O Trustee v Q

• Jurisdiction: British Virgin Islands
• Judge: Wallbank, J.
• Judgment Date: 10 June 2021
• Neutral Citation: VG 2021 HC 40
• Docket Number: CLAIM NO. BVIHCM 2020/0116
• Court: High Court (British Virgin Islands)

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

COMMERCIAL DIVISION

CLAIM NO. BVIHCM 2020/0116

Between:

[1] O Trustee

[2] P Trustee

Claimants

and

[1] Q

[2] R

[3] S

(A Minor)

[4] T

(A Minor)

[5] U

(A Minor)

Defendants

C

Non-Party/Applicant

Appearances:

Mr. Richard Wilson, QC with him Ms. Sophia Hurst, Mr. Niki Olympitis and Ms. Sara-Jane Knock for the Claimants

Mrs. Elspeth Talbot Rice, QC with her Mr. Oliver Clifton, Ms. Tamara Cameron and Ms. Yegâne Güley for the Non-Party/Applicant

1 Wallbank, J. (Ag.) On 27 ^th July 2020, the Claimants filed a Fixed Date Claim Form. They did so in their capacity as the sole trustees (‘the Trustees’) of two trusts, known as the O Trust and the P Trust respectively (‘the Trusts’). Both Trusts are subject to the laws of the Territory of the Virgin Islands (‘BVI’). The Trustees seek certain directions which would affect the Defendants, who are beneficiaries to the Trusts.

2 There are two related applications before the Court. These have been brought by C. C describes herself as the full-time mother of the Third, Fourth and Fifth Defendants, who are minor children (‘the Minor Children’ or ‘Minor Beneficiaries’) and as the only person having custody and care of them, their father having died. I shall refer to the Third Defendant as S, the Fourth Defendant as T and the Fifth Defendant as U. The first of these applications, filed on 14 ^th September 2020, seeks an order that C be appointed as the Next Friend for the Minor Children and such further and/or other relief as the Court may consider appropriate. The second application brought by C, on 13 ^th November 2020, seeks recognition by this Court of orders made by courts in California and Texas which, she claims, conferred on her the status of mother and/or guardian, or a person otherwise having legal responsibility for each of the Minor Children. This is the Court's judgment in respect of each of these three applications (so far as the Court can and is required to determine them now).

3 Concerning the Claimants' claim, relief is sought pursuant to the Trustee Ordinance 1961, as amended, 1 rules 67 and 23.8, Civil Procedure Rules 2000 (‘CPR’) and/or the inherent jurisdiction of the Court. The goal of the Claimants is to obtain the Court's directions in relation to proposed revisions to the Trusts and the arrangements in respect of them, and approval of what they call certain ‘momentous’ decisions of the Trustees. Before determining that aspect though, which it is premature to do now (as all concerned agree), the Claimants seek orders that would set up an orderly hearing at which the Court will be asked to sanction the proposed decisions. The Claimants seek an order that a Mr. Loh, a senior lawyer, should be appointed as the Next Friend for the Minor Children, so that they can participate in the directions hearing. The Claimants also seek orders that would authorize Mr. Loh additionally to:

• (1) correspond with the Trustees on behalf of the Minor Children in respect of the Trusts generally and in connection with the proposed restructuring;

• (2) interact with the relatives and carers (including C) of the Minor Children as to their needs and requirements;

• (3) give good receipt to the Trustees in connection with any distributions made to him by the Trustees from the Trusts for the benefit of the Minor Children;

• (4) instruct and retain any relevant professional advisers, including tax accountants, to complete tax returns for the Minor Children if distributions for their benefit are made from

  the Trusts giving rise to tax obligations, and to sign such returns on their behalf so far as may be required.

4 We can thus see that there are disputes between the Claimants and C as to who should be the Next Friend for the Minor Beneficiaries and as to who would be able to give good receipt for distributions from the Trusts in favour of the Minor Beneficiaries.

5 Regarding the dispute as to who should be appointed as the Next Friend, this has been a particularly hard-fought contest. It is clearly important to the Claimants and to C, respectively, that their own choice be appointed. The Claimants do not want C to be the Next Friend nor the person who should receive future distributions on behalf of the Minor Beneficiaries from the trust assets. Conversely, C does not want Mr. Loh to take on these roles. C wants to be the Next Friend. She also wants to be the person who can give good receipt of future distributions from the trust assets. Since, she contends, it goes beyond the remit of a Next Friend to give good receipt for trust assets in future distributions (that is, outside the ambit of legal proceedings), she seeks to be recognized under BVI law as the Minor Children's mother, or guardian, or person otherwise having legal responsibility for each of the Minor Children.

