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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Gestrust SA v Sixteen Defendants [2016] EWHC 3067 (Ch) (29 November 2016) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2016/3067.html Cite as: [2016] EWHC 3067 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building Fetter Lane London EC4A 1NL
		Date: Tuesday 29 November 2016

Mr Edward Bartley Jones QC:

Preamble

1. This is an open, non-confidential, judgment available to all the parties to this Action and also to the public at large. Its contents are freely reportable.
2. However, for the reasons set out below, this judgment has been anonymised. Further, I make it clear to the parties and the public that I hereby make:-

(1) an order under CPR 5.4C(4) prohibiting a non-party to this Action from exercising any rights under the general rule (as contained in CPR 5.4C(1)) to obtain copies of statements of case, judgments or orders. Such order does not, for the avoidance of doubt, extend to this judgment. But it does extend to the second and confidential judgment which I will hand down at the same time as this judgment. Such order also extends to any order made as a result of either (1) this judgment or (2) my confidential judgment; and

(2) an order under CPR 5.4B(1) prohibiting any party to these proceedings from obtaining from the records of the court, without the leave of the court, a copy of any skeleton argument, witness statement or exhibit thereto or any other document falling within the ambit of paragraph 4.2A of Practice Direction 5A, which has been exchanged confidentially as between (1) the Claimant and (2) those of the Defendants who are minors. This order, obviously, does not affect either the Claimant or the Defendants who remain minors. But I intend it to apply as from when they attain the age of 18. Further, I intend to order that my confidential judgment should not be made available to the Thirteenth Defendant (who has now attained majority) personally.

3. So far as my order under CPR 5.4C(4) is concerned, Ms Bedworth, on behalf of the minors whom she represents, applied for such order (albeit not by formal Application Notice).
4. As the hearing before me was in private, non-parties are not entitled to a transcript of what occurred. Further, none of the Defendants are entitled to a transcript of any part of the hearing before me from which they were excluded.
5. Whilst my confidential judgment is confidential to the Claimant and the Fourteenth, Fifteenth and Sixteenth Defendants (including their litigation friend) and their legal advisors, I intend to order that it can be made available to the Mediator if, but only if, he enters into a contractual obligation with the Claimant and the Fourteenth, Fifteenth and Sixteenth Defendants not to disclose it, or its contents, to any other person (including all the other Defendants to this Action). I also intend to order that my confidential judgment can be made available, on a confidential basis, to the solicitors and counsel acting for A Limited and B Limited at the Mediation.
6. I amplify, below, my reasons for adopting the above courses of action.

Introduction

7. The Claimant (which I will now call "the Trustee") is a professional trustee. It is based in Geneva and, although this does not appear from the evidence, I presuppose that it is incorporated under the laws of Switzerland. Wherever it is incorporated, it most certainly is not incorporated under the laws of England and Wales.
8. The Trustee is the present sole trustee of a Trust of considerable value. The Trust was originally created by a Deed of Settlement dated 5 November 1963 and made between (1) the Settlor and (2) National Provincial Bank Limited. The Defendants are all beneficiaries, albeit that certain of their interests are contingent, under that Trust.
9. Indirectly, through a chain of shareholdings, the Trust owns 100% of the "A" shares in A Limited. A Limited is a company incorporated under the laws of Guernsey. In turn A Limited owns 100% of the shareholding in B Limited, a company incorporated under the laws of the British Virgin Islands. Together A Limited and B Limited own a substantial portfolio of residential properties which are let out to tenants. There appear to be 221 properties, of which 208 are in Town A and 13 are in Town B. Town A and Town B are some distance from one another. The vast bulk of these properties are owned by A Limited. Only 14 of the properties are owned by B Limited and those 14 properties are situated in Town A. They form part of the larger estate which A Limited owns in Town A.
10. The property portfolio of A Limited and B Limited was from, at least, September 1966 until on or about 27 February 2009 managed by C Limited. C Limited is a company incorporated under the laws of England and Wales. It is presently under the control of the First Defendant who is one of the four life tenants under the Trust (and, hence, entitled to one quarter of the income of the Trust). The First Defendant has caused C Limited to commence a claim in the English courts against A Limited and B Limited ("the 2015 Action").
11. As a consequence, the Trustee commenced the present Action by Part 8 Claim Form issued on 20 July 2016. By that Claim Form the Trustee seeks directions:-

(1) as to what it should direct A Limited and B Limited to do in response to C Limited's claim against A Limited and B Limited. The directors of A Limited and B Limited are a Ms Diana Brush and Mr Marc Angst. Ms Brush is a Senior Trust Manager employed by the Trustee. Mr Angst is the Managing Director of, and 50% shareholder in, the Trustee. In her evidence, Ms Brush accepts that the Trust, through its shareholding, controls the activities of A Limited and B Limited;

(2) whether there should be a Mediation of C Limited's claims against A Limited and B Limited;

(3) if so, what should be the parameters for the stance to be adopted by A Limited and B Limited in any such Mediation;

(4) as to how (1) the costs of A and B Limited in defending C Limited's claims, (2) any potential liability of A Limited and B Limited for C Limited's costs and damages and (3) the costs of and incidental to this Action, should be apportioned as between capital and income.

All the Defendants are members of different generations of the Settlor's family. There are deep divisions within the Defendants both as to the merits of C Limited's claims and as to how any necessary monies to dispose of those claims (including the costs of this Action seeking directions) should be borne as between the capital and income of the Trust.

12. This Action has been described by all counsel as a quasi-Beddoe application (see Re Beddoe, Downes -v- Cottam [1893] 1 Ch 547). I would question the utility of that epithet. As it seems to me that epithet is capable of masking the true issues which arise in this case.
13. Each of Ms McDonnell (for the Trustee) and Mr Scrivener (for the First Defendant) urge upon me that I should regard the properties in the portfolio as if they were assets of the Trust. Mr Scrivener put it most strongly. His words were that the properties in the portfolio are the assets of the Trust and it would be artificial to say anything else. He and Ms McDonnell rely primarily in support of that proposition on what they say is the true meaning of the judgment of Deemster Kerruish in the High Court of the Isle of Man in Poyiadjis [2004] WTLR 1169. Ms Bedworth, for the minors and also the unborns, now argues strongly against this. Ms Bedworth's position has, I think, developed as time has gone on. That is no criticism of her because all counsel's positions became somewhat fluid in response to challenges which I put before them. That is why I ordered two rounds of written submissions (original and responsive) following conclusion of the oral hearing before me. The issues raised in this Action are challenging and it is not surprising that all counsel needed to develop their positions as a result of the forensic process (including my interventions).
14. However, I say at this early stage that if (and it is a big if) Deemster Kerruish did in Poyiadjis decide what Ms McDonnell and Mr Scrivener say he did, then the Deemster was, in my judgment, wrong to do so and I am not prepared to follow his decision.
15. The hearing before me also raised issues as to the manner of its conduct. I chose to conduct the hearing in private and to make an order excluding, sequentially, various of the Defendants from the hearing in respect of certain specific issues. Practice Direction 64B relates to applications to the court for directions by a trustee in relation to the administration of a trust. Paragraph 3 of that Practice Direction provides that the proceedings will, in the first instance, be listed in private. Obviously, the important words are "in the first instance". At the commencement of the hearing before me I sought submissions as to whether the hearing should continue in private. No-one argued for a public hearing. Accordingly, I continued in private but subsequently sought submissions as to whether this judgment should be given in public.

