Guernsey Law Reports 2005-06 GLR Note 2
IN THE MATTER OF THE TUBUOH TRUST
ROYAL COURT (Carey, Bailiff): March 11th and May 12th, 2005
Trusts—costs—indemnity
A Ghanaian created a settlement, of which a Guernsey bank (“the original trustee”) was the trustee; the terms were those of a standard discretionary trust, identifying members of his extended family as beneficiaries. The bank later moved its business to Jersey, and the funds were consequently transferred to the applicant trust company. Proceedings were initiated in England against the original trustee by a Ghanaian company, of which three of the beneficiaries under the trust were directors, seeking a declaration that it was in fact the owner of the trust funds. It was agreed that the original trustee was obliged to defend the proceedings because such a declaration would have caused unfairness and difficulty for the applicant. The applicant therefore made a retrospective Beddoes application in respect of the costs of defending the action.
The Royal Court (Carey, Bailiff) adjourned the application sine die, pending the outcome of the proceedings in England. The English proceedings were subsequently struck out on the basis that leave for service out of the jurisdiction had been improperly granted, and the Ghanaian company was ordered to pay the applicant’s costs.
Held: In dealing with a Beddoes application, the court would normally canvass the views of the beneficiaries, who would have the opportunity of being heard as to whether they felt there were grounds to restrict the indemnity. However, since the beneficiaries were all resident in Ghana, rather than flying them to Guernsey to be heard—a considerable expense—the applicant would be ordered to send a report to all the discretionary beneficiaries, detailing the action taken and the extent to which it was seeking indemnity out of the trust fund. Any beneficiary seeking to restrain the trustee from paying out the moneys had to do so by an action in Guernsey within eight weeks of the sending out of the report. The trustees were obliged to pay the legal costs incurred in defending the interests of the trust, but the court would always seek to protect innocent trustees, engaged in legitimate business in Guernsey, from unjustified attack and unnecessary expenditure in the furtherance of disputes. On the other hand, the trustees had a duty to be pragmatic and to be aware that the funds were not to be drawn on at their will. They were obliged to consider very carefully any step likely to diminish the trust funds as a result of incurring substantial legal expenses.
2009
Law Report
None
Guernsey Law Reports 2005-06 GLR Note 2