6 The reason why C wishes to seek this recognition is because the Trusts are governed by BVI law and the Trust Deeds provide that where there are minor beneficiaries, their ‘parent or guardian or other person having legal responsibility’ for them can receive funds on their behalf and give good receipt to the Trustees.

7 Until such time as C obtains such recognition, she apprehends, she would not be able to receive distributions and give good receipt on behalf of the Minor Children. Conversely, if Mr. Loh were to be appointed Next Friend, and C were to obtain the recognition she hopes for, she would in that capacity be able to receive the distributions and there would be no good reason why she should be by-passed with the payments going through Mr. Loh.

8 The basic facts that have given rise to the present dispute can be stated quite briefly. There was a very successful international businessman called X. He was married to a lady named Z. During their marriage, X fathered two children, Q and R. They are now adults. They are the First and Second Defendants. Q and R were born as a result of what appear to have been ‘commercial surrogacy arrangements’. X's spermatazoa, deposited in a ‘sperm bank’ in California, United States of America, was used for their conception. Z died in 2008. Around the following year, in 2009 (claims C), when X was 84 years old, he and C met. C was then around 40 years old. She was a commercial real estate agent and had worked as a private banker. They started living together in 2011, in Tokyo, Japan. They did not marry. On 10 ^th January 2012, X settled the Trusts by way of trust deeds (the ‘Trust Deeds’). Both Trusts are irrevocable discretionary trusts in favour of Q, R and any other children ‘conceived and born with the Settlor's sperm currently deposited in a sperm bank in California’ and any other persons that might be added by the Trustees under a general power of addition. Both Trusts are governed by BVI law. C was not a stated beneficiary of the Trusts. Nor was she ever added as a beneficiary. The trust period was 20 years from the date of the respective Trust Deeds, whereupon the assets would vest in the beneficiaries. Around the time the Trusts were settled, or very shortly afterwards, X and C went together to the United States to arrange that X should father more children, using his sperm stored in California. Consequently, with the assistance of three surrogate women and two ‘egg donors’, and pursuant to what the Claimants say were ‘commercial surrogacy arrangements’ (although C takes issue with this characterization), S was born on x August 2013 in California, T was born on x September 2013 in Texas and U was born on x October 2015 in California. X was their biological father. C was not their biological or gestational mother. Nonetheless, birth certificates were issued from the authorities in these respective states recording C as the mother of these Minor Children. The Minor Children then resided with X and C in Hong Kong. Substantial distributions from the Trust assets ensued, including for the benefit of the Minor Children, with the monies being paid to X on the Minor Children's behalf as their father. Each of the Minor Children received quarterly payments of AUS$225,000. The Court was told that the value of the Trusts' assets stands at around US$450million. Unfortunately, relations between X and his eldest son, Q, deteriorated over a number of years. By 2016, when X was about 91 years old, going by certain written communications passing between them it appears that there was considerable friction between Q and his father, at least partly to do with Q's view that it was irresponsible of X, at his very advanced age, to procreate more children. X passed away in May 2020. The quarterly payments to the Minor Beneficiaries then stopped in July 2020. The Minor Children have continued to reside with C in Hong Kong. The Court was told that the Minor Children, who are United States nationals, reside in Hong Kong under student visas. C has not adopted them under Hong Kong law. Nor has she sought or obtained recognition in Hong Kong of parentage orders C and X obtained in the United States (‘the US Orders’). C has the role of their mother, although formally, under the laws of Hong Kong, as I understand the position, she has no legal status in relation to the Minor Children. C has, in the past, attempted to become a beneficiary of the Trusts, claiming that X wished this, but she did not succeed in this regard. C has had some other dealings with the Trusts which the Claimants say indicate she has interests that conflict with those of the Minor Beneficiaries, which I will consider in some further detail below. The Claimants, for their part, are not professional trustees. Both are companies which, historically at least, and possibly, still today (although this is denied), were (or are) under the direct and/or ultimate but indirect control of Q. The Claimants contend that one of the reasons they want to appoint Mr. Loh as the Next Friend is to enable the process of preparing...