted that the first category of amendments flowed from paragraph 13(b) of the Amended Representation.

89.     In relation to the second category and the amendments at paragraph 21(kk) -“ (kkk), if the amendments were allowed, this would lead to the trial dates being vacated.  The amendments would also give rise to a need for expert evidence as to whether there was a tax issue.  It was not enough simply to say there was a risk of a tax issue without having to work through whether or not there was an issue was wrong.  The Representor's approach of raising a prospect of an issue relating to tax meant that the First Respondent would not be able to respond to that risk if the Representor's approach was adopted. 

90.     The Ernst & Young tax advice relied upon was also only in draft and therefore did not represent the Court having the full picture.

91.     In relation to the Erinvale decision, he emphasised paragraph 35 and that disagreement between beneficiaries was not a sufficient ground to remove a trustee.  What was necessary was to find something which persuaded the Court that trust property would not be safe or that the trust would not be properly executed in the interests of the beneficiaries.  He therefore emphasised there was no evidence that any tax authority had raised any issue.

92.     In relation to the third category, Advocate Renouf took me through the exchange of correspondence between Company 2 and Company 4 at the time of their resignation which included the following statement:

"We note with disappointment that the deadline for our receiving the attached completed and signed trustee declaration from [Company 2] has lapsed and have therefore been left with no option but to proceed as per our email of the 16th January. We are thus terminating our engagement and the provision of our services, including resigning from our positions as directors within [Company 6]"

It was therefore clear why Company 4 had resigned which had nothing to do with the First Respondent.

93.     In relation to the fourth category, this was a new allegation of breach of trust which was prescribed. It would also need additional discovery, factual evidence and expert evidence, and would inevitably put back the trial date. Q was also an independent non-executive director on the Board of Company 6. He had been appointed in 2015 with the agreement of F and the Second Respondent before any disagreement between beneficiaries.  He was also paid by Company6, not the First Respondent. There was therefore no basis to suggest that the First Respondent had any power to change the board of Company1. The composition of the board of Company 1 was also a matter to be raised at the board of Company 6.  To date it had not been raised.  The issue was therefore hopeless and was a back door attempt to pursue areas of dispute between F and the Second Respondent.

Submissions for the Second Respondent

94.     In relation to the applicable legal principles, Advocate Robertson had also set those out in his Skeleton Argument for the Second Respondent.  In particular, he emphasised paragraph 36 of my decision as Master in Trico Limited v Buckingham [2019] JRC 163, where I cited with approval the observations of Miss Justice Carr in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (comm). At paragraph 36 of the Quah Su-Ling judgment, Miss Justice Carr stated that a late application to amend would be refused if it was clear that the proposed amendment had no real prospect of success and state that the test to be applied was the same as for summary judgment.

95.     He also contended that this was a late application to amend because if the amendments were granted there was a serious risk of the trial dates being adjourned. 

96.     In relation to the Toucan Energy decision referred to by Advocate Thomas, he emphasised paragraph 10 and the observation that "the mere fact that an issue has received some attention in the preparation of the case and the expert's reports is not necessarily sufficient to make permission to amend appropriate".

97.     In relation to each category of amendment sought, Advocate Robertson made the following submissions.

98.     Like Advocate Renouf, he did not dispute that leave to amend could be given in respect of the first category because it was arguable that the amendments followed on from what had been pleaded already at paragraph 13b of the Amended Representation.

99.     The remaining grounds however if permitted would require additional pleadings in response, additional evidence of fact and expert evidence.

100.   He was also critical of the lack of explanation as to why these issues had not been raised before.

101.   He also supported the position that it was not enough to rely on what he called vague assertions in affidavits which did not set out the case the Representor now wished to advance.

102.   There was also no evidence as to the strength of the new allegations which was required as a matter of law.  The test was not therefore that the claims were so hopeless that they should not be struck out.