The Family/The Defendants

16. The Settlor was a highly successful builder and developer. He died in 1974. He had four children.
17. His eldest child ("Child 1") was a son who died in 2002. His widow is still alive and she is the Fourth Defendant.
18. The Settlor's second child ("Child 2") was also a son. He died in 2011 but his widow remains alive and she is the Third Defendant. She is now aged 85. Child 2 and the Third Defendant had two children, a son now aged 57 who is the Fifth Defendant and has no children and a daughter who is now aged 53 and is the Sixth Defendant. In turn, the Sixth Defendant has two children, a daughter who is the Ninth Defendant (now aged 26) and a son who is the Tenth Defendant (now aged 28). In turn the Tenth Defendant has a daughter, now aged 2, who is the Sixteenth Defendant.
19. The Settlor's third child was the First Defendant who is now aged 83. Her husband predeceased her and she has no children.
20. The Settlor's fourth child was a son who is the Second Defendant. He is now aged 82. His wife is still alive and she is aged 77. The Second Defendant had two children namely a daughter now aged 53 (the Seventh Defendant) and a daughter now aged 48 (the Eighth Defendant).
21. The Seventh Defendant has three children, namely a daughter now aged 26 (the Eleventh Defendant), a son now aged 24 (the Twelfth Defendant) and a son born on 18 October 1998 who is the Thirteenth Defendant. He is the Defendant who was a minor at the time of the hearing before me but has now attained the age of 18 years.
22. The Eighth Defendant has two children namely a daughter now aged 14 (the Fourteenth Defendant) and a son now aged 11 (the Fifteenth Defendant).
23. It can be seen, therefore, that there are presently four layers to the family of the Settlor. At the top layer are his four children or their widows. Below that layer are the two children of Child 2 and the two children of the Second Defendant. Below that layer again are the two children of the Sixth Defendant, the three children of the Seventh Defendant and the two children of Eighth Defendant. Finally at the fourth layer, there is the 2 year old child of the Tenth Defendant. Clearly, however, unborns are likely to enter into this fourth layer. There may also be subsequent layers capable of taking under the Trust.

The Trust - Beneficial Interests

24. It is common ground (correctly so) that the Trust is governed by the law of England and Wales. The fact that the Trustee is an offshore entity makes no difference. Again it is common ground (correctly so) that the Trustee, in its capacity as a trustee of the Trust, is subject to the jurisdiction of this court and, also, entitled to approach this court for directions.
25. As a result of the Deed of Settlement of 5 November 1963 the property portfolio was transferred to National Provincial Bank Limited, as trustee, together with certain other residential properties. Certain of those other residential properties have been sold subsequently. This makes somewhat ironic the present protestations of certain of the Defendants that the Settlor would never have wished to see his property empire disposed of or diluted.
26. As a result of a Deed of Appointment dated 28 March 1979 the Trust Fund became held upon trust for the "Selected Beneficiaries" as tenants in common in equal shares on the further trusts as declared by that Deed of Appointment. "The Selected Beneficiaries" were defined as meaning the four children of the Settlor.
27. On 31 December 1982 Deeds of Appointments were executed by each of (1) Child 2 and (2) the Second Defendant. These Deeds of Appointment were executed under powers given to each of Child 2 and the Second Defendant by the Deed of Appointment of 28 March 1979.
28. As a result of these various Deeds of Appointment:-

(1) each of the Settlor's four children was entitled to the income of their respective one quarter share in the Trust Fund for life, with a life interest thereafter in favour of the child's surviving spouse. The present life tenants are the Fourth Defendant (the widow of Child 1), the Third Defendant (the widow of Child 2), the First Defendant and the Second Defendant. The First Defendant presently has no spouse. Should the Second Defendant predecease his spouse then she will become entitled to a life interest in the Second Defendant's quarter share in the Trust Fund;

(2) neither Child 1 nor the First Defendant had any children. Accordingly, under the terms of the Deed of Appointment of 28 March 1979, following their deaths the capital of their respective shares in the Trust Fund will be held on trust for such of the Fifth, Sixth, Seventh and Eighth Defendants as are living at the date of death of the last of the Settlor's four children to die, and if more than one in equal shares absolutely (clause 4 of the Deed of Appointment of 28 March 1979). Quite how, granted the structure of the Trust which I discuss below, whichever of the Fifth, Sixth, Seventh and Eighth Defendants acquire an absolute interest in capital are actually going to receive that capital must be a matter of speculation. I do not know whether this has been addressed. If it has been addressed, it is not reflected in the evidence before me.

