Triple A Trustees Limited
[2020] NZHC 1314
•12 June 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2019-404-796
[2020] NZHC 1314
UNDER Part 19 of the High Court Rules IN THE MATTER
of an application under the Trustee Act 1956
BETWEEN
TRIPLE A TRUSTEES LIMITED
Applicant
Hearing: 13 June 2019 Appearances:
D Bigio QC and C Harris for Applicant
N Ingram QC and M Kyriak for Represented Beneficiaries
Result:
13 June 2019
Reasons:
12 June 2020
JUDGMENT OF DUFFY J
This judgment is delivered by me on 12 June 2020 at 11:30am pursuant to r 11.5 of the High Court Rules.
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Registrar / Deputy Registrar
Solicitors:
Jackson Russell Lawyers, Auckland Kyriak Law, Auckland
D R Bigio AC, Auckland Noel Ingram AC, Auckland
TRIPLE A TRUSTEES LIMITED [2020] NZHC 1314 [13 June 2019]
[1] On 13 June 2019 I delivered a results judgment granting the unopposed originating application to replace Triple A Trustees Ltd with the FFP Trustee (NZ) 2 Ltd (FFP) and ordering the recovery from trust funds of reasonable costs and disbursements of the applicant in making the application.1 My reasons now follow.
[2] The Triple A Trust (the Trust) is a New Zealand foreign trust. The applicant, Triple A Trustees Ltd is a New Zealand registered company and the sole trustee.
[3] The Trust was settled by Ataollah Ahsani on 28 February 2014 and holds assets on trust for discretionary beneficiaries of the Ahsani family. Mr Ahsani is the Trust’s appointor and protector. He holds the power of appointment and removal of trustees. He advised the applicant of his intention to remove the applicant as trustee and to replace it with FFP, which is also a New Zealand registered company. Such replacement automatically triggers an obligation on the part of the applicant to transfer the Trust’s assets to FFP.
[4] The applicant did not oppose in principle its removal or the appointment of FFP as trustee. However, circumstances that were affecting the Ahsani family at the time caused the applicant to seek a Court order authorising the applicant, without liability, to transfer the Trust assets to FFP. Hence this application.
[5] The Ahsani family controls the Monaco based Unaoil group of companies (the Group) based in Monaco, which in 2016 became subject to allegations they had distributed bribes to government officials globally on behalf of multi-national companies being awarded government contracts within the oil industry.
[6] In March 2016 the United Kingdom Serious Fraud Office (UK SFO) commenced an investigation into the Group in relation to possible offences of bribery, corruption and/or money laundering committed under United Kingdom law. Authorities in Monaco, at the request of the UK SFO, searched the homes of the Ahsani family. In May 2017 Mr Ahsani’s son, Sassan, was arrested by the UK SFO and his documents were seized. He was later released with no charges laid. The UK SFO raided offices of the Group and homes of members of the Ahsani family in the
1 Re Triple A Trustees Ltd [2019] NZHC 1336.
UK and seized documents. In September 2017 a warrant for the arrest of Saman Ahsani on a charge of criminal conspiracy in connection with bribery was issued by the Westminster Magistrates Court. In February 2018 the Court of Appeal of Monaco denied an extradition request by the UK SFO. At the time of bringing the originating application the applicant understood the UK SFO investigation was on-going. In June 2018 the UK SFO issued a press release stating that it had commenced criminal proceedings against companies within the Group. The applicant was advised that the UK SFO has since indicated it would withdraw the summons against one of the companies within the Group, but that criminal proceedings may yet be commenced. The applicant has also been advised that the French, United States of America and Australian authorities have either been assisting the UK SFO with its investigation or maybe conducting their own investigations into the Ahsani family or the Group.
[7] The Ahsani family and the Group deny the allegations. The applicant understands the Ahsani family required funds from the Trust to help meet their legal expenses. Further, that as a result of the allegations and the UK SFO investigation, the Ahsani family decided to remove the applicant as trustee and appoint a replacement trustee with experience in dealing with distressed assets and the threat of litigation with government authorities. FFP, the intended new trustee, was established by the directors of FFP Cayman Ltd which is a specialist fiduciary services provider based in the Cayman Islands. The applicant was comfortable with the proposed new trustee’s appointment. The applicant was not aware of there being any specific investigation into, or adverse claims or potential claims, contemplated against the Trust’s assets. The possibility that proprietary claims by third parties such as foreign based regulatory authorities (against the Trust assets) could not, however, be ruled out.