103.   In relation to the second category of the amendment sought, there was no evidence to show that there was a withholding tax issue for the Court to determine or form a view as to what the trustee did or failed to do.  For the court to carry lout such a task, it would need to receive extensive evidence.  This would include expert evidence to determine the extent of any tax risk arising by virtue of the First Respondent's conduct.  Without evidence of foreign tax law, the Court could not assess the conduct, or the extent of any risk posed by the First Respondent's conduct.  The requirement for expert evidence on this issue meant that the trial dates would have to be vacated if the amendments were granted.

104.   In relation to the third category, the Representor had failed to address that there was no evidence that Fenlight caused Company 4 to resign.  The Representor's Skeleton at paragraph 29, which stated "If it is the case that Fenlight caused [Company 4's] resignation ." meant that the Representor's amendment was hopeless.

105.   What evidence there was also showed that why Company 4 resigned was the failure by Company 2 to provide the appropriate KYC documentation.  The failure was therefore the failure of the then trustee of N Trust to provide the documentation that Company 4 required.

106.   In respect of the fourth category and the allegations in respect of Company 1, this was an allegation of a failure to monitor which was a new allegation.  There were only hints about that in the evidence, but nothing more.  The role of Company 6 in relation to Company 1 was described at paragraph 5.2 of the Second Respondent's fifth affidavit which made it clear that the First Respondent was not involved in the day-to-day running of Company 1.

107.   In relation to Company 6, the First Respondent only had one representative on the board of Company 6 and was not therefore in a position to replace the board of Company 1 in any event.  Paragraph 6.4 of the fifth affidavit of the Second Respondent also set out an explanation for the fall in profits.  To test that again would require extensive discovery and expert accounting evidence to analyse why profits had fallen.  It was not enough simply for the Court to look at the accounts.

108.   The Second Respondent at paragraph 6.8 of his fifth affidavit also emphasised that no request had ever been made to replace the board of Company 1.  Rather, this was an attempt by F to embarrass the Second Respondent.  To suggest that a board that had been there for many years and where the Second Respondent had been in the business for thirty years was described by Advocate Robertson as "utterly fanciful".  To allow the amendments would cause serious injustice, again, because the trial dates would have to be vacated.

109.   Advocate Robertson also submitted that the proceedings brought by the Representor were being funded through F or N Trust which produced an unjust equality of arms.  The Representor had failed to respond to these assertions.

Submissions in reply

110.   Advocate Thomas, in reply, contended that amendments were permitted unless they were so hopeless that they would be liable to be struck out (see paragraph 11(ii) of Financial Technology Ventures).

111.   In relation to Company 6, no one ever disputed the tax advice.  It was also accepted by the Second Respondent there was a tax issue by reference to paragraph 88(iv) of his own affidavit). The tax advice was therefore already before the Court to enable it to at least adjudicate on the first part of amendments sought under the second category which would allow the Court to determine the first part of the amendments at paragraph 21kk that the First Respondent provided incorrect instructions.  That did not require expert evidence.

112.   Sub-paragraph 21(kkk) followed on from the existing assertion at paragraph 21(k) that K had been taking undue tax risks by making key management decisions in Jersey.

113.   In relation to why Company 4 resigned, Advocate Thomas referred to an email from R dated 23 January 2020, where in respect of the request for a Declaration of Trust, she stated as follows:

"As to your request regarding the N Trust declaration of trust. You refer to that being the "updated" version. There is only one declaration of trust, and always has been. I am assuming you already have this as it is a core trust document. Its retention must be required as a matter of your basic client due diligence obligations from the inception of your engagement."

