Desmond Devaux Claimant v [1] Richard Johnson [2] Gerard Bergasse Defendants [ECSC]
| Jurisdiction | St Lucia |
| Judge | Belle. J |
| Judgment Date | 22 March 2012 |
| Judgment citation (vLex) | [2012] ECSC J0322-1 |
| Court | High Court (Saint Lucia) |
| Docket Number | CLAIM NO. SLUHCV 2010/0783 |
| Date | 22 March 2012 |
IN THE HIGH COURT OF JUSTICE
CLAIM NO. SLUHCV 2010/0783
The Claimant in this case is a beneficiary of a trust which was pursuant to the Will of Marie Camille Thérèse Devaux (deceased) mother of the Claimant Desmond Devaux and the Executor of the Will Charles Devaux.
The Trustees paid the Claimant $3000.00 per month and made provision for any special needs of the beneficiaries such as "house repairs car replacement and the like," to be paid to the Claimant from the trust fund.
On 10th June 2003 the Trustees/Defendants invested $150,000.00 with CLICO. During the period June 2003 to February 2008 the Trustees/ Defendants invested $820,000 in four Executive Flexible Premium annuities with CLICO.
However the Claimant discovered in about June 2010 that the Defendants had invested the trust funds with CLICO and according to him the trust amount was in trouble. He relied on public knowledge that CLICO had suffered massive financial reverses and was in the process of being dissolved. He therefore filed this Claim to secure his beneficial entitlement under the trust deed.
In his Claim Form the claimant claimed:
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(1) An account of all of the Defendants' dealings with the trust, with substantiating certificates, deeds and other source documents and supported by an affidavit;
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(2) An order that the Defendants do furnish to the Claimant details of the investments of the trust, including copies of all certificates of deposit or other documents representing those investments.
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(3) A declaration that the CLICO investment was unauthorised;
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(4) An order that the Defendants make good any loss to the trust ascertainable upon taking of an account occasioned to the trust by the unauthorised investment.
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(5) A declaration that the Claimant is entitled, upon replenishment of the trust, to have the trust amount paid to him;
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(6) Interest thereon at 6% per annum from the date of the said investment (to be ascertained) or such other rate and such other period as the Court shall think fit;
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(7) Further or other relief;
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(8) Costs.
The Claimant claimed in his statement of Claim that by letter dated 19th April 2010 the Claimant, through his solicitors requested the following from the Defendants:
"to be allowed on behalf of the Claimant to inspect the accounts of the trust and the vouchers supporting them;
Details of the investment of the trust, including the copies of all certificates of deposit or other documentation representing those investments."
According to the Claimant the Defendants had failed/ or refused to comply with the said request.
The Defendants admitted receiving the Claimant's request but denied that they refused to comply and explained that they submitted audited accounts prepared by an independent accountant to the Claimant every three years as mandated by paragraph 12 (viii) of the Will.
The issues in the case are as follows:
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1. Did the Defendants/Trustees fail to provide accounts of the trust to the beneficiary/the Claimant when required to do so?
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2. Did the Defendants breach their fiduciary duty as Trustees by investing the bulk of the trust funds in CLICO?
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3. Do the Trustees' duties include the duty to have regard to the standard investment criteria which are (a) the suitability to the trust of investments of the same kind as any particular investment proposed to be made or retained and of that particular investment as an investment of that kind and (b) the need for diversification of investments of the trust in so far as is appropriate to the circumstances of the trust, based on the relevant law in England which applies pursuant to Article 916A of the Civil Code?
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4. Was the scope and sufficiency of the advice given by the person duly qualified in financial matters part of the Claimant's case?
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5. How is the phrase "the law of England for the time being in force "to be interpreted?
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6. How is the duty of care of the Trustees to be exercised?
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7. Were the Trustees impartial in the exercise of their duties.
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8. Can the beneficiary bring the trust to an end?
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9. Are the Trustees liable to make good any loss to the trust?
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10. Are the Trustees liable to pay costs?
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11. Can costs be paid to the Trustees from the trust fund?
