Milton Grundy Foundation Trustees Ltd (suing on behalf of The Donald McKinney Foundation) v Tortola Trust Corporation Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Joseph—Olivetti J. |
| Judgment Date | 31 May 2006 |
| Court | High Court (British Virgin Islands) |
| Docket Number | BVIHCV 2001/0031 |
| Date | 31 May 2006 |
IN THE HIGH COURT OF JUSTICE
BVIHCV 2001/0031
Stephen Moverly-Smith Q.C with Keisha Durham of Harney Westwood Riegels for the Claimant
Paul Dennis with Michael Hales of O'Neal Webster for the Defendant
(Charitable Trust — Construction of charging provision in deed — Whether words ‘any trustee who shall be appointed’ are to be interpreted to refer only to a future appointment and not to holder of office when deed executed — whether relationship between the trustee and the Trust can be taken into account in construing provision
Charitable Trust — Extent of Court's inherent jurisdiction to retrospectively sanction payment of fees to a trustee — Is it limited to exceptional cases and is it only to be exercised sparingly — Meaning of exceptional cases — Whether fact that Visitor authorised fees and fees charged for a number of years in any event exceptional)
This case concerns the interpretation of a charging provision in a deed governing a charitable trust known as the Donald Mc Kinney Foundation (‘the Foundation’). The Claimant—Milton Grundy Foundation Trustees Limited (‘MGF’) is the new trustee of the Foundation. MGF claims on behalf of the Foundation, that the Defendant, Tortola Trust Corporation Ltd. (‘TTC’) which was the former trustee acted in breach of trust by wrongfully paying itself fees which it was not entitled to and seeks repayment of those fees. TTC denies the claim relying in the main on the express provisions of the Principal Deed or alternatively on the inherent jurisdiction of the court to sanction a trustee's fees or on the principles of estoppel or on an exculpatory clause in the Principal Deed or section 63 of the Trustee Act Cap 303 which is of similar effect to the Court'sinherent jurisdiction. And it seeks certain declarations by way of counterclaim effectively sanctioning the fees.
Mr. James Milton Grundy gave evidence on behalf of MGF. He is an eminent lawyer, being a member of the English Bar and head of Gray's Inn Tax Chambers, Gray's Inn, London. He is also a director and the principal shareholder of MGF and he is also the Visitor of the Foundation.
Mr, Denys Meade Laurence and Mr. Douglas Mackintosh testified on behalf of TTC. Mr. Laurence is a retired lawyer of the English and Canadian Bars and he has practiced in many of the Caribbean jurisdictions in addition to Europe. His specialty was taxation. His family trust is the majority shareholder in IMT Group Limited (‘IMTG’) the ultimate holding company of TTC. He was a director and the Chairman of IMTG.
Mr. Mackintosh is an experienced accountant and a member of the Institute of the Chartered Accountants of Scotland. He is also a director of IMTG and the managing director of IMT Fiduciary Services Limited which acts as administrator of TTC which Mr. Douglas says is now called IMT Trustees Limited but I will retain the appellation TTC for the purposes of this judgment.
The main issues arising are as follows:—
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(i) Whether TTC as trustee was entitled to remuneration having regard to clause 6 of the Schedule to the Principal Deed,
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(ii) alternatively, If TTC were not so entitled, whether by virtue of the conduct of the Visitor in approving payment of some remuneration, the Foundation is estopped from seeking to recover the moneys TTC wrongly paid itself;
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(iii) alternatively, If TTC were not so entitled whether the court should exercise its inherent jurisdiction to retrospectively sanction the remuneration charged;
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(iv) alternatively, If TTC were not so entitled, whether the court should nonetheless exercise its jurisdiction under section 63 of the Trustee Act Cap. 330 and sanction the fees;
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(v) alternatively, if TTC were not so entitled, whether the Foundation is prevented from seeking to recover the sums TTC paid itself because it delayed in bringing the action;
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(vi) alternatively, if TTC were not so entitled whether the Foundation is precluded from bringing this action by virtue of Clause 8 of the Principal Deed.