29. The devolution of Child 2's share (where his widow the Third Defendant presently has a life interest) and the Second Defendant's share (where his wife may have a life interest if she survives him) is governed by the two Deeds of Appointment of 31 December 1982. These Deeds are in identical terms. In the case of the Second Defendant's share then, following the death of the survivor of the Second Defendant and his wife, his share will be held on trust to pay the income to their two children (the Seventh Defendant and the Eighth Defendant) for life, and then after the death of the first of the Seventh and Eighth Defendants to die, to pay the income to the survivor for life with remainder (as to both capital and income) "upon trust for all such one or more of the children or remoter issue of the [Seventh Defendant] and [Eighth Defendant] born within the perpetuity period as defined by the said Appointment of the 28 March 1979 as shall attain the age of Twenty One Years or marry under that age and if more than one in equal shares". The definition of "the perpetuity period" as contained in the Deed of Appointment of 28 March 1979 is not without its difficulties. But, before me, it seemed to be common ground that the perpetuity period ended on 5 November 2033. It would seem that the Eleventh Defendant and the Twelfth Defendant (two of three children of the Seventh Defendant) have already acquired vested remainders. The Thirteenth, Fourteenth and Fifteenth Defendants, granted their age, presently have contingent remainders. Clearly there is the realistic possibility of unborns acquiring contingent, and then vested, remainders in the capital and income of the Second Defendant's shares.
30. The position in respect of Child 2's share is identical save that, of course, the people are different. Child 2's children are the Fifth and Sixth Defendants. The Fifth Defendant has no children. The Sixth Defendant has two children (the Ninth and Tenth Defendants) who, granted their age, have already attained vested interests in remainder in the capital and income. The Tenth Defendant has a two year old daughter (the Sixteenth Defendant) who presently has a contingent interest in the remainder. Again there is the clear realistic possibility of unborns acquiring contingent, and then vested, interests in the remainder on capital and income of Child 2's share.
31. By Order of Master Matthews made in this Action on 28 July 2016 a Mr Duncan Elson, a solicitor with Charles Russell Speechlys, was appointed as litigation friend for the Thirteenth to Sixteenth Defendants and to represent the interests of the unborn beneficiaries of the Trust. The Master provided that Mr Elson's costs should be assessed on the indemnity basis (if not agreed) and paid out of the Trust Fund. I have before me evidence from Mr Elson. I am more than satisfied from that evidence that he has carefully considered the position of all of those whom he represents. For these purposes has taken the advice of Ms Bedworth. Ms Bedworth's submissions to me reflect her Advice which Mr Elson has accepted.

The Trust-Structure

32. The primary evidence as to the present structure of the Trust (by which I mean the structure under which the Trustee holds the Trust Fund) comes from Ms Brush. I am more than satisfied that, in her evidence, Ms Brush has sought to be as objective and as helpful to the court as possible. Unfortunately, there are many matters to which she merely refers without any form of amplification. Again, I am satisfied that this is merely through inadvertence - in all probability because the significance of these matters became clear only during the course of the hearing before me.
33. On 30 December 1988 the then trustees of the Trust transferred all the then property portfolio to A Limited. The Transfer refers to A Limited as having paid to the trustees the sum of £625,200 in consideration for this Transfer. I do not know what happened to the £625,200.
34. Ms Brush describes A Limited as having been, at this time, wholly owned by the then trustees of the Trust. But she then says that the Trustee now owns all of the "A" shares in A Limited through two nominee companies. She says that from 30 December 1988 onwards the income received by the trustees for the time being of the Trust entirely consisted of dividend payments from A Limited.
35. Pausing here, I know nothing of the two nominee companies. I do not know where they are incorporated or who are their directors. I do not know if they are bare trustees of the shares in A Limited or if they are something more than mere bare trustees.
36. Ms Brush then goes on to describe the Trust as being the ultimate owner of the whole (I stress whole) of A Limited. I simply do not understand that because Ms Brush then goes on, in the very next paragraph of her witness statement, to negate this.
37. In that subsequent paragraph Ms Brush indicates that some further re-structuring took place in 1991, on the advice of leading counsel, Robert Venables QC, with the aim of diversion of future growth in the assets of the Trust into new family trusts so as to minimise inheritance tax liability on the death of the Selected Beneficiaries. She says that, as part of that exercise, new "B" shares were created in A Limited. The existing "A" shares, which continued to be assets of the Trust, were entitled to all of the dividend income and a maximum capital value (in the event of sale or liquidation) of £10m. The new "B" shares were entitled only to any capital value in excess of £10m, and were entitled to require that A Limited be liquidated instead of sold. The new "B" shares in A Limited were allotted to the trustees of new discretionary trusts settled by each of the four children of the Settlor.
38. As I understand this, the "B" shares in A Limited are not held on the trusts of the Trust. Whoever holds them they are held on entirely separate and discrete trusts.
39. The Articles of Association of A Limited were not placed before me. It is, I suppose, quite possible that only the "A" shares confer voting rights in A Limited and so, in that sense, control of A Limited lies entirely with the "A" shares. But, even in these circumstances, it would be wrong to describe the Trust as the ultimate owner of the whole of A Limited. To the extent that A Limited's capital value exceeds £10m then that excess would seem to be attributable only to the value of the "B" shares. Although there is no formal valuation of the property portfolio before me (and nor need there have been) the evidence suggests that the combined total valuation of the whole property portfolio as held by A Limited and B Limited is in the region of £30m. So, on Ms Brush's evidence, the "B" shares are very much of relevance. The directors of A Limited (in fulfilling whatever are their duties under the law of Guernsey) will no doubt wish to bear in mind that their activities affect not only the "A" Shares but also the "B" Shares.
40. This brings me to a further puzzling point. The argument before me over the allocation of costs as between capital and income was hard fought between the participants. And yet no one mentioned the "B" shares. As far as I can see, if everything were allocated to capital the loss would be borne by the "B" shares and would not affect the "A" shares at all. I can easily see why those beneficiaries entitled only to income should wish to argue that such costs should be borne entirely by capital. I find it more difficult to see why those beneficiaries entitled to capital under the Trust should have been arguing before me that the capital of the Trust should be protected by the costs associated with C Limited's claims being borne by income. The "A" shares, the subject matter of the Trust, do not appear to be adversely affected in capital value by the costs of C Limited's claims being borne by capital. On the figures, that loss appears to be borne by the "B" Shares.
41. At this point in her witness statement Ms Brush goes on to discuss the creation of various new trusts and sub-trusts. I cannot quite follow what actually occurred. But for present purposes I do not think that matters. Suffice to say that in 2006 A Limited acquired a wholly-owned subsidiary, B Limited, incorporated in the British Virgin Islands. A Limited subsequently transferred to B Limited 14 residential premises in Town A.
42. The current directors of A Limited and B Limited are, as I have indicated, Ms Brush and Mr Angst. However, I stress that what I have before me is not an application by the directors of either A Limited or B Limited, in their capacity as such directors, for directions or assistance from the court. Nor could any such application ever be heard by me. I have no jurisdiction whatsoever over the internal conduct of A Limited or B Limited. These are offshore companies. Any such application by the directors of A Limited and B Limited would have to be made to the courts of Guernsey and the British Virgin Islands respectively. The sole application before me is that of the Claimant, as trustees of the Trust, asking for assistance as to what it should do in its capacity (and only in its capacity) as a trustee of the Trust.