114.   This indicated that there was something more going on.

Decision on the application to re-amend

115.   In relation to an application to amend, there have been a number of authorities which considered these principles. In Trico v Buckingham [2019] JRC 163, as Master, I summarised these principles at paragraphs 35 to 38 as follows:

"35. In respect of the Jersey position, I was referred to MacFirbisigh v C.I. Trustees an Executors Limited and Others [2014] (1) JLR 244 where I summarised the applicable legal principles on an application to amend at paragraphs 27 to 30 including citing the decision of Cunningham v Cunningham [2009] JLR 227.  In summary, the principles was covered by paragraph 21 of Cunningham as follows:-

"21     Where there is a late application for an amendment to the order of justice (or to the answer or reply) the Jersey courts have to strike a balance which is primarily between the parties to the instant case.  The burden on the applicant is a heavy one to show, for example, (1) why the matters now sought to be pleaded were not pleaded before; (2) what is the strength of the new case; (3) why an adjournment should be granted, if one is necessary; (4) how any adverse effects on the other party including the effects of any adjournment, any additional discovery, witness statements or experts reports, or other preparation for trial can be remedied; and (5) why the balance of justice should come down in favour of the party seeking to change its case at a late stage of the proceedings."

36. My decision in MacFirbisigh however was prior to the introduction of the overriding objective into the Royal Court Rules in June 2017.  The current approach in England to late applications to amend therefore goes further than the approach in MacFirbisigh and other previous decisions on applications to amend.  In Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm), Mrs Justice Carr DBE summarised these principles at paragraphs 36 to 38 as follows:-

"36.    An application to amend will be refused if it is clear that the proposed amendment has no real prospect of success. The test to be applied is the same as that for summary judgment under CPR Part 24. Thus the applicant has to have a case which is better than merely arguable. The court may reject an amendment seeking to raise a version of the facts of the case which is inherently implausible, self-contradictory or is not supported by contemporaneous documentation.

37. Beyond that, the relevant principles applying to very late applications to amend are well known. I have been referred to a number of authorities - Swain-Mason v Mills & Reeve [2011] 1 WLR 2735 (at paras. 69 to 72, 85 and 106); Worldwide Corporation Ltd v GPT Ltd [CA Transcript No 1835] 2 December 1988; Hague Plant Limited v Hague [2014] EWCA Civ 1609 (at paras. 27 to 33); Dany Lions Ltd v Bristol Cars Ltd [2014] EWHC 928 (QB) (at paras. 4 to 7 and 29); Durley House Ltd v Firmdale Hotels plc [2014] EWHC 2608 (Ch) (at paras. 31 and 32); Mitchell v News Group Newspapers [2013] EWCA Civ 1537.

38. Drawing these authorities together, the relevant principles can be stated simply as follows:

a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted;

b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission;

c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept;

d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;

e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation;

f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;

g) a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so."

37. The Court of Appeal in Nesbit Law Group LLP v Acasta European Insurance Company Limited [2018] EWCA Civ 268 endorsed this approach at paragraph 41 as follows:-

"41. The principles relating to the grant of permission to amend are set out in Swain-Mason and in a series of recent authorities. The parties referred particularly to Mrs Justice Carr's summary in Quah Su-Ling v. Goldman Sachs International [2015] EWHC 759 (Comm) at paragraphs 36-38 of her judgment. In essence, the court must, taking account of the overriding objective, balance the injustice to the party seeking to amend if it is refused permission, against the need for finality in litigation and the injustice to the other parties and other litigants, if the amendment is permitted. There is a heavy burden on the party seeking a late amendment to justify the lateness of the application and to show the strength of the new case and why justice requires him to be able to pursue it. These principles apply with even greater rigour to an amendment made after the trial and in the course of an appeal."

38. In my judgment, the approach now taken in England should be reflected in this jurisdiction and therefore greater emphasis should be given to the overriding objective compared to the approach taken in MacFirbisigh and other decisions in Jersey.  I stress however this is a change of emphasis rather than a marked departure from the previous approach because some of the factors in MacFirbisigh overlap with those now relied upon before the English Court.  Nevertheless that change of emphasis giving greater emphasis to the overriding objective is one that in the future I consider should be taken in this jurisdiction."

