Analysis
Ms Velutini, the claimant, was a 98-year-old woman with very considerable personal wealth, and without any spouse, children or immediate family. This case related to assets in which she was interested and which had been held within trust structures since about 2011, which were said to have a value of between US$30m and US$50m (the assets).
In April 2021, the BCV Foundations Trust (the BCVFT) was formally established in order to replace various trusts formerly in effect. The BCVFT was a revocable English law settlement. In November 2021, Ms Velutini revoked the BCVFT (the revocation) and set up a new trust, called the BCV Trust (the new trust), on substantially the same terms, including in respect of its beneficiaries. The principal difference was that the new trust was irrevocable. The new trust also had new trustees, namely the Geneva Trust Company (GTC) SA (GTC). The defendants had been the trustees of the BCVFT.
In essence, a conflict had arisen between Ms Velutini and the defendants in relation to the former’s repeated attempts to access the assets held in the BCVFT for the purpose of funding a development project in Caracas. The trustees had been concerned that Ms Velutini might have been the subject of undue influence, and were unprepared to release funds for the project prior to receipt of a costed proposal for the completion of various intended works, and a supporting business plan. The trustees also refused to allow the release of funds on the request of Ms Campos, Ms Velutini’s personal assistant, or generally without Ms Velutini conforming to the longstanding process for requesting such releases.
The eventual consequence of this was that another party to the development project (PMA) commenced arbitral proceedings (governed by Venezuelan law) against Ms Velutini (the PMA arbitration) and various corporate vehicles associated with her. They obtained an emergency order for the seizure of goods against Ms Velutini to the sum of US$4m, which was executed by bailiffs at Ms Velutini’s home, terrifying her and causing her considerable distress. It was this incident, coupled with Ms Velutini’s growing frustration at her inability to access the funds held in the trust, and an episode in which a member of the protector committee had left a voice note for Ms Campos, suggesting that ‘perhaps it is a solution for [Ms Velutini] to die now’ and indicating that this would mean that ‘[w]e can keep [Ms Velutini’s] inheritance’, which caused Ms Velutini to revoke the BCVFT.
Following the revocation, various forms of correspondence were exchanged, in which, among other things, the defendants disputed the validity of the revocation, alleged that there was a possibility that Ms Velutini lacked capacity or was being subjected to elder abuse, and generally proceeded in a way which the Master characterised as ‘high-handed, hostile and entirely inappropriate for an experienced professional trustee’.
By this action, Ms Velutini sought directions from the court, and further sought:
- (i) a declaration that she had revoked the trust by the revocation, and that consequently the former trustees held the assets on bare trust for her and at her direction;
- (ii) an order that the former trustees transfer those assets to GTC, alternatively to Ms Velutini, by a specified date; and
- (iii) all necessary and/or consequential orders, accounts and enquiries which for the purposes of this application included:
- (a) the level of the retention the former trustees were to be permitted to retain; and
- (b) whether the former trustees should be entitled to rely on their indemnity.
The former trustees acknowledged that the trust had been validly revoked and that they were in principle obliged to transfer the assets to GTC, nor did they dispute the validity of the exercise of the power to revoke in respect of the BCVFT. Their position was that the transfer of the assets to GTC should take place on the provision of appropriate and reasonable indemnities. Ms Velutini continued to pursue a declaration as to the validity of the revocation, on the basis that the former trustees had previously challenged its validity. Ms Velutini acknowledged that the former trustees were entitled to reimbursement for costs and expenses reasonably incurred in the administration of the trust but disputed their entitlement to receive the costs of this claim.
Held:
The declaration as to the validity of the revocation would be granted, notwithstanding that the defendants no longer challenged its validity. It would be of genuine utility in light of the doubts which had previously been raised concerning elder abuse, undue influence and Ms Velutini’s capacity. It was the most effective way of resolving the issue and providing certainty and comfort to the claimant, the defendants, the new trustees and the beneficiaries of the trust, and moreover to third parties, and would hence eliminate any need for satellite litigation on this point.
