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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Tantular-v -AG [2014] JRC 128 (10 June 2014) URL: http://www.bailii.org/je/cases/UR/2014/2014_128.html Cite as: [2014] JRC 128 |
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Before : |
Sir Michael Birt, Kt., Bailiff and Jurats Fisher and Olsen |
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Between |
Tan Chi Fang Jason Ray Tantular Sandy Tantular Michael Tantular |
Applicants |
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And |
HM Attorney General |
Respondent |
IN THE MATTER OF THE REALISABLE PROPERTY OF ROBERT TANTULAR
Advocate T. V. R. Hanson for the Applicants.
A. J. Belhomme, Esq., Crown Advocate for the Attorney General
Advocate H. E. Ruelle for the Trustee.
Advocate D. R. Wilson for the Viscount.
judgment
the bailiff:
1. This is an application by the applicants for an order that all assets that are identifiable in the Jasmine Investment Trust ("the Trust") as being acquired by the Trust prior to a certain date should be released from a saisie judiciaire over the assets of the Trust which was granted ex parte by the Bailiff on 9th August, 2013, following an application by the Attorney General on behalf of the Ministry of Law and Human Rights of the Republic of Indonesia.
2. The application raises an important point as to whether assets of a discretionary trust fall to be considered as 'realisable property' of a person who is a discretionary beneficiary of such a trust.
3. It is not necessary to record the factual background in any detail. The matters relevant to the particular issue with which we are concerned can be summarised as follows.
4. Mr Robert Tantular ("the settlor") was the President of an Indonesian Bank called P.T. Bank Century Tbk ("Bank Century"). In September 2009 he was convicted of certain banking offences in relation to Bank Century and, following various appeals, was sentenced to nine years' imprisonment.
5. He has now been charged with fraud and money laundering offences in relation to his position as president of Bank Century. These new proceedings had not been concluded at the date of the hearing before us. On 4th February, 2010, in connection with those proceedings, the Central Jakarta District Court issued a restraint order in respect of the assets of the Trust. The Ministry of Law and Human Rights in due course sought the assistance of the Attorney General to obtain a saisie judiciaire in Jersey and, as already stated, such an order was granted on 9th August, 2013. The saisie was in the normal form in that it was granted in respect of the realisable property of the settlor situated in Jersey, but it was also expressed specifically to extend to the assets of the Trust.
6. The Trust was established by deed dated 17th June, 2004, between the settlor and ING Trust Company (Jersey) Limited as trustee. The present trustee is BOS Trust Company (Jersey) Limited. The beneficiaries were listed as the settlor, his wife (the first applicant), his three children (the second to fourth applicants) and his wife's younger sister ("the sister-in-law"). They remain the only beneficiaries although there is power to add to the class.
7. The Trust is a discretionary trust governed by Jersey law. It is in conventional form. Thus there is a power of appointment of capital and income in favour of any one or more of the beneficiaries. Subject to any such appointment, the trustee may pay or apply the capital or income to or for the benefit of any one or more of the beneficiaries as it may in its discretion think fit failing which there is a trust to accumulate the income. Finally, at the expiry of the trust period, which is 78 years (or such earlier day as the trustee may declare) the trust fund is to be held upon trust for such one or more of the beneficiaries in such shares or proportions as the trustee may determine, in default of which upon trust for the individual beneficiaries then living in equal shares.
8. It is said that the original assets of the Trust were first settled into a New Zealand trust on 13th March, 2003. On 17th June, 2004, all the assets of the New Zealand trust were transferred to the Trust.
9. It appears that the assets of the Trust are essentially as follows. The Trust owns the entire share capital of a company called Perennial Investment Holdings Limited ("Perennial"). Perennial was contributed to the Trust in 2004. Perennial owns a property in Singapore which it acquired in 2000. There is a mortgage over the Singapore property with Credit Suisse, Singapore, in the sum of approximately S$2.4m. There is however, an equity in the property of over S$1m.
10. The Trust also owns a BVI company called Jonzelle Limited which was incorporated on 19th August, 2004. In 2005 it purchased what is now the home of the settlor's family in Singapore. Again, there is a mortgage with Credit Suisse which has a balance of some S$4.4m, leaving a substantial equity in the property. We were informed that Credit Suisse has called in the mortgages on both properties with the consequence that the family is at risk of being evicted from the family home.
11. Finally, there is a third company which has certain investments, cash balances and insurance policies. The company is said to have comparatively little value.