116.   This decision however was not considered by the Royal Court in the Financial Technology Ventures decision relied upon by Advocate Thomas.  However, I do not consider that Commissioner Clyde-Smith, at paragraph 11(ii), where he stated "amendments will not be permitted which infringe the rules of pleadings or introduce a claim which is so hopeless that it would be liable to be struck out" was determining for late applications to amend, that it was only hopeless amendments that would not be permitted. This is clear from paragraph 11(iii) where he noted that "more stringent considerations apply where an application to amend is late".  Once a Court finds that an application is late, Commissioner Clyde-Smith recognised at paragraph 11(iii)(b) that the Court could consider "the strength of the new case". The Quah Su-Ling decision referred to in Trico is itself a decision as noted at paragraph 36 of Trico, a decision on late applications to amend.  It is therefore clear that the observations at paragraph 36 of that judgment, set out at paragraph 36 of Trico, is the test applicable to late applications to amend.

117.   The English Court of Appeal in the Nesbit decision, referred to at paragraph 37 of Trico, were of the same view, where they stated, "There is a heavy burden on the party seeking a late amendment to justify the lateness of the application and to show the strength of the new case and why justice requires him to be able to pursue it".

118.   In my judgment, the present case is a late application given that the litigation was commenced over four years ago, that the last round of amendments took place two and a half years ago, and the parties have been through an extensive discovery exercise and a complex exercise of filing extensive evidence.

119.   The relevant legal principles also require a balancing exercise, as also noted in the Nesbit case, where the Court is required to, "taking account of the overriding objective, balance the injustice of the party seeking to amend if it is refused permission, against the need for finality in litigation and the injustice to the other parties and other litigants if the amendment is permitted".

120.   The principles I set out in Trico are therefore the principles I have applied.

121.   In relation to the first category of re-amendments concerning paragraphs 21(h), 24 and 24(A)of the draft Re-Amended Representation, ultimately the First and Second Respondents accepted these re-amendments because they all followed on from paragraph 13(b) of the Amened Representation which allegations were inserted in 20 June 2022.  In my judgment, the First and Second Respondents were right to accept these re-amendments.  They did not require any additional evidence than the evidence already filed and simply followed on from an allegation made in June 2022. There was no prejudice for this category which could not be met by the usual costs order made on an amendment being granted.

122.   In relation to the second category of amendments found at paragraph 21(kk) and 21(kkk), these amendments were refused.

123.   Firstly, the allegation that the First Respondent provided "incorrect instructions" and / or failed "to properly implement the advice received" were allegations of breach of duty.  Yet this was not a new issue as it has been known to the Representor for some considerable time and was therefore arguably prescribed. In that regard I noted that a direct allegation of breach of trust would be struck out on the basis that it was arguably prescribed (see Bagus v Kastening [2010] JLR 355). While I accepted that this was not a claim for breach of trust in respect of these amendments, and that the test for a removal is as set out in Erinvale Ptc Limited [2021] JRC 241 at paragraphs 33 to 37, Erinvale does not address directly what should happen in respect of allegations of misconduct that are prescribed but which are relied upon to justify a removal of a trustee. 

124.   In my judgment, the approach contended for by Advocate Thomas would allow any dissatisfied beneficiary to try to seek to remove a trustee on the basis of past misconduct whenever it occurred, even though the time for bringing any such claims for breach of duty had long since passed.  Such an approach would allow one beneficiary in disagreement with the others to try to cause disruption by having the trustee removed.  Yet disagreement between beneficiaries is not a sufficient ground to the removal of trustees as is clear from Erinvale and other authorities.  Something more is required which has to meet the threshold that the trust property will not be safe or that the trust will not be properly executed in the interests of the beneficiaries. That something more might be fraud (in which case a claim for breach of trust would not be prescribed or dishonesty or a lack of fidelity (see the extract from Lewin cited at paragraph 34 of Erinvale). Each case will be determined on its own facts to see how far back a trustee seeking a removal might go and whether what would be prescribed breaches of duty might be taken into account   Past breaches of duty alone about which no beneficiary has complained, and which claim to alleged breach of trust is prescribed, without something more, does not meet that threshold.