Structure - Discussion

43. Underpinning the initial skeleton arguments of Ms McDonnell and Mr Scrivener, and underpinning their oral submissions to me, was the proposition that I should treat the property portfolio as if it were an asset of the Trust directly held by the Trustee (without the interposition of any of the above Structure). In fairness to Ms Bedworth her position was somewhat more nuanced. But I did not detect her in her original skeleton, or in her oral submissions before me, to be adopting the position which she now adopts. The point was seen at its acutest in the Capital/Income apportionment issue. As advanced to me orally that issue gave me considerable difficulties. With varying degrees of clarity I sought, from time to time, to challenge counsel on this issue and on the underpinning thesis of Ms McDonnell and Mr Scrivener. In the further round of written submissions each of Ms McDonnell and Mr Scrivener again assert that, for the purposes of the directions I have been asked to give, I should treat the property portfolio as a trust asset (i.e as if it were directly held by the Trustee). Ms Bedworth, however, takes a very different view. She points out, correctly in my judgment:-

(1) that the costs and damages associated with C Limited's claims against A Limited and B Limited are liabilities of A Limited and B Limited and not of the Trust. No one is suing the Trust as such;

(2) that A Limited and B Limited are separate legal entities from the Trust with their own individual legal personalities. No one had argued before me that A Limited and B Limited held the property portfolio on bare trust for the Trustee; no one had argued before me that there were any grounds or basis for piercing the corporate veil under the principles set out in Prest v. Petrodel Resources Limited [2013] 2 AC 415; accordingly

(3) the Structure must take effect according to its terms. This meant that the property portfolio, itself, was not an asset of the Trust. The property portfolio was merely an asset of the two companies in which directly, or indirectly, the Trust was the shareholder,

44. As it seems to me, the Structure I have described above has been deliberately created, in part at least on the advice of leading tax counsel, and is deliberately intended to work according its terms. In no sense can it be described as a sham (compare what Munby J had to say as to the true nature of a sham in A v. A [2007] 2 FLR 467). As Ms Bedworth correctly says no case was advanced before me by anyone to the effect that:-

(1) on the facts as properly analysed A Limited and B Limited held the property portfolio on bare trust for the Trustee; or

(2) that the corporate veil should in some way be pierced in accordance with the principles set out by the House of Lords in Prest.

45. Mr Scrivener does, in his written submissions following the hearing, points out that Ms Brush's evidence indicates that there will be a liability on the Trust for the 10- yearly charge to UK Tax in 2021-2022 and that this liability is expected to be greater than it was 10 years earlier because the capital value of the properties will have increased. This, he submits, would be a further reason for supporting the First Defendant's primary position that the property portfolio should be treated as an asset of the Trust. But I have no information before me as to how the 10-yearly charge is calculated and levied by HMRC on the Trust. Further, how HMRC chooses to treat the above Structure for the purposes of taxing statutes and provisions is a fundamentally different question from the question as to whether the Structure exists and takes effect according to its terms.
46. As it seems to me, therefore, ultimately the submission of Ms McDonnell and Mr Scrivener to the effect that the property portfolio should be treated, for the purposes of the directions being sought from me, as an asset of the Trust (and as if the property portfolio were directly held by the Trust) depends entirely on the submission that a proposition of law to this effect was decided by the Deemster in Poyiadjis and that I should apply that proposition of law in England and Wales.
47. In Poyiadjis there were two trusts (the Atlas Trust and the Trident Trust), established for the benefit of Mr Poyiadjis and his family. The assets of the two Trusts consisted of the entire share capital of two companies incorporated in the British Virgin Islands. Those companies had bank accounts in the Isle of Man holding $39m odd and $128m odd respectively. The directors of the companies were also the trustees of the Atlas Trust and the Trident Trust. In October 2001 the Isle of Man Court made an order, pursuant to section 7 of the Criminal Justice Act 1990, restraining the removal or other disposal of Mr Poyiadjis' assets from the jurisdiction. That restraint order specifically referred to the monies held in the two bank accounts. It was alleged that the monies held in the two bank accounts were the proceeds of a securities fraud committed in the USA by Mr Poyiadjis. The US Department of Justice commenced in rem proceedings claiming the monies subject to the restraint order. This resulted in a default judgment being given by a US court. Criminal proceedings and an action by the Securities and Exchange Commission were also begun against Mr Poyiadjis, and freezing and repatriation orders were made by the US courts. By a petition to the Isle of Man courts the trustees and beneficiaries of the Atlas Trust and the Trident Trust, as well as the two companies, sought permission to use the funds that were subject to the restraint order to finance defences against the US Proceedings. US law provided that assets subject to the orders of the US Courts could not be utilised for legal costs.
48. As an integral part of his submissions on behalf of the trustees and beneficiaries of the two Trusts and on behalf of the two companies, Mr Mowbray QC argued that the bank accounts were not owned by the trustees but by the two companies and the two companies were entitled to the monies in the accounts absolutely. He further argued that the shares held by the trustees in the two companies did not give the trustees any right, title, or interest to the bank accounts. Hence he argued that the bank accounts were corporate, not trust, assets. However, it is also clear that in response the Attorney General was arguing that the background to, and the source of the monies in, the two bank accounts resulted in a constructive trust being imposed over the monies in the two bank accounts in favour of the people who had, allegedly, been defrauded. The Attorney General's contention was that the trustees of the two Trusts were confronted with two competing sets of beneficiaries claiming beneficial ownership of the shares in the companies, and through them the balances in the bank accounts.
49. Ultimately, the decision of the Deemster was that matters should be referred to a different Deemster on a Beddoe-style procedure so as to decide whether the relief sought (utilisation of the monies in the bank accounts for legal fees) should be granted. However, in coming to this conclusion the Deemster did have to deal with the submission that the monies in the bank accounts were not trust assets but were solely corporate assets. At paragraphs [30] to [32] the Deemster said this (with the italics being inserted by me):

"[30] Whilst I accept that in law the bank accounts are corporate and not strictly trust assets, in the circumstances of this case, I find that the interposition of a limited company does not in any material way qualify the trustees' interest in the relevant bank accounts. It does not make a difference to the duties and responsibilities of the trustees, including responsibilities to persons, who have or may have an interest in the trust assets, whether held directly by the trustees or through a company.

[31] Further in the circumstances of this case, the directors, when exercising their powers - including deciding what, if any, action to take relevant to the order, the bank accounts, or the in rem proceedings - cannot divest themselves of the knowledge and information obtained in their capacity as trustees, and therefore must act at all times mindful of their duties and responsibilities to persons, who have or, may have an interest in the trust assets.

