Bonham & Anor v Fishwick & Anor

A trustee-exemption clause must first be construed, and the pleaded allegations must then be tested against its proper scope. Where liability is limited to wilful and individual wrongdoing, the claimant must plead conscious and wilful misconduct, meaning a knowing and deliberate breach of duty or reckless indifference, personally attributable to the trustee.

A later claim may also be an abuse of process where it should have been raised in earlier proceedings. The question is a broad, merits-based assessment of whether the later claim misuses the court’s process, having regard to the public and private interests and all the circumstances.

The present trustees of the Bonham Settlement brought claims against former trustees for breach of trust concerning options granted to Mr Pinhorn over company shares. The former trustees applied to strike out the claims or obtain summary judgment, relying on a trustee-exemption clause and contending that the claims should have been advanced in earlier proceedings.

The earlier proceedings had resulted in judgment for the former trustees and costs orders against the claimants. The central issues were whether the pleaded allegations sufficiently alleged wilful and individual wrongdoing and whether bringing the later proceedings constituted abuse of process.

1. Construction of the exemption clause. The court adopted the approach in Bogg v Rapier [1989] 1 ITELR 267. The clause had to be construed first, and the pleaded complaints then considered against its scope. The words “wilful and individual” governed both fraud and wrongdoing. “Individual” required personal fault by the trustee sued.
2. Meaning of wilful wrongdoing. Following Armitage v Nurse [1998] Ch 241, wilful wrongdoing meant conscious and wilful misconduct: a knowing and deliberate breach of duty or reckless indifference. The claimants disclaimed fraud, so the allegations had to disclose that level of deliberate misconduct.
3. The allegations concerning the options rested on a misapprehension of the advice given by counsel. The advice was that the rule in Samuel v Jarrah Timber and Wood Paving [1904] AC 323 no longer represented the current law and that the first option was enforceable, although a challenge might require consideration by the House of Lords. The second option was a separate commercial arrangement made to enable the corporate reorganisation and sale. Granting it was not shown to be a breach of trust, let alone wilful and individual wrongdoing.
4. The claims were also abusive under the Henderson v Henderson principle. Applying Johnson v Gore Wood and Co. 2002 [2AC1], the issue was whether the claims should have been raised in the earlier proceedings, assessed through a broad merits-based judgment rather than an automatic rule. The present claim should have been brought in sufficient time for determination in those proceedings. The court also adopted the reasoning in Basso v Estry & others that withholding a claim until it was too late to advance it in the first action may constitute abuse.
5. The claims against both former trustees were struck out. The claimants’ application for a stay of execution of the earlier costs order was dismissed. The defendants’ application for a stay of the present proceedings therefore required no determination.