125.   In this case, the Representor had not explained why a particular issue on withholding tax meant that trust property was not safe, or that the Respondent would not properly execute the trust in the interests of the beneficiaries. There was also no allegation of dishonesty or a want of fidelity. It was also significant that the Representor had not produced her own tax advice to say that there was in fact a problem.  Rather, she was simply hinting that there might be a problem.  She did not therefore show a strong case that the trust property would not be safe, or that the trust would not be properly executed in the interests of the beneficiaries as a whole.

126.   In addition, if this category of re amendment had been allowed, it would have needed discovery of the entire tax advice obtained and all communications in relation to the advice and its implementation.  It might well also have needed further evidence of fact because the First Respondent would wish to respond to the allegations that it had failed to obtain advice correctly and / or had implemented that advice in breach of duty. There would also likely be expert evidence on withholding tax, as to whether there is in fact a tax issue.  The Court could not adjudicate a claim for removal on the basis that there might be an issue as Advocate Thomas contended, by reference to the Ernst & Young advice. That would not have been fair to the First Respondent.

127.   All this additional evidence made it inevitable that the trial would have to be adjourned.  Yet this was a claim that was started four years ago.  The balance on this issue therefore clearly came down in favour of the First Respondent.  In addition, refusal of the proposed re-amendment under this category did not prevent the Representor from pursuing her case on the existing grounds relied upon.

128.   The fact that these issues were touched upon in the affidavits was also not sufficient to persuade me to grant leave. The analysis at paragraph 56 above applied to the application to re amend, just as it applied to the specific discovery application. The reliance on the Toucan Energy decision did not assist.  Amendments, even late amendments, which are no more than a formality, bringing a party's case into line with what has been argued for months, will clearly be allowed. In the Toucan case, the relevant issue, the subject of the amendment, had been dealt with by some other witnesses of fact and experts. The present case was very far from that and instead falls within paragraph 10 of the Toucan decision cited at paragraph 96 above.  The issue raised by paragraphs 21(kk) and 21(kkk), while it might have received some attention in affidavits, was very far from a complete evidential picture for the Court to be able to determine the same, if allowed. . 

129.   I also accepted the submissions of the Respondents that compensation in costs was not sufficient where a case has been running for four years and where parties wish to know where they stand. In addition, in this case, although the First and Second Respondents had indicated that they believed the Representor is being funded by F and / or the N Trust, the Representor failed to respond to that allegation.  While the Court was not entitled to know at this stage of proceedings how a party was being funded, when set against the background of hostility between the Second Respondent and N, the lack of a response that the Representor's approach was part of a war of attrition tipped the balance of justice further in favour of refusing the amendments.

130.   In relation to the third category of amendments and the resignation of Company 4, while the issue was addressed in the affidavit of K, sworn on 19 January 2024 at paragraph 129, the documentary evidence he exhibited indicates that Company 4 resigned because Company 2 did not provide the documentation that Company 4 required.  In relation to this amendment therefore the threshold that the amendment must have a real prospect of success was not met.  By reference to paragraph 29 of the Representor's Skeleton, the Representor's case amounted to no more than fishing or speculation.  There was no evidence to show that Company 4 resigned for any other reason than that set out in the contemporaneous exchange of documents between Company 4 and Company 2.  To allow this amendment would therefore have allowed the application to remove a trustee to be brought on the basis of speculation and the hope that something might arise. 

131.   In addition, this re-amendment was also late because Company 4 resigned in March 2020.  Again there was no explanation as to why the application to amend was only made at this stage.  As with the second category of re-amendments, the claim is again arguably prescribed and the same reasoning set out above for prescribed claims also applies to the third category. It is also difficult to see why the resignation of a corporate services provider could lead to a conclusion that the First Respondent was endangering trust property or acting dishonestly, or a want of proper capacity to execute it or showing a want of reasonable fidelity.

