ACLBDD Holdings Ltd & Ors v Staechelin & Ors

A contractual commitment by two trustees to pay commission can bind all trustees where the trust instrument authorises decisions by a majority and does not require prior notice, consultation or a formal meeting. The court construes the trust instrument as a whole. A third party dealing with trustees need not investigate the internal propriety of their decision where the instrument so provides. Where services are requested and remuneration is not fixed, reasonable remuneration is assessed by the objective market price, rather than the defendant’s subjective valuation. An alleged fiduciary breach will not forfeit commission unless the breach is established on the facts.

The claimants sought $10 million commission arising from their involvement in the sale of a Gauguin painting owned by the Rudolf Staechelin Family Trust. The painting was sold to the Emir of Qatar for $210 million. The claim principally concerned whether an agreement made on 26 June 2014 by two trustees and the claimants created a binding obligation to pay commission, whether that obligation bound the third trustee, and whether the claimants had forfeited their entitlement through an alleged fiduciary breach.

The court also considered alternative claims for reasonable remuneration and the identity of the contracting parties.

1. The agreement reached on 26 June 2014 was a simple contractual commitment that, if the painting were sold for $210 million, Mr de Pury would receive $10 million commission. It was not merely an intention to recommend payment to the third trustee. Nothing in the context or wording prevented contractual effect.

2. On the proper construction of the Trust Agreement, decisions could be made by a majority of the trustees. The instrument did not require a formal meeting, prior notice to every trustee, or consultation with the third trustee before a decision was effective. The provision permitting a trustee to decline participation affected the constitution of the majority; it did not create a general consultation requirement.

3. Sovereign Trustees Ltd v Glover [2007] PLR 277 was distinguished because the trust instrument in that case expressly required meetings to be convened by due notice. Re Whiteley [1910] 1 Ch 600, Wilkinson v Malin (1832) 2 Crompton & Jervis 636 and Grindley v Barker (1798) 1 Bosanquet and Puller 229 did not establish a general consultation rule; their effect depended on the requirements of the relevant trust. Re Martin’s Will (1961) 29 Misc. 2d 271 concerned the rights of co-executors between themselves and did not make the decision ineffective against a third party.

4. The agreement made by Mr Staechelin and Mr Paisner bound all three trustees. In any event, those two trustees were contractually bound between themselves and Mr de Pury. The de Pury & de Pury LLP was entitled to enforce the agreement as undisclosed principal.

5. The fiduciary-duty defence failed on the facts. There was no agreement to conceal the earlier offer and no breach in Mr de Pury’s failure to press the matter with other trustees after Mr Staechelin had refused to discuss it.

6. Alternatively, applying the principles in Benedetti v Sawiris [2014] AC 938, reasonable remuneration would be assessed by the objective market price for the services. The court would have assessed that remuneration at $7.5 million. This alternative analysis was unnecessary to the result.

7. The LLP was entitled to judgment for $10 million. Interest and costs were left for further submissions.