As to the transfer of assets to the new trustees, the defendants opposed any order setting a time period for its completion. They contended that there was no need for the court to interfere, there having been no prejudice to the claimant caused by any delay since she intended the assets to be held in the new trust once transferred. These were not good or compelling reasons for not making an order, but instead demonstrated a lack of urgency and a continuing apparent resistance to the transfer, which themselves made a time-limited order appropriate. Prejudice would be caused by delay, given Ms Velutini’s age and her potential need to undertake future planning with the new trustees.
For that reason, the court indicated that if the transfer of the assets had not been completed by the time the judgment in this matter was handed down, an order would be made requiring that both the claimant and the defendants take all such steps (including procuring that others take any necessary steps) to complete the transfer of the assets by a date 28 days after the hand-down of the judgment. At the end of that period, the court would require a witness statement on behalf of the defendants and on behalf of the new trustees which should set out what each party said remained outstanding for the transfer of the assets and provide an indication of the overall timescale to complete the transfer. A hearing would be listed approximately six weeks after hand-down to consider what further order if any should be made.
As to the scope of the retention which the defendants were entitled to make, the defendants contended that they should be entitled to retain US$1.5m indefinitely, taking into account the risk to them of having to defend a claim against them in the PMA arbitration, the expected handover costs, and the costs of this claim. The claimant did not believe any retention was appropriate in respect of the arbitral proceedings, and generally claimed that the retention should be limited to US$250,000 and held for a period of only three years. The claimant moreover maintained that the defendants should not be able to rely on their indemnity or recover their costs except to a very limited extent.
As to the PMA arbitration, the court held that it was difficult to see any argument according to which the defendants could be made liable as former trustees. At least as a matter of English law the possible claims were ill thought-out and made no sense and would be unlikely to gain any traction. The defendants were not parties to the PMA arbitration, which had been launched while the defendants had still been trustees. The fact that since then the trust structure had moved on twice made the likelihood of any action against the defendants in the PMA arbitration even more remote. Its lack of clarity notwithstanding, the clear purpose of the PMA arbitration notice in describing Ms Velutini’s trust structure was for the purposes of enforcement if any award was not otherwise met, and not as an attempt to pursue a direct claim or any claim against the previous trustees. However, the defendants maintained that they were seeking a retention only to protect against the costs involved in responding to a bad claim.
The court held that the English law test for the reasonableness of a retention (ie that the risk against which a retention protects must be more than merely fanciful) does not, contrary to the Jersey case of White Willow (Trustees) Ltd v Trilogy Management [2022], require only that there not be ‘no risk at all’. The bar is not so low that the risk has to be imaginary or illusory before the court can conclude that the risk is fanciful. The test requires in this context that the potential basis of liability for the trustees be ‘reasonably arguable’. For the reasons given, the risk of a claim against the defendants was less than reasonably arguable. If the transfer of the assets was completed the former trustees would no longer be the relevant trustees in relation to any attempt to unpick the trust structure or pierce the corporate veil by the time the PMA arbitration had concluded, and the possibility of a claim against the defendants directly as (former) trustees was also fanciful and remote.
Although the law of Venezuela might theoretically allow claims against the defendants in the PMA arbitration which would not be arguable under English law, no evidence had been presented as to the differences between Venezuelan and English law. In consequence, the authority of Concord Trust v The Law Debenture Corporation plc [2005] demonstrated that the court was bound to presume that there was no significant difference between the law of the two jurisdictions. On any basis the court had been given no evidence which would have allowed it to assess what a reasonable sum would have been for such a retention. The court would not, therefore, allow any retention on account of the PMA arbitration.
As to the handover and litigation costs, the only dispute was as to the quantum of the retention to be allowed on account of these. Although the court would not normally be asked to engage in determining the amount of the retention for the handover costs or legal costs, here three different figures had been proposed for each and there appeared to be overlap or even possible duplication between the figures sought. The court had to be satisfied that it was permitting a retention on some proper evidential basis, albeit that it did not have to determine the actual handover and legal costs. The figures given by the defendants were uncertain, changeable over time and improperly itemised and particularised, and the evidence in support was flimsy and opaque.
