[1] Zorin Sachak Khan [2] Afaque Ahmed Khan [3] Sasheen Anwar Appellants v [1] Gany Holdings (PTC) SA [2] Asif Rangoonwala Respondents

• Jurisdiction: British Virgin Islands
• Judge: Blenman JA,Louise Esther Blenman,Justice of Appeal,Gertel Thom,Humphrey Stollmeyer,Justice of Appeal [Ag.]
• Judgment Date: 14 March 2016
• Neutral Citation: VG 2016 CA 3
• Judgment citation (vLex): [2016] ECSC J0314-1
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: BVIHCMAP2014/0018
• Date: 14 March 2016

[2016] ECSC J0314-1

EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Louise Esther Blenman Justice of Appeal

The Hon. Mde. Gertel Thom Justice of Appeal

The Hon. Mr. Humphrey Stollmeyer Justice of Appeal [Ag.]

BVIHCMAP2014/0018

Between:

[1] Zorin Sachak Khan

[2] Afaque Ahmed Khan

[3] Sasheen Anwar

Appellants

and

[1] Gany Holdings (PTC) SA

[2] Asif Rangoonwala

Respondents

Appearances:

Mr. Richard Wilson, QC, with him, Mr. Robert Christie and Ms. Clare-Louise Whiley for the Appellants

Mr. Christopher Tidmarsh, QC, with him, Ms. Arabella di lorio and Mr. Brian Lacy for the First Respondent

Ms. Sue Prevezer, QC, with her, Mr. Andrew Willins for the Second Respondent

Commercial appeal — Whether trial judge made incorrect factual findings — Discretionary Trust — Responsibilities of trustees — Duty of disclosure to beneficiaries — Account of trust assets by trustee — Burden of proof — Breach of Trust — Personal liability to account — Knowing Receipt

A discretionary trust called the ZVM Trust was created by a wealthy businessman, Muhammed Aly Rangoonwala ("MAR"). His daughter Zorin Sachak Khan, her husband, Afaque Khan, daughter, Sasheen Anwar ("Zorin") 1 and Zorin's brother, Asif Rangoonwala ("Asif") are among the beneficiaries of the trust. The ZVM Trust was established by MAR on 24 ^th September 1982 and US$100 vested in the trust. The trustee of the Trust at that time was a company called Schweizerisch Finance Limited (SFL). SFL was succeeded as trustee of the trust by Maly Investments SA ("MISA"), which was in turn succeeded by Gany Holdings (PTC) SA ("Gany"). Asif is also a director of Gany and appointor of the Trust.

After Gany was appointed as trustee, shares in a Hong Kong registered company called European Commodities Limited ("ECL HK") were transferred to Gany. ECL HK held the shares in the English registered company, Valson International Limited ("Valson") as nominee for MAR. Two days after the ECL HK shares were transferred to Gany, one share in European Commodities Limited BVI was allotted to Gany.

Following MAR's death, Zorin sought to have the trustee account for the assets that formed part of the ZVM Trust as she was convinced that the Trust had very substantial assets. The trustee refused to account for the Trust's assets. Subsequent to MAR's death, substantial monies were paid to the beneficiaries. Zorin contended that the moneys that were paid came from the ZVM Trust; however, Asif asserted that the monies came from a separate MAR foundation. Zorin had received substantial sums of money which had belonged to her father but was unconvinced that her father's assets had been properly distributed. Asif and Gany told Zorin that the ZVM Trust was an empty shell but Zorin was of the view that Asif and Gany were not being forthright. Asif had initially indicated that the ZVM Trust had no assets and that his father had given all of the remaining assets to him. Nevertheless, Zorin pressed Gany and it eventually admitted that the ZVM Trust had assets in the nature of shares in ECL HK but asserted that they were not of significant value.

Very belatedly, it was revealed to Zorin that the assets in the ZVM Trust which, were taken to mean the ECL HK shares, were appointed out to Asif on 22 ^nd December 1998. Convinced that the Gany was not properly accounting to the beneficiaries, Zorin filed proceedings in order to have Gany account for the assets of the ZVM Trust. The learned commercial court judge gave directions to Gany to account to the beneficiaries, but despite

those directions, which Gany purported to comply with, Zorin had remained unconvinced that Gany had provided full accounts. She therefore filed a claim against Gany and Asif in which she sought to have Gany removed as trustee of the Trust and Asif as appointor. Zorin also sought to have the court declare that the appointment was void or liable to be set aside and grant an order setting aside the appointment. In addition, she sought a number of reliefs against Gany and Asif, including a declaration that Asif is liable to account as constructive trustee.

