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Victory for Viberts’ client after six year trust battle

Viberts has secured an overwhelming victory in the long running case of MacFirbhisigh & Ching v. CI Trustees & Executors Limited et ors.

After more than six years, represented by Viberts, the defendant trustee and its director have been vindicated by the Royal Court’s finding that ‘all the plaintiffs’ claims against all the defendants fail and are dismissed’.

It was a sad and hard-fought case in which the plaintiffs had made challenges to the validity of the trust of which they were beneficiaries, as well as various allegations against the trustee and others, including conspiracy, negligent misstatement, breach of trust and dishonest assistance. The original pleading sought to recover in excess of £2m.

Background

Ten years ago a retired stockbroker and his wife (Mr and Mrs Ching, the plaintiffs in the case) ran into financial difficulty.  They were asset rich but cash poor, meeting their living expenses by running up debt.

Mr Ching had kept his wife in the dark about their cash flow problems. Eventually Mr Ching confided in a business acquaintance (another defendant in the case) who agreed to help by negotiating with creditors and consulting about the future management of the Chings’ affairs.

The plaintiffs decided to settle their assets on a discretionary trust, removing control of the family finances from Mr Ching in whom Mrs Ching had lost faith. The trust was established with a nominal £100.

In addition to the £100, on the same day, transfers were effected to the trustee of shares in companies holding Canadian mining investments. Several months later, the Chings’ land was sold and most of the proceeds were also settled.

Around this time, Mr Ching was consumed by other worries as he was under regulatory investigation. First he was deemed unfit for interview with the regulator and later found unfit to manage his affairs generally. These were placed in the hands of a curator soon after the creation of the trust but before the sale of the properties.

Having taken on the trust, the trustee almost immediately ran into trouble when it was revealed that the companies holding the mining shares did not just hold shares for the Chings but also Mr Ching’s clients and various other parties. This led to delays in the administration of the trust at first and ultimately to a break down in relationships.

Judgment

By the time of the trial Viberts had successfully challenged virtually all the allegations of dishonesty and conspiracy. The Royal Court has now published a 200 page judgment dismissing the remainder of the plaintiffs’ claims.

So what are the ten main things we can take away from the Ching case?

From a legal perspective:

  1. The case provides new authority confirming that the limitation period in Jersey for a breach of fiduciary duty analogous with tort is three years not ten.
  2. Even if a plaintiff does not have all the information needed to press home a claim, time may still be running against them towards the limitation deadline.
  3. Re Beaney provides the applicable test for incapacity in the context of voluntary inter vivos gifts: i.e. is the donor capable of understanding the effect of the deed when it has been fully explained?
  4. Whether the effect of incapacity on a voluntary inter vivos disposition is to render it void or voidable remains a grey area (i.e. must we strike it down vs. may we strike it down).
  5. Where a word or description creates uncertainty in the provisions of a trust the court will seek to find a workable meaning based on a sufficient degree of probability as to what the settlor had in mind.
  6. Cross-examination of expert witnesses is not to be restricted merely because there is no opposing expert testimony upon which to base a challenge.
  7. From a fiduciary best-practice perspective:
  8. A trustee should be very careful when using ‘in house’ or past precedents and must ensure that settlors understand what trust arrangements are being put in place.
  9. Trustees should be scrupulous in their accounting for initial property and will likely be bound by the receipt recorded in the trust instrument.
  10. Trustees should carry out the best due diligence they can in order to limit the risk of taking on property they later wish they had not.
  11. Officers and advisers should be careful not to assume personal liability, for example in negligent misstatement and dishonest assistance.
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