Doing the best it could on the limited evidence, taking into account both the complexity of the trust structure and the nature of the assets and the evidence of the nature and extent of the work needed to effect the handover, and moreover the legal work undertaken by the defendants’ solicitors for which there were actual figures and invoices, but also the absence of evidential support for the global figures claimed, the court ordered a retention of US$500,000 in respect of both handover and legal costs. Any balance of the sums then retained by the defendants should be released.
Although the defendants opposed the imposition of any time limit on the retention, given that no retention had been allowed on account of the PMA arbitration, it was not clear why an indefinite retention should be allowed. By the time the judgment was handed down, the transfer of the assets would either have been completed or else the court would have set a time limit. Once the handover had been completed and this litigation resolved, the defendants would be placed to provide their final figures to the claimant, who in turn could then challenge any sums claimed. The tensions between the parties also made it appropriate not to leave matters open-ended. A time limit would provide focus and discipline. A period of 12 months from the hand-down of the judgment would be more than adequate to allow the handover to be concluded and final invoices for both the handover and the litigation costs to be raised and, if not agreed, to be challenged. Therefore the appropriate time limit would be 12 months from the hand-down of the judgment. The court would, however, expect the parties to co-operate in agreeing any extension if there were any outstanding determinations which required part of the retention to be held for longer. For that reason, the order would include permission to apply.
As to the indemnity, the issue between the parties was whether the defendants could rely on their trustees’ indemnity in respect of costs and expenses occasioned by the revocation and the transfer of the assets. It was settled law that generally former trustees would be entitled to rely on their indemnity to recoup from trust assets expenses properly incurred in connection with the performance of their role as former trustees. The crucial questions were whether the trustees’ expenses had been properly incurred, and had been incurred when acting on behalf of the trust. If a trustee takes an aggressive and/or hostile approach to the claim or behaves unreasonably in all the circumstances, including not taking a neutral position and/or not acting impartially, the court may conclude that the trustees have not acted in the best interests of the trust and have incurred expenses that are not properly incurred, and as such that their indemnity should be curtailed.
In a number of regards the defendants had conducted themselves inappropriately. They had only accepted that the revocation was valid after the claim was issued, and having created doubt and uncertainty as to its status through their failure to accept this previously. This placed the claimant, other former trustees and the new trustees at risk. They had moreover failed to complete the transfer of the assets, and some of the delays in this were caused by or substantially contributed to by the lack of co-operation from and conduct of the defendants. The defendants had moreover retained US$1.5m from assets without providing any proper basis for doing so. Much of the cost and argument over the retention was unnecessarily increased by the defendants’ conduct. These were professional and experienced trustees who had represented the claimant as trustees since 2011. In the circumstances, they had taken an inappropriately aggressive and threatening approach to the claimant following the revocation and had created costs that would not otherwise have been incurred. They had not acted neutrally nor reasonably in the best interests of the beneficiaries in effecting the handover of the assets from the BCVFT to the new trust. Misconduct, for the sake of determining whether a trustee’s indemnity should be curtailed, should be construed widely and includes conduct that is unreasonable in the circumstances.
The court would therefore partially curtail the indemnity allowable to the defendants. The court should approach the determination of the extent of this curtailment on a similar basis to the approach that it would adopt in determining an appropriate order for costs when directing that one party pay a proportion or percentage of the overall costs rather than a distinct part. Doing the best it could, the court would limit the defendants to 70% of their standard indemnity. This order was entirely separate to how any future challenge brought by the claimant against the defendants’ costs in this case would be determined, and would not in any way limit the claimant’s ability to pursue such a challenge in the usual way.
While the claimant had sought to have the scope of the indemnity allowable determined by way of an indemnity basis assessment of particular types of costs, this was a separate question to that of how far the defendants’ indemnity should be curtailed.
JUDGMENT MASTER KAYE: [1] Belen Clarisa Velutini Perez (‘Ms Velutini’ or ‘the claimant’) is 98 years old and wealthy. She has no children, no immediate family, and is unmarried. She has health, sight and mobility issues. [2] Her wealth and her family’s wealth derive from the Velutini family’s involvement in Venezuelan banking which dates back …Continue reading "Velutini Perez v Equiom Trust Corporation (UK) Ltd & anr [2023] WTLR 349"