The Foundation on whose behalf MGF sues was established by a renowned Bahamian barrister, Senator the Hon. Donald McKinney who lived and practiced in the Bahamas. Mr. Grundy stated that it was established in 1963 but I accept that the date is 1974 as recited in the Principal Deed which was executed on 28th March, 1979. The circumstances surrounding the establishment of the Foundation were that Mr. Grundy, the principal figure behind MGF, became acquainted with Mr. McKinney and they embarked on business together (essentially tax planning and trust management services for international clients) which resulted in the substantial assets held by the Foundation at all relevant times.
It is not necessary for the purposes of this judgment to explore or describe the complex business structure devised by these two good lawyers to ensure that the fiscal authorities did not benefit unduly from their business. It is sufficient to say that they formed a number of companies the most important being General Finance and Banking Ltd. (‘GFB’) which carried on a banking and trust business. The shareholders of that company were seven nominee companies incorporated by Mr. McKinney's law firm. In due course GFB formed subsidiaries including TTC. Eventually all these companies became part of the structure know as the IMT Group of companies. The international tax planning and trust management business was conducted under the umbrella of Tortola Investment Corporation Ltd. (‘TIC’) a corporation incorporated in the Cayman Islands.
Mr. Grundy explained, not one whit humbly,‘these companies essentially put my ideas into practice and in so doing they prospered. Between Mr. McKinney and me, it was understood that the shares in these companies should not belong to either of us, but should be held on charitable trusts and that I should have the right to decide what charities should be supported’. That then was the basis on which Mr. McKinney and Mr. Grundy conducted their business and set up the Foundation.
In 1979 Mr. Grundy drafted the formal documents governing the Foundation with which we are now concerned, although by that time Mr. McKinney had died in a boating accident.
These documents comprise what is called the Principal Deed and the Visitor's Deed. The only party to the Principal Deed is TTC in its capacity of trustee. The Deed is essentially in the form of a declaration by TTC to the effect that the Foundation exists, what comprises the trust property, the uses to which the property is to be put and the powers of the trustees. Recital B of the Principal Deed states that the trusts powers and provisions are to be found in several other instruments,’ and it is desired to express the same in this deed…’ No other instruments identified or produced but in any event this is not necessary as having regard to that recital they are all now contained in the Principal Deed and the Visitor's Deed.
The trust property is described in the Principal Deed as all the shares in TIC. The instrument states in clause 2 that ‘this deed shall be governed by the law for the time being in force in the Virgin Islands.’ The Visitor's Deed bears the same date and is made between TTC and Mr. Grundy. By this Deed, TTC appointed Mr. Grundy the Visitor of the Foundation and gave him certain powers which effectively vested the control of the Foundation in him as he was given power to appoint and dismiss trustees and to advise on how the trust property was to be utilized.
Both parties accept that TTC acted as trustee prior to 1979 and so was not the initial trustee of the Foundation but neither party could say definitely who that was. However, I am not called upon to make a finding on this as it is not necessary for the purposes of deciding the issues before the court.
Thus, in 1979, at the time of the execution of the Principal Deed, TTC was the sole trustee and Mr. Grundy was the Visitor of the Foundation. Subsequently, in 1986, Mr. Grundy restructured the international management trust business. The ownership of TIC was transferred to a private unit trust called International Management Trust. Three quarters of the units were issued to the Foundation in exchange for its shares in TIC and the remaining units to individuals. One of those was Mr. Laurence who received 10% gratuitouslyin 1988 because of his valuable services to the group, 5% to Mr. Singleton and 10% to trustees of the family of AI Murty for like reasons. Thus, the Foundation held units in IMT which owned TTC and therefore the Foundation owned indirectly majority shares in its trustee—a curious situation to say the least.
In all this, to quote Mr. Laurence, Mr. Grundy had an‘all enveloping grip on IMT and the Foundation. He was the reason why IMT existed. He was the Chairman and a member of the advisory board of IMT and made all important decisions in relation to it. He was the principal designer of the tax avoidance schemes that were the basis of that business. He also had control of the entire ownership of IMT through his role as Visitor of the foundation until 1986 when for the first time other investors took units. Even then, the Foundation never owned less than 75% of the units. For those of us who worked at IMT, Mr. Grundy was synonymous both with IMT and the foundation.’1
The Foundation exercised its charitable activities not directly but by supporting other charitable trusts and in particular the Warwick Arts Trust (‘WAT’) established in England. The sole trustee of that trust is MGF. WAT in turn supported the Clara Haskill Trust, another English charitable trust. Mr. Grundy was instrumental in the management of both those other Trusts in...
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