At the outset it was apparent that the Claimant had not filed any evidence in support of his Statement of Case. The Claimant was therefore not permitted to give evidence at trial. There was therefore no body of evidence before the court in support of the Claimant's claim. However the Claimant's counsel submitted that the Defendants could still be cross-examined and evidence based on the cross-examination may support the Claimant's case.
The case proceeded on the basis of the evidence of the Defendants alone.
Was there a duty on the part of the Defendants to have regard to and did they apply the standard investment criteria?
The Claimant's case was that the Defendants invested the trust funds with CLICO without informing the Claimant and without consulting a person who is reasonably believed by the Defendants to be qualified by his ability in and practical experience of financial matters on the question of whether the new investments are satisfactory having regard to all the circumstances of the trust. The Claimant alleged that this was contrary to clause 12 of the Will.
Counsel for the Claimant argued further that the trustees were obliged to achieve the minimum standard investment criteria required for investors based on section 5 (1) of the Trustee Act (UK) which applies in Saint Lucia via Article 916A of the Civil Code.
Counsel argued cogently that subsection (3) of Article 916A provided that the law of England for the time being in force governing the rights and duties of trustees and beneficiaries under a trust shall be extended to Saint Lucia. Subsection (4) of Article 916A goes even further and states that whenever by the law of England a beneficiary of a trust is entitled to a right in equity a beneficiary shall be entitled to a like right under the Civil Code.
Counsel found authoritative support for his view in the decision of the Court of Appeal inEversly Thompson v R Court of Appeal No.9 of 1995 where Byron CJ (as he then was) had occasion to discuss the meaning of the expression "for the time being in force."
Indeed inEversly Thompson v R Byron CJ himself relied on academic writing of Dr Kenney Anthony who had opined in an article titled "The Court and the inter-relation of the Civil Code in a mixed Legal System: St. Lucia revisited" published in Caribbean Law Review that the view most widely accepted is that the law to be applied in these circumstances is the law of England as it stands whenever the court is asked to apply the relevant provision.
Counsel therefore concluded that the court should apply the law of England as it stands today (at time of trial) relating to rights powers and duties of trustees. Counsel citedUnderhill & Hayton Law of Trusts and Trustees, 16th Edition at page 597 where the authors of that text state:
"Trustees cannot lawfully invest funds upon any securities other that those authorized by the settlement or by statute (or in rarer case, by the court)".
Counsel opined that the court should have regard to the standard investment criteria which are, pursuant to The Trustee Act (UK):
(a)the suitability to the trust of investments of the same kind as any particular investment proposed to be made or retained and of that particular investment as an investment of that kind, and
(b)the need for diversification of investments of the trust in so far as it is appropriate to the circumstances of the trust.
Counsel also relied on section 5 (1 ) of the Trustee Act which states:
"Before exercising any power of investment, whether arising under this Part or otherwise, a trustee must (unless the exception applies) obtain and consider proper advice about the way in which having regard to the standard investment criteria the power should be exercised."
Counsel argued that the Defendants' evidence at least from Mr Gerard Bergasse did not say that Mr. Regobert from whom they sought advice on the CLICO investment had practical experience on financial matters relating to the proposed CLICO investment or that the trustees believed that to be the case. He argued further that in the correspondence to which the Defendants refer in which the trustees requested Mr Regobert's advice they did not write that the wanted to know whether investment with CLICO was a good and acceptable form of investment "under the terms and conditions as set out by the trust" and having regard to the standard investment criteria.
Counsel cited the caseCowan v Scargill [1985] Ch 270 in support of the submission that the trustees were in breach of their duty of care to the beneficiaries. In that case the trustees enjoyed a broad power of investment but the court insisted on the following guidelines relating to the duty of care owed by trustees.(ln Summary)
"It is the duty of trustees to exercise their powers in the best interest of the present and future beneficiaries of the trust, holding the scales impartially between the different classes of beneficiaries."
Counsel identified dicta in the case to the effect that the trustees should take such care as an ordinary prudent man would take if he were minded to make an investment for the benefit of otherpeople for whom he felt morally bound to provide. This included the duty to seek advice on matters which the trustee does not understand such as the making of investments.
Counsel cited the need in this context for the trustees to consider diversification of the investment portfolio and the suitability of the...
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