Jack Cunningham -v- Andrew Cunningham & Others [2009]JRC124

Introduction

This decision of the Royal Court in Jersey provides a helpful explanation of the position regarding a "trustee de son tort" and contrasts such a position with that of a delegate appointed to discharge certain functions by a duly authorised trustee. The judgment also addresses the requirements with regard to an allegation of dishonest assistance.

Background

An application was made to add Sovereign Trust (Gibraltar) Limited ("Sovereign Gibraltar") as an additional defendant to ongoing proceedings, it being alleged that Sovereign Gibraltar had acted as "trustee de son tort" of a Jersey law discretionary settlement (the "Settlement") because it in fact undertook all the work of Sovereign Trust International Limited ("Sovereign International") and sent out invoices in its name. It was also claimed that the exercise by the protector of his power to remove the original trustee of the Settlement and to appoint Sovereign International in its place was void as being a fraud on a power.

"Trustee de son tort"

The Royal Court referred to the applicable principles regarding a "trustee de son tort" (a trustee of his own wrong) and noted that it was essential that, to be categorised as such, a person must not have authority from a trustee and must "take it upon himself" to intermeddle and act as a trustee.

A "trustee de son tort" is to be contrasted with a delegate who is appointed by a trustee to undertake certain functions: such a person derives his authority from the trustee and is entitled to act in accordance with the delegated authority without himself becoming a trustee. A delegate, in such circumstance, has done no "wrong" and is not intermeddling in the trust and so does not become a "trustee de son tort".

In this case, if the allegation that the deed appointing Sovereign International should be declared void were to succeed, the consequence would be that Sovereign International would be "trustee de son tort" as it would have been acting as trustee without authority (although in good faith) and would have intermeddled in the Settlement. However, the allegation being made was that Sovereign Gibraltar was a "trustee de son tort".

With regard to Sovereign Gibraltar, it was explained that it was the service company within the Sovereign group of companies and that it provided various services (such as accounts preparation) to other group companies which acted as trustees of trusts. It was noted that the Settlement contained the necessary power to allow for delegation.

Looking at the allegations being made, namely, that the plaintiff was wrongly excluded as a beneficiary of the Settlement and that sums were wrongly advanced to the first defendant and/or his wife, it was noted that it was pleaded that the advances were made by Sovereign International pursuant to written resolutions which it (i.e. Sovereign International) made, and that there was no suggestion that the exclusions were made by anyone other than Sovereign International.

Decision

The Court did not consider that, if Sovereign International had been validly appointed as trustee of the Settlement, there was an arguable case that Sovereign Gibraltar was thereafter acting as "trustee de son tort".

However, if Sovereign International had not been validly appointed as trustee, Sovereign Gibraltar would not have been acting under the authority of the trustee. Accordingly, the court did not consider that the claim to the effect that Sovereign Gibraltar was acting as a "trustee de son tort" was such that it could be struck out.

In the circumstances, the court therefore gave leave to include an allegation that, in the event that the deed appointing Sovereign International were to be held to be invalid, both Sovereign International and Sovereign Gibraltar were liable as "trustees de son tort" for any losses suffered by the Settlement. However, leave was not given to allege that, even if Sovereign International were to have been validly appointed, Sovereign Gibraltar was nevertheless a "trustee de son tort".

In this context, the court noted that there would be various issues to be addressed, including that as to whether Sovereign Gibraltar could only be treated as a "trustee de son tort" if it had taken possession of the trust fund and whether, if that were to be the case, it had in fact taken possession.

Dishonest Assistance

Amendments were also sought to introduce allegations to the effect that Sovereign International and/or Sovereign Gibraltar and/or Mr Hodgson (group legal director of the Sovereign group of companies) dishonestly assisted the first defendant's breach of fiduciary duty as Protector of the Settlement.

The court noted that the requirements for dishonest assistance were established in Royal Brunei Airlines -v- Tan [1995] 2 AC 378 and subsequently refined in Twinsectra Limited -v- Yardley [2002] 2 AC 164 and Barlow Clowes International Limited -v- Eurotrust International Limited [2006] 1 WLR 1476, and that there was an objective test of dishonesty to be satisfied.

Being a serious allegation, the court considered that an allegation of dishonest assistance required full and proper particulars to be given in respect of each person against whom it was made. In this case, where an "and/or" formulation had been used with regard to who was party to the plan alleged, it was held that the pleading was insufficient.

In the circumstances, an adjournment was granted to allow for the allegations of dishonest assistance to be re-formulated.