Fattal & Ors v Walbrook Trustees (Jersey) Ltd & Ors

A trustee exoneration clause protecting against liability for any matter or thing, except wilful and individual fraud or dishonesty, generally protects a professional trustee unless dishonesty is established. Dishonesty requires a deliberate breach of trust accompanied by knowledge that the breach is contrary to the beneficiaries’ interests, reckless indifference to that question, or a belief so unreasonable that no reasonable professional trustee could have held it.

A late amendment alleging dishonesty is a new claim for limitation purposes. It should not be permitted unless it falls within CPR 17.4, has a real prospect of success, and its admission would be just notwithstanding prejudice, limitation and disruption. Extensive, unsupported and unclear re-amendments shortly before trial were refused.

The claim arose from long-running disputes concerning Berkeley Court and a joint venture arrangement involving the Fattal Trusts, Walbrook and other interests. The claimants sought permission to re-amend their pleadings to add or expand allegations of dishonest breaches of trust, deceit, fiduciary breaches, concealment, losses and related matters.

Walbrook applied for summary judgment on the claims against it, relying principally on the exoneration clause in the Fattal trust instruments. The court considered limitation, the scope of CPR 17.4, pleading dishonesty, the construction of the exoneration clause, the alleged fiduciary duties and the prospects of the various claims.

1. Amendments and limitation. An amendment introducing dishonesty, fraud or intentional breach of fiduciary duty is a new cause of action. Under CPR 17.4, the new claim must arise from the same or substantially the same facts already in issue. Even where jurisdiction exists, permission remains discretionary. The court should not lightly deprive a defendant of a limitation defence, particularly where the amendment is late, unsupported by evidence and would disrupt the trial.
2. Dishonesty. A pleading must identify primary facts which justify an inference of dishonesty. Mere allegations of deliberate overlooking, failure to apply one’s mind, influence, incompetence, lack of consultation or failure to disclose are ordinarily consistent with honesty. An unequivocal assertion of dishonesty does not cure the absence of supporting facts.
3. Exoneration clause. The clause was to be read as a whole. Its general words protected the trustee from liability for any matter or thing unless the trustee was guilty of wilful and individual fraud or dishonesty. The clause therefore protected against negligence, incompetence and non-deliberate breaches of trust. The court followed the approach in Armitage v Nurse and Walker v Stones.
4. For a professional trustee, dishonesty required a deliberate breach of trust and either knowledge that the breach was contrary to the beneficiaries’ interests, reckless indifference to that question, or a belief so unreasonable that no reasonable professional trustee could have regarded the conduct as beneficial. The test could vary according to the trustee’s role. A conflict between duty and duty was less readily characterised as dishonest than a conflict between duty and personal interest.
5. Fiduciary duties. Fiduciary duties could not be imposed by labelling a relationship fiduciary. The contract was the starting point and defined or modified the scope of any concurrent fiduciary duties. A joint venture did not automatically generate a fixed package of fiduciary obligations. The pleaded duties which contradicted the voting structure, entire agreement clause or express contractual obligations were refused.
6. Disposition. Permission to re-amend was refused except for the limited amendments identified in the judgment. Summary judgment was given for Walbrook on all claims except matters requiring an account. The accounting issues were referred to a Master of the Chancery Division. The remaining claims against David Dangoor and Monopro were allowed to proceed only to the limited extent stated in the judgment.

Not an appeal. The judgment concerned interlocutory applications in continuing High Court proceedings.