[8] The applicant was aware that where a trustee becomes aware of adverse claims or potential claims to the trust fund or any part of it, a trustee should act with caution. If it fails to do so, the trustee will be held personally liable to an adverse claimant should it deal with the trust fund when on notice of an adverse claim and such claim is subsequently proven to be well founded.2
2 Guardian Trust and Executors Company of New Zealand Ltd v Public Trustee of New Zealand
[1942] AC 115 (PC) at 127.
[9] The applicant refers the Court to subsequent authority that has held that the principle in Guardian Trust is limited to “a reasonably arguable claim” and not one that is specious with no arguable foundation.3 In such cases trustees will not be able to distribute safely on their own authority once they have notice of a claim, or of circumstances which could give rise to a claim unless “they are able to take the view that the claim is almost indisputably a bad one”.4 In such cases trustees are “well advised” to seek the directions of the Court.5
[10] Further, the need for trustees to act with caution is not limited to situations where the trustee has notice of an existing adverse claim to trust assets. Trustees should also exercise caution where they have notice of circumstances that could give rise to a claim.6 In Finers v Miro the Court acknowledged the potential liability of trustees based in constructive trust where a trustee has knowledge of potential fraud claims against the beneficiaries. In that case no claims had been against the trust fund by third party claimants.7
[11] The applicant is aware that under English law the UK SFO has various powers to pursue assets that may constitute proceeds of crime; ss 6 and 7 of the Proceeds of Crime Act 2002 (UK) provides for a confiscation order in respect of a defendant’s proceeds of crime. While it is not certain whether the Ahsani family or the Group are being investigated in other jurisdictions, it is possible that equivalent laws relating to proceeds of crime may implicate the Trust’s assets. The applicant finds itself therefore in the position where it is on notice of circumstances that could give rise to a claim, however, it does not have transparency as to the status and possible outcome of any such criminal investigation. The applicant understands that the UK SFO investigation relates to alleged breaches of UK bribery laws for a period from 2002 onwards. The applicant is not in a position to safely take the view that any potential claim by the UK SFO or other regulator is “indisputably a bad one.”
3 Sinel Trust Ltd v Rothfield Investments Ltd [2003] JCA 048, [2003] WLTR 593, Jersey CA at [30].
4 Lynton Tucker Lewin on Trusts (19th ed, Sweet and Maxwell, London, 2014) at 26-031.
5 Above at 26-028.
6 Finers v Miro [1991] 1 WLR 35 (CA).
7 Above at [45].
[12] Accordingly, the applicant sought directions from this Court to protect it from liability when transferring the Trust assets to FFP. The Court has jurisdiction to make such direction either under the Trustee Act 1956 or pursuant to its inherent jurisdiction to supervise the administration of trusts.
[13] Here, the applicant relies on the Court’s inherent equitable jurisdiction to supervise the administration of trusts, including in appropriate cases to permit or direct a trustee to distribute trust assets notwithstanding the existence of claims or potential claims against the trust fund by third parties.8 Where a trustee is faced with a practical difficulty in establishing the existence of possible beneficiaries or other claimants the trustee can, in reliance on the principle established in Re Benjamin, apply to the Court for a direction to the trustee enabling it to distribute trust property on the assumption of fact that there is no such beneficiary or claimant. Such direction has come to be known as a Benjamin order, the making of which is a function of the inherent jurisdiction of the Court to supervise and administer trusts.9
[14] Originally the principle in Re Benjamin was applied to allow a trustee to distribute trust assets in circumstances where a beneficiary was missing or could not be identified. However, over time this principle has been extended to apply, for example, to trust creditors rather than just beneficiaries. The requisite basis for a Benjamin order being “evidence of the practical impossibility of proof of the fact or event sought to be established”.10 When the Court makes such an order it does do not “have the effect of destroying any proprietary rights of third parties but may afford protection against personal claims against trustees from third parties.”11
[15] Here the applicant submits that the unknown status or merit of potential adverse claims to the Trust assets by overseas regulators present a practical impossibility for the applicant in establishing potential proprietary claims. Thus, the applicant is not in a position to determine whether it holds assets on a constructive
8 Re Benjamin [1902] 1 Ch 723.
9 In Re MF Global UK Ltd (in special administration) (No 3) [2013] EWHC 1655, [2013] 1 WLR 3874 (Ch) at 3881.
10 In Re Gess [1942] Ch 37 cited in Re MF Global UK Ltd (in special administration) (No 3) [2013] EWHC 1655, [2013] 1 WLR 3874 (Ch) at 3881.