[32] I therefore consider that to treat the companies as bodies independent of the trustees qua trustees, and to treat the latter as shareholders, would be to ignore the reality of the situation. I further consider that, bearing in mind the terms of the order, and the circumstances which gave rise to it, the bank accounts ought to be considered not only as corporate assets, but also as trust assets. Accordingly, I do not consider that I need to address Mr Farrer's alternative submissions on the piercing of the corporate veil."

50. The order being referred to in paragraph [32] by the Deemster was the restraining order made pursuant to section 7 of the Criminal Justice Act 1990. Quite clearly what the Deemster had to say was heavily influenced by the terms and effect of that order, by the underlying allegations of fraud and by the claim of those allegedly defrauded to benefit from a constructive trust over the trust assets and the monies in the bank accounts.
51. For my part, it seems to me that what the Deemster was saying in paragraphs [30] to [32] was directed to the specific circumstances of that particular case. I do not detect the Deemster identifying and applying any independent principle of law, applicable to all cases, that the Structure which the parties have chosen to put in place can be ignored and that the court is perfectly free to treat corporate assets as trust assets by ignoring the interposition of limited companies.
52. Nevertheless, the reality of the submissions of Ms McDonnell and Mr Scrivener is that the Deemster did, indeed, identify such an independent proposition of law applicable to all circumstances. Of course there will be circumstances where the interposition of a limited company can be ignored. The limited company maybe a bare nominee; the Structure may be a sham; there may be grounds for piercing the corporate veil on the basis of the principles set out in Prest. None of those circumstances apply here. What Ms McDonnell and Mr Scrivener are contending for, therefore, is for an independent proposition of law that, absent these circumstances, still the court should treat the corporate assets as trust assets. It seems to me to be extremely unfair on the Deemster to suggest that he identified, and applied, any such independent proposition of law in Poyiadjis.
53. But if Ms McDonnell and Mr Scrivener are right and the Deemster did, indeed, apply such an independent principle of law in Poyiadjis then I am most certainly not prepared to follow the Deemster's decision and to apply it. On this analysis (which I again I stress seems to me to be extremely unfair to the Deemster) the Deemster simply asserted a proposition of law without in any way identifying how, or on what basis, it arose. I cannot see how that proposition of law is right. I know of no English authority in support (and none was cited to me). It seems to me to be fundamentally wrong in principle. Absent defined grounds for "collapsing" the transaction then the transaction takes effect according to its terms. Accordingly, I refuse to treat the property portfolio as if it were an asset of the Trust directly owned by the Trustee.
54. Where, then, does this leave matters on this directions hearing? In my judgment, firmly within the world of Bartlett v. Barclays Bank Trust Co Limited [1980] Ch 515. I make two initial points:-

(1) the deed creating the Trust contain no anti-Bartlett clause;

(2) as it seems to me the whole reasoning in Bartlett negates the proposition that the Structure in this case can be collapsed, as a matter of law, in manner suggested by Ms McDonnell and Mr Scrivener. As Brightman J said at 532B:-

"If the trust had existed without the incorporation of BTL, so that the bank held the freehold and leasehold properties and other assets of BTL directly upon the trusts of the settlement, it would in my opinion have been a clear breach of trust for the bank to have hazarded trust money upon the Old Bailey Development project in partnership with Stock Conversion."

But Brightman J did not then seek to address matters by collapsing the Structure so as to treat the bank as having held the freehold and leasehold properties directly upon the trusts of the settlement. On the contrary, he turned to the question as to what was the duty of the bank as the holder only of the shares in the two companies.

55. Brightman J answered this question at two levels. He started by considering the position of the bank as a trustee without reference to the fact that it was a specialist trustee. He held that the bank, as with any ordinary trustee, was bound to act in relation to the shares and to the controlling position which they conferred in the same manner as would any prudent man of business. The prudent man of business would act in such manner as was necessary to safeguard his investment. He would do this in two ways. If facts came to his knowledge which told him that the company's affairs were not being conducted as they should be, or which put him on enquiry he would take appropriate action. Appropriate action would no doubt consist in the first instance of enquiry of and consultation with the directors, and in the last but most unlikely resort, the convening of a general meeting to replace one or more directors. (532 at E-G). Brightman J then went on to the second level and held that a higher duty of care was plainly due from someone such as a trust corporation which carried on a specialised business of trust management. (534 C). As it happens (535 C) Brightman J held that the bank, as trustee, had failed in its duty whether it was judged by the standards of the prudent man of business or of the skilled trust corporation. If the bank had intervened, as it could and should have done, the loss would not have been incurred.
56. Leaving aside, for the moment, the fact that the two directors of A Limited and B Limited are an officer and the Managing Director of the Trustee, clearly the Trustee, as trustee of the Trust, has an obligation under Bartlett to familiarise itself with what is being done by the directors of A Limited and B Limited in respect of the claims of C Limited. Appropriate action, even by the standards of the prudent man of business, would involve seeking to persuade the directors of A Limited and B Limited to deal with the claims of C Limited in a manner which was most favourable to the best interests of the Trust. An unwillingness on the part of the directors so to act could lead, under the Bartlett duty, to the necessity for intervention through the Trustee using its direct, or indirect, shareholding in A Limited and B Limited to replace the directors with more compliant ones (assuming this were lawful and achievable under the laws of Guernsey and the British Virgin Islands).
57. But, of course, the directors of A Limited and B Limited will, in all probabilities, owe duties to their respective companies to act in the best interests of those companies. Whilst I do not know what is the law of Guernsey or the British Virgin Islands in this regard it does not seem unreasonable to presuppose that there may well be such duties in both jurisdictions. The directors in fulfilling such duties would, no doubt, take the Trustee's instructions into account. But they might then make a bona fide commercial decision not to follow the instructions to the letter. In these circumstances, as it seems to me, the Trustee could arguably be blamed for not removing the directors for more complaint ones only if fulfilling the instructions were lawfully under the laws of Guernsey and the British Virgin Islands respectively. In other words, intervention to obtain more compliant directors is perfectly permissible, and may be necessary under the Bartlett duty, in respect of a bona fide commercial decision which is unattractive to the Trustee. But it cannot be a breach of the Bartlett duty, in my judgment, to require intervention so as to force the directors, or the new directors, to achieve something which is unlawful under the laws of Guernsey and the British Virgin Islands.
58. For my part, I do not see what difference it makes that the two directors of A Limited and B Limited are an employee and the Managing Director of the Trustee. In their capacities as directors of A Limited and B Limited they must fulfil their duties as directors under the laws of Guernsey and the British Virgin Islands and act in the best interests of the company. But if, within the parameters of whatever duties they owe to the companies under such laws, they can fulfil their instructions from the Trustee then they should do so.
59. Accordingly, as it seems to me, on this directions hearing I can assist the Trustee, in fulfilment of its Bartlett duties, by indicating what instructions it should give to the directors of A Limited and B Limited to deal with, and fund, the claims made against A Limited and B Limited by C Limited. But, and it is a big but, the directors should fulfil those instructions only if they can lawfully do so under the duties owed by them, in the law of Guernsey and the British Virgin Islands, to the two companies.
60. I note that the conclusion I have reached appears to be in accordance with the views expressed in Lewin on Trusts 19^th Edition at para 27-246 where under the heading "Litigation by or against companies owned by a trust" it is suggested that it may be appropriate for an application for directions to be made by the share owning trustees because questions may arise how, if at all, the trustees should in the interests of the beneficiaries exercise their powers and rights as shareholders to intervene in the management of the affairs of the company in regard to the litigation "under the relevant principles considered elsewhere". ("Relevant principles considered elsewhere" is a reference to the principles in Bartlett).
61. I do, however, also note that footnote 840 to paragraph 27-246 refers to the Hong Kong Court of Appeal having taken a restrictive approach on this issue in Highmax Overseas Limited v. Chau Kar Hon [2014] HKCA 248. That restrictive approach was taken on the grounds that the management of a trust-owned company was a matter for its directors and the court should not support interference by the trustee if the directors had taken a reasonable view. Highmax was not cited to me and I have not heard submissions on it. However, in principle under the Bartlett duty, I do not see why a trustee should not intervene in the best interests of the trust, by using the trust's voting power, if the trust would prefer the directors to take a different reasonable view. If there are competing reasonable views then surely the shareholder is entitled to use his voting power to ensure that the directors prefer his lawful reasonable view? What the trustee is not entitled to do is to utilise his shareholding power to force the directors to take an unreasonable view (i.e a view which would, granted the duties owed by directors in the relevant jurisdiction, be a breach of the duties of directors).
62. What, however, are the best interests of the Trust in the present case? As far as I can see, granted the existence of the "B" shares in A Limited, the best interest of the Trust lie in maximising income. Depreciation of the capital value of the property portfolio appears to affect only the "B" shareholders.