12. There is a letter of wishes dated 19th June, 2004, from the settlor to the original trustee. The letter recognises that the settlor's wishes are not legally binding upon the trustee and that it grants no rights to any of the potential beneficiaries. However, it expresses the hope that the trustee will take his wishes into account when exercising any discretionary powers. The letter goes on to say that, during his lifetime, the settlor would like the trustee to consider him as the principal beneficiary. After his death, he wished the trust fund to be held for his wife and children in specified shares, passing to grandchildren in default. It went on to say that, should all his children die without issue, he would wish the trust fund to be held for the sister-in-law.
13. The Proceeds of Crime (Enforcement of Confiscation Orders)(Jersey) Regulations 2008 ("the 2008 Regulations") modify the Proceeds of Crime (Jersey) Law 1999 ("the 1999 Law") as it applies to external confiscation orders i.e. confiscation orders made by courts outside Jersey. Schedule 2 of the 2008 Regulations sets out the 1999 Law in its modified form ("the modified 1999 Law") and the relevant provisions for our purposes are as follows:-
14. Article 2 of the modified 1999 Law deals with the meaning of "realisable property" and the relevant provisions are as follows:-
15. Finally, in Article 1(1), dealing with interpretation, the following definition is to be found:-
16. The applicants do not suggest that the conditions set out in Article 15 of the modified 1999 Law for the grant of a saisie judiciaire are not satisfied. Thus proceedings against the settlor have been instituted in Indonesia for offences of fraud and money laundering, those proceedings have not been concluded, and there are reasonable grounds for believing that an external confiscation order may be made in those proceedings.
17. What Advocate Hanson focussed on, on behalf of the applicants, was that most of the assets of the Trust - and in particular the two properties in Singapore - do not constitute "realisable property" and cannot therefore properly be made the subject of a saisie judiciaire because, under the terms of Article 16(4), a saisie judiciaire can only be applied to realisable property. He contended that these assets were contributed to the Trust before any alleged criminal conduct began and, therefore, were not gifts caught by the modified 1999 Law (see Article 2(9) quoted above). He further contended that the fact that the settlor was a beneficiary of the Trust did not of itself mean that all the assets of the Trust were realisable property. In this respect he submitted that a beneficiary of a discretionary trust was not 'beneficially entitled' to the property subject to the trust.
18. In his ex parte application to the Bailiff and in his submissions before us, Crown Advocate Belhomme asserted that the assets of the Trust are realisable property on two grounds:-
"It is alleged that the settlor made certain gifts to the Trust after the date of commencement of his alleged criminal conduct. The assets of the Trust are therefore realisable property under Article 2(1)(b)(ii) to the extent of such gifts.
More generally, as the settlor is a beneficiary of the Trust, he is therefore 'beneficially entitled' to the assets of the Trust so that all the trust assets are realisable property as falling within Article 2(1)(b)(iii) of the modified 1999 Law."
19. As to (i), the Court gave directions at the conclusion of the hearing for the obtaining of further information concerning the extent of gifts into the Trust and maintained the saisie judiciaire over all the trust assets pending the outcome of such further investigations regardless of its decision in relation to (ii). Having heard argument, the Court reserved its decision in relation to (ii) and this judgment contains our decision on that aspect.
20. Crown Advocate Belhomme's submissions were simple. He began by referring to Re Kaplan [2009] JLR 088 where Bailhache, Bailiff made it clear that, when interpreting the 1999 Law, the Court should adopt a purposive approach. Thus at paragraph 18 of his judgment the Bailiff quoted with approval from a passage from an earlier case of In re Illinois District Court [2001] JLR 160 at para 10 as follows:-
The Bailiff then went on at paragraph 19 of Kaplan as follows:-
21. Crown Advocate Belhomme then turned to the definition of "property" in Article 1(1) of the modified 1999 Law, namely "all property, whether movable or immovable, or vested or contingent and whether situated in Jersey or elsewhere" [emphasis added].
22. He went on to refer to Article 2(1)(d) of the modified 1999 Law, which includes in the definition of realisable property "any property to which the defendant is beneficially entitled". He submitted that, adopting the purposive construction envisaged in Re Kaplan, a combination of these two provisions was wide enough to encompass the contingent beneficial interest of a beneficiary of a discretionary trust and that the settlor had a contingent beneficial entitlement to the entirety of the assets of the Trust.