11 Lynton Tucker Lewin on Trusts (19th ed, Sweet and Maxwell, London, 2014) at 26-033; Re Green’s Will Trusts [1985] 3 All ER 445 at 462 cited in Re Plato [1989] 2 NZLR 360 (HC).
trust for potential claimants. However, the applicant considers that at the very least it is on notice of circumstances which could give rise to a potential claim. A Benjamin order will therefore allow the applicant to transfer the whole of the trust assets to FFP on the assumption of fact that there is no current proprietary claim, and without the risk of personal liability in the future. The transfer does not prejudice the position of the UK SFO. The regulator is aware of the application as well as the details of the new proposed trustee should the UK SFO wish to make any claim on the trust assets in the future.12
[16] From the evidence the applicant filed in support of the application I was satisfied that the UK SFO was fully informed of the application and had not sought to oppose it. Insofar as regulatory authorities of other jurisdictions may have an interest in the Trust assets, such interest has not been advanced to the point where those authorities could be identified with precision and orders directing service made, as was the case with the UK SFO.
[17] The proposed new trustee is also a New Zealand registered company. Accordingly, any proceedings taken in this country against FFP will proceed in the same fashion as if they were brought against the applicant. The effect of transferring to a new New Zealand registered trustee company creates no additional impediment to bringing proceedings against the trustee of this Trust. This circumstance must have been implicitly understood by the UK SFO as can explain the neutral position this agency has assumed, after having been notified of the commencement of this proceeding.
[18] Accordingly, I was satisfied that it was appropriate to make the orders sought in exercise of the inherent jurisdiction available to me, as recognised by the Benjamin line of case law.
[19] The applicant also sought approval for the transfer of the Trust assets to FFP pursuant to s 66 of the Trustee Act 1956. The exercise of this jurisdiction was recently
12 At the direction of Whata J (minute dated 20 May 2019) the applicant has notified the UK SFO of the application. The UK SFO has advised the applicant’s solicitors in writing that it “has considered the application and does not seek to make any observations regarding the application.”
considered in Re Honoris Trust13 where Fitzgerald J found that the trustees’ ability to seek a “blessing order” fell into one of the four categories of cases in which the Court will give directions to trustees, namely where a trustee has formed its own view of the appropriate course of action, but it nevertheless seeks the Court’s blessing given the course of action is momentous. Further, a trustee who is in genuine doubt about the propriety of any contemplated course of action may seek the Court’s approval under s 66. In Chambers v S R Hamilton Corporate Trustee Ltd14 s 66 was described as an enactment of the Court’s broad equitable jurisdiction that has long resided in Chancery Courts, which recognises that a trustee who is in genuine doubt is always entitled to seek the Court’s guidance as to the contemplated course of action in the exercise of a trustee’s discretionary or fiduciary duties.15 The applicant contends that directions given under s 66 are similar to a Benjamin order in that a directional order made under the statutory provision does not prejudice the rights of a potential third party claimant.
[20] In this proceeding certain represented beneficiaries of the Trust appeared and consented to the order sought by the applicant to transfer the trust property to FFP without liability to the applicant, and for recovery of reasonable costs of the applicant from the Trust’s assets. The represented beneficiaries departed slightly from the applicant’s position insofar as they contended that the applicant is not so much aware of any threatened adverse claims against the Trust assets, but rather the applicant is concerned about a potential for such claims. This slight distinction is enough to cause the represented beneficiaries to submit that an order under s 66 is unnecessary or should not be granted in the alternative. The represented beneficiaries contend that a court’s “blessing order” under s 66 is not a valid alternative here, and in any event the availability of such an order is academic in circumstances where the parties are agreed a Benjamin like order is appropriate. For this reason the represented beneficiaries reserved their position in relation to any “blessing order” under s 66.
[21] I was satisfied that the orders sought by the applicant were orders that could properly be made in accordance with the Benjamin principle and they did not require bolstering through resort to a “blessing order” under s 66 as well. Accordingly, for
13 Re Honoris Trust [2017] NZHC 2957, [2018] 3 NZLR 160.
14 Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882.
15 Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882 at [32] citing Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] All ER 198 (PC) at 201.
completeness I record that the orders made on 13 June 2019 were made through the exercise of the Court’s inherent jurisdiction and in reliance on the principle established in Re Benjamin.
Duffy J
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