C Limited

63. For many years the sole business of C Limited had been the management of the property portfolio. Each of the Settlor's four children were directors of C Limited and each, originally, held an equal shareholding therein. As at today's date, 25% of the shareholding in C Limited is held by the Third Defendant. The Second Defendant and the husband of the Seventh Defendant has acquired the Fourth Defendant's shareholding in C Limited. Of the remaining 25% shareholding in C Limited (which comprises 750 ordinary shares) part (700 ordinary shares) is held by the First Defendant with the remainder (50 ordinary shares) held by D Limited. The directors of C Limited are, now, the First Defendant and D Limited. D Limited is a company owned and controlled by the First Defendant.
64. In 1996 Chesterton Plc produced a Report on the property portfolio. As a result a 12 year modernisation plan was commenced with a view to upgrading the property portfolio. What happened was that C Limited received the gross rental income from the property portfolio as managing agents. A certain portion of that gross rental income was earmarked for ordinary maintenance works with, it is said, a further 35% of that gross rental income being utilised for renovation and improvement works under the modernisation plan. This arrangement, it is said, adversely affected the life tenants under the Trust (albeit with their consent through C Limited) in that the monies used to fund the modernisation plan did not become available, up the chain, to pay income to them under the terms of the Trust. Rather such renovation and improvement works went to improve the capital value of the property portfolio.
65. It is common ground that, at ail material times, C Limited was entitled, for its management work, to a commission of 12% on rental income with a further entitlement to charge a fee of 7% on any repair costs. It is also common ground that this entitlement was extended to B Limited when B Limited acquired its small part of the property portfolio.
66. By 2008 there were clearly difficulties between the then surviving children of the Settlor (Child 2, the First Defendant and the Second Defendant). The Second Defendant was removed as a director (he had in fact been managing director) of C Limited on 17 November 2008. The difficulties appear to have related to the management of C Limited and, in particular, to the letting of members of the second generation of the Settlor's family into the management of C Limited.
67. Further the Trustee received a Report dated 31 July 2008 from Strutt & Parker which was highly critical of the management of the property portfolio by C Limited. Various of the Defendants (in particular the First Defendant) heavily criticised this Report and say it was self-serving and should not have been acted upon.
68. However, the Trustee did act on this Report. Each of A Limited and B Limited terminated their management agreements with C Limited with effect from 27 February 2009. Following such termination C Limited had no business to conduct.
69. Following termination of the management agreements, A Limited sought possession from C Limited of an office which C Limited had occupied for many years. This led to contested proceedings with an order for possession of the office being made against C Limited on 2 September 2010. Ultimately in those proceedings, but I stress by consent, the First Defendant and Child 2 were joined as parties for the purposes of a costs order being made against them. Child 2 and the First Defendant were, again f stress by consent, ordered to pay A Limited's costs of the proceedings. Those costs totalled some £145,000.
70. At this time there was clearly a high level of discord amongst the Settlor's surviving children. Indeed, the First Defendant made allegations of fraud against the Second Defendant which led to the Second Defendant being arrested and interviewed by the police in respect of his conduct as a director of C Limited. A few weeks later the police confirmed that they were taking no further action against the Second Defendant.
71. This level of discord has permeated through the subsequent generations of the Settlor's family. There are those who think that the present situation has been brought about by the older generation (i.e. the children of the Settlor) and so income should fund any resolution. There are those who think that the older generation sacrificed income as part of the modernisation plan and that C Limited was badly treated. They are sympathetic to C Limited's claims and think that capital should bear the costs of any resolution. I have taken into account all the views of all the Defendants as expressed either in writing or as expressed to me orally. I do not think it would assist family harmony for me to identify precisely who thinks what but I do make the following points:-

(1) the First Defendant clearly thinks that the present claims of C Limited are fully justified and that they should be borne by capital; but

(2) the Second Defendant and the husband of the Seventh Defendant (as 50% shareholders of C Limited) do not support the claims which C Limited is now bringing (but, of course, they can do nothing about it because they are not directors of C Limited). They do not wish to see capital being used to fund any resolution.