The proceedings were heard by the learned commercial court judge who made a number of findings of fact and findings of law. He held that the burden of proof was on Zorin to show that the account was deficient and that she had failed to do so. The learned judge held that there was no breach of trust and refused to set aside the 1998 appointment. In addition he held that the trustee was not under a misconception when it appointed out the assets to Asif. He further held that Asif was not personally liable on the basis of knowing receipt as constructive trustee and dismissed the claim against Asif. The learned judge therefore dismissed Zorin's claim and awarded costs against her to Gany.

Zorin, being dissatisfied with the judge's decision, appealed against the judgment in relation to several findings of fact and findings of law, including, that the ZVM Trust had ceased to have any significant assets; that the burden of proof was on Zorin to establish that the assets held by Gany were held on trust for the ZVM Trust and that she had failed to do so; that the 1998 appointment was not a sham; that the trustee was not under a misconception when it appointed out the assets to Asif; and that the appointment was valid and there was no breach of trust.

Held: allowing the appeal; and making the orders as set out in paragraph 112 of the judgment; and ordering that Gany pay Zorin's costs in this Court and in the court below to be agreed within 21 days, failing which, costs to be assessed by a commercial court judge, that:

• 1. The law is well settled in relation to the approach an appellate court will take on an appeal against a trial judge's findings of fact. An appellate court which is disposed to come to a different conclusion on the printed evidence should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses could not be sufficient to explain or justify the trial judge's conclusion. The appellate court may take the view that, without having seen or heard the witnesses, it is not in a position to come to any satisfactory conclusion on the printed evidence. The appellate court, however, either because the reasons given by the trial judge are not satisfactory, or because it unmistakably so appears from the evidence, may be satisfied that the judge has not taken proper advantage of having seen and heard the witnesses, and the matter will then become at large for the appellate court.

  Thomas v Thomas [1947] AC 484 at pp. 487–488 applied; Central Bank of Ecuador and others v Conticorp SA and others [2015] UKPC 11 at para. 5 applied; McGraddie v McGraddie and another [2013] UKSC 58 at para. 1 applied; Beacon Insurance Company Limited v Maharaj Bookstore Limited [2014] UKPC 21 applied; re B (A Child) (Care Proceedings: Threshold Criteria) [2013] 1 WLR 1911 at para. 53 applied.

• 2. In the case at bar there was overwhelming evidence before the judge to indicate that in addition to the ECL HK shares, Gany held shares in ECL BVI, Cedilla Investments SA and Schweizer Holdings. It was clear that the ZVM Trust contained assets that were significantly more than US$100. Accordingly, the learned judge made an incorrect finding of fact when he stated that there was no evidence that Gany held the shares in these companies.

• 3. A trustee as legal owner of property for the benefit of the beneficiaries has control over the trust assets. The trustee has a fiduciary duty to the beneficiaries in respect of the trust property. The trustee usually has all management and ownership functions in respect of the trust property. The beneficiary's only remedy is to ensure that the trust property is properly administered in accordance with its terms and the trustee's fiduciary duties. The trustee must maintain accurate accounts of trust property and it is the first duty of a trustee to be constantly ready with his accounts. The trustee's duty to account is the irreducible core minimum of the trusteeship.

  Armitage v Nurse and others [1998] Ch 241 at p. 253; Davis v Administrator-General (1969) 14 WIR 111 applied; O'Rourke v Darbishire and others [1920] AC 581 at p. 626 applied.

• 4. If a settlor of a trust subsequently transfers to or vests further monies or assets in the trustees, then a presumption arises that those further assets are to be held by the trustees on the same terms as the original trust. Similarly, if a person purchases property in the names of the trustees of a settlement previously made by him, there is a presumption that he meant to add the property to the trust fund.

  Re Curteis' Trusts (1872) LR 14 Eq 217 applied.

• 5. On the evidence that was before the learned commercial court judge it was clear that there were assets vested in Gany which it held as trustee of the ZVM Trust. The learned trial judge was of the incorrect view that if Zorin wished to challenge that the only assets in the ZVM Trust (aside from the immaterial US$100) were the shares of ECL HK, the onus must be on them to show that the account is deficient. This was an error of law. Instead of placing the burden on Gany to rebut the presumption that the assets form part of the ZVM Trust, he incorrectly placed the burden of proof on Zorin. Gany ought to be held liable to account to Zorin for all the assets that have been held or held by it as trustee of the ZVM Trust together with all assets which came into possession from MAR or from anyone on his behalf, since Gany failed to lead any evidence in rebuttal.

  Re Curteis' Trusts (1872) LR 14 Eq 217 applied.

• 6. The failure of a trustee to consider a relevant consideration or factor can give rise to a breach of trust in administering the trust. Trustees are to take the interests of the beneficiaries into account during the...