132.   Whether this amendment would cause an adjournment of trial was not possible to determine because much would have depended on the attitude of Company 4.  It was therefore the weakness of the case, and the lack of any explanation as to why it had not been brought before, that in my conclusion justified the refusal of this amendment.

133.   In relation to the fourth category concerning the administration of Company 1 at paragraph 21(ll), this was an allegation of breach of duty in the sense of an allegation that the First Respondent had failed to "monitor or properly monitor the poor performance of Company 1".  To the extent the allegation concerned declines of profit occurring more than three years ago since the delivery of accounts, part of the claim might arguably be prescribed and therefore ran into the same difficulties as the second category of re-amendments sought.

134.   To the extent the claim was not prescribed, for the Court to determine this claim would have required significant evidence about the reasons for the declining profits. While the Second Respondent had provided some evidence on the issue, both he and the First Respondent would be entitled to adduce full evidence in response to such an allegation. There would also be a need for additional discovery. Both would also be entitled to call expert evidence to consider whether the statements made by the Second Respondent explaining why profits declined were reasonable opinions to conclude, or whether the decline in profits should have led the First Respondent to step in in some way.

135.   There were also problems with the other part of the allegations which concern the failure to replace the present directors and management team of Company 1.  In relation to this part of the proposed re-amendment, the First Respondent does not possess the power to replace the board of Company 1.  He is only one director on a board of three.  To the extent that the Representor sought to suggest that Q was not independent, there was no basis for such an assertion.  This allegation therefore did not meet the required threshold to show that there was a serious issue to be tried. It is doubtful that it would even meet the strike-out threshold.

136.   In addition, there was no explanation as to why the allegation had not been made before, given that the last amendment took place in 2022, and what is alleged is a fall of profits between 2018 and 2022.

137.   The fourth category was also an issue which it was more appropriate for the N Trust to raise, if it wishes to do so, as the other 50% shareholder in Company 1.  To have allowed the amendment at this stage ran the risk of turning what are removal proceedings in relation to disputes between equal partners in a significant business. In addition, the lack of any explanation about funding these proceedings was also pertinent to this category of proposed re-amendments.

138.   For all these reasons the application was also refused for the fourth category of re-amendments.

139.   Consequential orders

140.   As a result of refusing the amendments sought in respect of the second, third and fourth categories of the proposed re-amendments, the discovery requests set out at paragraph 3 of the Act of Court of 16 May 2024 referred to at paragraph 6 above were also dismissed for the reasons set out at paragraphs 54 to 57 above.

141.   I also directed evidence in reply in respect of the existing issues should be filed in August and issued directions for a pre-trial review.

Postscript

142.   It is also right to record in this judgment that subsequent to arguments being filed, the hearing and the decision I had reached, while this judgment was in the course of preparation, the Representor passed away unexpectedly.  However, while I was informed of the Representors passing (and vacated the trial dates as a consequence) as I had already reached my decisions, I completed this judgment so that the parties were aware of my reasons and so that any question of costs could be still determined.  In doing so, I set out my reasons on the basis of the submissions made by the parties, disregarding the fact that the Representor had subsequently passed away.

Authorities

Chu v Lau [2020] 1 WLR.

Lewin 20th Edition.

Representation of C re P Trust [2021] JRC 205.

Hanby v Oliver [1990] JLR 337.

Vilsmeier v AI Airports International and Another [2014] 1 JLR Note 26

Erinvale Ptc Limited [2021] JRC 241

Re Trafalgar Trust [2021] JRC 327

Toucan Energy Holdings Limited v Wirsol Energy Limited [2021] EWHC 895. 

Financial Technology Ventures 2 (Q) LP v ETFS Capital Limited [2020] JRC 152. 

Cunningham v Cunningham [2009] JLR 227. 

Patel v JTC [2022] JRC 150. 

Trico Limited v Buckingham [2019] JRC 163.

Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (comm)


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