C Limited's Claims

72. Shortly after termination of the management agreement, C Limited rendered various Invoices to A Limited and B Limited, The subject matter of those Invoices was said to be significant sums in respect of repairs, maintenance and improvement works for the property portfolio which had been expended by C Limited but for which C Limited had not received reimbursement from A Limited and B Limited.
73. However, nothing was actually done by C Limited to recover the sums the subject matter of these Invoices (notwithstanding the ongoing proceedings for recovery of possession of the offices and the need for C Limited, Child 2 and the First Defendant to pay £145,000 in costs) until the issue of a Claim Form on 6 February 2015.
74. The Claim Form (which commenced the 2015 Action) came out of the blue. There was no attempt whatsoever to comply with any Practice Direction on Pre-action Conduct.
75. By the Particulars of Claim in the 2015 Action C Limited made the following claims against A Limited and B Limited:-

(1) a reimbursement claim against A Limited in the total sum of £184,298,16 and a reimbursement claim against B Limited in the total sum of £22,807.03. These claims had been the subject matter of the 2009 Invoices and were broken down into various parts, such as "Thermogenesis and Newlite repair costs", other repairs, structural works, woodworm treatment, works to doors and windows, works to gardens and fences and off-street parking works;

(2) a claim against each of A Limited and B Limited for wrongful termination of the management agreements. It is said by C Limited that 12 months' notice should have been given, resulting in a claim for £164,712.53 against A Limited and £11,402.48 against B Limited;

(3) a claim for consequential loss which consisted entirely of legal fees in the sum of £80,760.21; and

(4) a claim for interest on all the above sums at the rate of 8% per annum.

76. The total value of C Limited's present claims (assuming interest at 8%) is £663,904. This is after giving credit for rental deposits, the property of A Limited and B Limited, which C Limited has throughout continued to hold. C Limited has admitted that A Limited and B Limited are entitled to credit for these rental deposits. On the basis of the present costs budgets for a contested trial (and, I stress, those costs budgets have yet to be approved) the total downside for A Limited and B Limited together, assuming the entirety of C Limited's claim succeeded at trial and interest was awarded at 8%, would be some £1,153,461 (this includes the costs of A Limited and B Limited).
77. Assuming that matters proceeded to trial and C Limited failed in its claims in their entirety then still there would be irrecoverable costs for A Limited and B Limited. Their projected costs through trial are currently estimated at some £241,000 and, obviously, not all of this sum would be recovered on a detailed assessment on the standard basis. But, more importantly, C Limited is, presently, hopelessly insolvent. C Limited's most recent filed accounts show a deficiency of £444,098 on Total Assets less Current Liabilities. Creditors amount to £748,961 and C Limited appears to hold no meaningful assets apart from its claims against A Limited and B Limited.
78. However, the most major creditor of C Limited is the First Defendant (with, perhaps, Child 2 or his estate being the other major creditor). The First Defendant's evidence is that C Limited does not have external creditors (such as trade creditors or HMRC). She, and to a lesser extent Child 2, loaned monies to C Limited to enable it to pay all its external debts (including the costs orders in the possession proceedings). So any recovery in the 2015 Action by C Limited will enure primarily for the benefit of the First Defendant because it will enable C Limited to repay monies which C Limited owes to the First Defendant. The converse side of the coin, of course, is that this means that if C Limited is to fund the Action through to trial then the only realistic source of funding is the First Defendant (an elderly lady aged 83). Equally, the First Defendant may put herself at risk of a costs order being made against her personally as a result of her funding of C Limited's claims.

Mediation

79. As early as 15 April 2015 C Limited's solicitors indicated their willingness to participate in mediation. However the response of A Limited and B Limited, as reflected in an email of 1 September 2015, was that Mediation was appropriate only after an application for security for costs which A Limited and B Limited made against C Limited had been disposed of. On 9 February 2016 Master Eastman dismissed the application of A Limited and B Limited for security for costs against C Limited. As a result of that dismissal A Limited and B Limited became willing to engage in Mediation. It was also Master Eastman's decision which resulted in steps being taken for the issue of the Action for directions now before me.
80. Everyone is agreed that Mediation would be beneficial and should take place. Indeed, a Mediation is shortly to take place. I agree that the 2015 Action cries out for Mediation. Under the Bartlett duty I think that the Trustee would have been obliged to intervene had the directors of A Limited and B Limited not been willing to participate in Mediation.

Settlement Parameters

81. I will deal in my confidential judgment with all issues relating to (1) settlement parameters for A Limited and B Limited at the Mediation and (2) future conduct of the 2015 Action in the event of Mediation being unsuccessful. This second judgment will be confidential to the parties specified therein.
82. I would caution the First Defendant, however, from thinking that, as a result of my conclusion above that the property portfolio is not an asset of the Trust, my confidential judgment will have no meaningful effect on what can be obtained from A Limited and B Limited at any Mediation. I shall formulate my confidential judgment by reference to the Bartlett duty but the Trustee, and hence indirectly the directors of A Limited and B Limited, are likely, in practicality, to follow what I have to say to the letter.
83. I also referred above to various exclusion orders which I made when submissions came to deal with settlement parameters and the future conduct of the 2015 Action. In so doing acted in accordance with the principles set out in Re Moritz. Deceased [1960] 1 Ch. 251 and Re Eaton. Deceased [1964] 1 WLR 1269. As Wynn-Parry J said in Re Moritz at 255:-

"As I understand it, the practice in the [Chancery Division] is that where a trustee finds it is compelled to ask for the directions of the court as to whether or not certain proceedings should be taken, while it is proper and indeed necessary to join the parties against whom the proposed relief is sought, those parties should not be present in Chambers when the matter is debated; and they should not be furnished with the evidence upon which the court is asked to act."

84. In Re Eaton Wilberforce J stated (at 1270) that Re Moritz correctly reflected the practice followed in the Chancery Division and that such practice was correct. However, he said that Re Moritz did no more than to state a general rule and the court should, and does, endeavour to adjust its actions to the circumstances of the individual case with a view to doing justice so far as possible to all the parties.
85. As it seemed to me, granted the disparity of views within the Settlor's extended family, it was necessary to make the exclusion orders which I did in order to preserve confidentiality in the perceived merits of the 2015 Action. And that is why it seems to me to be necessary to deliver a second but confidential judgment on issues relating to settlement parameters (and the future conduct of the 2015 Action should settlement prove impossible at Medication).

Capital v. Income

86. This was in many ways the most contentious issue before me. However, it was argued on the false premise that the property portfolio was, or was to be treated as, an asset of the Trust. All the arguments of law, or mixed fact and law, advanced to me as to how expenses should be borne as between capital and income were, therefore, not directly relevant. In particular:-

(1) the costs associated with, and the sums needed to dispose of, the 2015 Action are sums payable by A Limited and B Limited and not by the Trust;

(2) the Trust's only assets are (1) its shareholding (either directly or indirectly) in A Limited and B Limited and (2) the income stream derived by way of dividend (either directly or indirectly) from A Limited and B Limited.

