First National Trustco (UK) Ltd & Anor v Page & Ors

A contractual indemnity for a trustee ordinarily responds to liabilities incurred by the trustee. Clear words are required before it can be construed as requiring payment of another entity’s liability or as putting the trustee in funds before liability arises.

Estoppel by convention requires a clear shared assumption communicated between the parties, reliance or material influence, and unconscionability in permitting departure. The mere passage of time is ordinarily insufficient. An unincorporated association may be bound through an authorised agent, but passive acceptance by its general membership is insufficient.

A constructive trust outside the familiar cohabitation cases requires unconscionable conduct by the legal owner. Knowing receipt requires trust property, a transfer in breach of trust, receipt for the defendant’s benefit and knowledge making retention unconscionable.

The claim concerned a timeshare resort in Gran Canaria. First National Trustco (UK) Ltd, as trustee, and Bahia Blanca Club B Ltd, the company holding most of the apartment titles, claimed that the club and its founder member were liable for Spanish tax liabilities of about €2.7 million.

The claimants alternatively sought an indemnity from trust property, reimbursement from club members, relief based on estoppel or constructive trust, and orders requiring Bahia Blanca Leisure SL to restore apartments acquired at a Spanish tax-authority sale. First National also claimed trustee remuneration and expenses.

The central issues were the construction of the trust deed, the status of the apartments within the trust structure, the requirements for estoppel and constructive trust, the governing law of the apartment transfer, and whether the knowing-receipt claim was established.

1. Spanish tax indemnity. Clause 14 of the Deed of Trust did not require the club or founder member to indemnify First National for Bahia Blanca Club B’s Spanish tax liability. “Indemnify” and “hold harmless” referred to liabilities incurred by the trustee. The words could not be expanded to mean that the trustee had to be put in funds to discharge another entity’s liability. A demand made on the trustee did not alter that conclusion where the trustee itself had no liability.
2. First National was not duty-bound to fund the tax liability. The trustee’s duty to act in members’ best interests did not fall within the clause 14 indemnity. The evidence did not show that preserving the shell company, which held only six apartments, was in the members’ best interests.
3. Estoppel. The committee and First National had for a period assumed that the club would meet the taxes, but the evidence did not establish the necessary reliance or material influence by First National. The common assumption ended when the club’s proposed strategy for acquiring the apartments and avoiding the tax liability was communicated in 2012. The mere passage of time was insufficient. The club’s general membership had not positively acted on the assumption, although an authorised committee could in principle bind members, including subsequent transferees.
4. The apartments were not Trust Property under the Deed of Trust. BBCB was not the defined “Owning Company”, and there was no basis for implying a term or rectifying the deed. Even if BBCB had been an Owning Company, its assets would have entered the trust structure through FNTC’s membership and control, not through a separate sub-trust.
5. The alternative common-intention constructive trust failed. The pleaded trust structures were inconsistent, and the claimants neither pleaded nor proved unconscionable conduct by BBCB. The estoppel claim concerning the apartments also failed.
6. Knowing receipt. The apartments were not trust property and there was no disposal in breach of trust. In any event, Spanish law governed rights in the apartments. The tax authority’s forced sale gave BBL SL good title free from any unregistered interest. The knowing-receipt claim was therefore rejected.
7. First National was entitled to recover qualifying expenses of £12,738.28, subject to deductions for charges relating to Midmark, BBCA and fiscal representation. It was also entitled to Grant Thornton’s fees of £3,549.79. The claim for a fixed annual trustee fee was not established; consequential submissions were invited concerning fees attributable to the remaining apartments.