Brian Williams v Sherborne Corporate Services Limited & Ors

A court may vest trust assets in a replacement trustee where the court is satisfied that the applicant is the current trustee and that the assets are trust property. Former trustees cannot retain trust assets as security where a foreign court has finally determined the relevant liabilities, or where the governing trust law provides only a non-possessory lien.

A foreign judgment may create an issue estoppel if it was given by a competent court, was final and conclusive on the merits, and involved the same parties and subject matter. A trustee’s self-dealing transaction is subject to strict scrutiny. Where a trustee acts for its own benefit in a conflicting capacity, the transaction is voidable unless authorised or justified by exceptional circumstances.

The Public Trustee of the Bailiwick of Guernsey sought vesting orders and declarations concerning real property and investment accounts held for five Guernsey pension schemes. The Defendants were the former trustees and a nominee company.

The Defendants had been debarred from defending after failing to comply with unless orders requiring payment of costs. They nevertheless relied on alleged trustee liabilities, liens and four deeds of assignment said to have transferred investment portfolios absolutely to the first Defendant in its separate capacity as scheme administrator.

The central issues were whether the assets remained trust assets, whether the Guernsey proceedings conclusively determined the alleged liabilities at nil, and whether the deeds of assignment prevented vesting orders.

1. Vesting jurisdiction. Under Trustee Act 1925, ss.44 and 51, the court had jurisdiction to vest land, personal property and rights in the Public Trustee. The statutory jurisdiction extended to a trustee appointed out of court under a statutory or express power. The court was satisfied that the Public Trustee remained the current trustee and that all the assets were trust assets.
2. Foreign issue estoppel. The Royal Court of Guernsey was a competent court. Its order of 12 July 2023 finally determined the former trustees’ alleged liabilities and claims against the scheme assets at nil. The decision was final and conclusive on the merits, the parties and subject matter were sufficiently identical, and any appeal period had expired. It therefore created an issue estoppel binding on this court. The former trustees could not relitigate their alleged liabilities or security claims.
3. Deeds of assignment. Properly construed, the deeds were security arrangements rather than absolute beneficial assignments. Their consideration was forbearance from immediate debt collection, and their reassignment provisions showed that the assets were intended to be held only until repayment. Since the liabilities had been determined at nil, there was no subsisting debt requiring security.
4. Self-dealing. Sherborne acted both as trustee and as assignee. The transaction therefore engaged the Guernsey rule against self-dealing and conflicts of interest, which reflected the corresponding English principles. The trust instrument contained no relevant authorisation. The deeds created a voidable title, and the Public Trustee had elected to avoid them. No exceptional basis existed for relief.
5. Outcome. The court made vesting orders or declarations for all the assets. The former trustees had been required to surrender them in 2017 and had no entitlement to retain them. The court also found the Defendants’ conduct unreasonable to a high degree and outside the norm. Consequential matters, including costs, were to be addressed at a short remote hearing.