87. Prima facie, therefore, the directors of A Limited and B Limited are perfectly entitled, acting in the best interests of A Limited and B Limited, to decide how to fund all sums (including costs) needed to dispose of the 2015 Action. They can do so out of "money saved up" for these purposes or from future income stream or from sale of properties in the property portfolio (or from a combination of these sources).
88. But ought the Trustee, in accordance with its Bartlett duty, to intervene in respect of whatever bona fide decision is taken by the directors of A Limited and B Limited as to how to fund all sums (including costs) needed to dispose of the 2015 Action. I find this to be a difficult question.
89. Prima facie, granted the existence of the "B" Shares, the Trustee's interest, in the best interests of the Trust, seems to lie in maximising income. And Mr Scrivener, on behalf of the First Defendant, urges upon me that capital should bear all sums (including costs) needed to dispose of the 2015 Action. He refers me to Carver v. Duncan [1985] 1 AC 1082 where Lord Templeman said this at 1120C:-

"Trustees are entitled to be indemnified out of the capital and income of their trust fund against all obligations incurred by the Trustees in the due performance of their duties and the due exercise of their powers. The Trustees must then debit each item of expenditure either against income or against capital. The general rule is that income must bear all ordinary outgoings of a recurrent nature, such as rates and taxes, and interest on charges and encumbrances. Capital must bear all costs, charges and expenses, incurred for the benefit of the whole estate"

On this basis, albeit on the false premise that the property portfolio was an asset of the Trust, Mr Scrivener urges on me that all sums (including costs) needed to dispose of the 2015 Action should come solely from the sale of properties, even if A Limited and B Limited presently have sufficient liquid resources to pay.

90. Conversely, Ms Bedworth urges on me that the sums (including costs) needed to dispose of the 2015 Action should be met entirely from rental income. It is more than possible that A Limited already has sufficient cash in hand (some of it acquired as a result of scaling back on maintenance work on the property portfolio following commencement of 2015 Action) to satisfy all sums (including costs) needed to dispose of C Limited's claims. She characterises, for the purposes of Carver, C Limited's claims as being claims for payment of sums which were of a recurrent nature and which ought to be chargeable to income.
91. Into the equation goes the fact that I have not heard submissions on the true effect of the "B" Shares and, also, the fact that if the "B" Shares have the effect which I have identified then, still, it would seem that the directors of A Limited would owe duties to taking into account the interests of the "B" Shares when making any commercial decision.
92. Ultimately, I have reached the conclusion that the directors of A Limited and B Limited are entitled, in their capacity as such directors, to take a bona fide decision in the best interests of A Limited and B Limited as to how to fund all sums (including costs) needed to dispose of the 2015 Action. There would not be any Bartlett duty on the Trustee to intervene unless:-

(1) the mode of funding threatened the Trustee's ability to pay to the existing life tenants the annual income which they have, historically, been receiving from the Trust; or, conversely,

(2) the mode of funding causes properties in the portfolio to be sold unnecessarily. Clearly a sale of a property or properties would not be unnecessary if required in order to enable the Trustee to comply with (1).

93. I do not see how the Trustee could be blamed, under the Bartlett duty, for failing to intervene should the directors of A Limited and B Limited make a bona fide commercial decision (in the best interests of A Limited and B Limited) which fell within these two broad parameters. Of course, the practical reality is that the decision is made by the Trustee. But for the avoidance of doubt the direction which I give on this issue is that the Trustee is not required to intervene under the Bartlett duty, so long as:-

(1) the decision as to how to fund all sums (including costs) necessary to dispose of the 2015 Action is made bona fide in the best interests of A Limited and B Limited; and

(2) such decision does not threaten the income which, historically, the four life tenants have received from the Trust; and

(3) such decision does not involve the selling of properties unnecessarily.

Costs of this Action

94. Any costs of this Action will not, of course, be borne by A Limited and B Limited but by the Trust. The Trustee is entitled to utilise either capital or income of the Trust to meet the legal costs of this Action (see the "General Rule" as stated in Lewin at 25- 091 and Carver as cited above). Thereafter the issue arises as to how such expenditure should be debited by the Trustee against either income or capital. Prima facie the legal costs of obtaining the directions of the court fall, at this point, on capital (see Lewin at 25-107).
95. However, in the present case the only capital which the Trust holds is its shareholding (directly or indirectly) in A Limited and B Limited. It follows that, at the first stage, the costs of this Action must be paid by the Trustee out of its dividend income stream (for there is no other source of payment). It then becomes impossible to see how there can be recoupment for the consequential shortfall in the dividend income stream through resort to capital. How can a small proportion of the shareholding in A Limited and B Limited be sold? Presumably either the whole shareholding has to be sold or none.
96. Whether it is possible for there to be some structure created whereby the shortfall in income stream caused by the payment of the costs of this Action can, somehow, be charged to capital I do not presently know. I am prepared to hear further submissions on this issue on a date subsequent to handdown. But the simple fact remains that, initially at least, the costs of this Action will have to be funded out of the Trust's income dividend stream since that is the only source of income or capital to fund them.

Privacy

97. The fundamental common law principle is one of open justice. The history of this principle, and the reasoning for it, are clearly set out in paragraph 13 of the judgment of Morgan J in V v. T [2014] EWHC 3432 (Ch). Clearly there have to be certain limits to this fundamental principle (as CPR 39.2(3) recognises). But, in my judgment, those restrictions should be carefully confined to circumstances where privacy is truly necessary.
98. Accordingly, it seems to me that the public are entitled to know, so far as possible, what occurred behind closed doors on a directions hearing of the present nature. But the present directions application concerns, amongst other things, the contingent interests of various minors in a very substantial trust fund. For the very cogent reasons identified by Morgan J at paragraph 23 in V v. T it would be to the detriment of the minors in this case if their identities were disclosed. That might be regarded as a reason for keeping the terms of this judgment confidential as well. However, I am mindful that any restriction on the principle of open justice must be only the minimum derogation required in order to achieve the ultimate purpose of protecting the minors (see the decision on the Court of Appeal in X v. Dartford and Gravesham NHS Trust [2015] 1 WLR 3647). Ms Bedworth submits to me that "Here, the nature of the public's interest in these proceedings is adequately served by the publication of the judgment without the need for details which identify the family and therefore the minor beneficiaries." I agree. Hence this judgment is both (1) open to the public and (2) anonymised.