23. In support, he pointed to two examples (one on 24th February, 2009, and one on 22nd August, 2011,) where a saisie judiciaire had been granted in respect of the assets of a trust of which the offender was a discretionary beneficiary. However, these were uncontested ex parte applications. Furthermore, all that was available to this Court was the Act of the court in each of those cases, which did not of course explain the background. We cannot therefore draw any assistance from these two examples.
24. In our judgment, a discretionary beneficiary (whether technically a beneficiary of a discretionary trust or an object of a discretionary power of appointment) is not 'beneficially entitled' to the property which is the subject of the trust or power of appointment.
25. One begins by noting that there is no special definition of 'beneficially entitled' in the modified 1999 Law. It follows that the legislature must have intended such expression to have its ordinary meaning and this is to be ascertained by applying ordinary principles of property or trust law (see R v May [2008] 4 All ER 97 per Lord Bingham at para 48 "The exercise of [the jurisdiction to make confiscation orders] involves no departure from familiar rules governing entitlement and ownership"; and see also Mitchell, Taylor and Talbot on Confiscation and the Proceeds of Crime at 3.037 "Whether a particular piece of property is realisable property is a question of civil property law").
26. For the purposes of this judgment, it is not necessary to draw a distinction between a beneficiary under a discretionary trust (in the strict sense) and the discretionary object of a power of appointment. We therefore propose for the sake of brevity to refer to a beneficiary of a discretionary trust to cover both categories. In our judgment, it is clear and abundantly well-established law that a beneficiary of a discretionary trust has no 'entitlement' to any of the trust property. His sole right is to be considered as a potential recipient of benefit by the trustee and he also has a right to have his interest protected by a court of equity (see Lord Wilberforce in Gartside v Inland Revenue Commissioners [1968] AC 553 at 617).
27. A convenient description of the position is to be found in Snell's Equity 32nd Edition, 647 as follows:-
28. To similar effect is Lewin on Trusts (18th Edition) at page 7 as follows:-
29. Matthews and Sowden, The Jersey Law of Trusts at 12.13 states:-
30. In our judgment, it is incompatible with fundamental principles of trust law to assert that a discretionary beneficiary of a trust is "beneficially entitled" to all - or indeed any - of the assets of the trust. The true position is that he has no right to any of those assets unless or until the trustees decide in their discretion to make an appointment to him and he then becomes beneficially entitled only to such assets as are appointed to him. As Lord Reid said in Gartside at 607:-
31. Crown Advocate Belhomme argued that because 'contingent property' was included in the definition of property, this covered the position of a discretionary beneficiary because his interest was contingent upon the exercise of the trustee's discretion in his favour. He further argued that Article 10(10) of the Trusts (Jersey) Law 1984 declared the interest of a beneficiary of a trust to be moveable property . But, even if a discretionary beneficiary's interest can be described as 'contingent property', it is only that interest which could conceivably be so described, not the underlying property of the trust. Thus all that could be made the subject of a saisie judiciaire would be a discretionary beneficiary's interest under the trust, which would mean his right to be considered for appointment by the trustee. That is completely different from the suggestion that he is beneficially entitled to all or any part of the trust property.
32. In our judgment, consideration of well-established principles of trust law is determinative of the outcome in this case. Nevertheless, it is instructive to consider some of the possible consequences if the argument put forward on behalf of the Attorney General is correct.
33. Crown Advocate Belhomme conceded (correctly) that there is no difference as a matter of law between the position of one discretionary beneficiary and another. The fact that one may be the settlor does not make his legal position different, nor does anything said in the letter of wishes. Thus the reference in the letter of wishes to the settlor as 'principal beneficiary' does not alter the legal position. Even if it is more likely (as a result of the letter of wishes) that the trustee would appoint assets to the settlor than, say, to the sister-in-law, this still does not mean that the settlor is entitled to any such assets. He will only become entitled to them if and when the trustee, in its discretion, appoints them to him.
34. He further accepted that the consequence of his argument is that the entire trust fund can be made subject to a saisie and in due course confiscated under a confiscation order if any of the discretionary beneficiaries commits a crime in circumstances where an external confiscation order could be made against that beneficiary. Thus, if a grandfather set up a discretionary trust for his children and grandchildren and if, many years later, one of his ten grandchildren committed a crime such that a confiscation order could be made against that grandchild, the entire trust fund could be made the subject of a saisie and in due course confiscated, to the prejudice of all the children and other grandchildren of the grandfather. By analogy, in this case, the entire trust fund could be taken if the sister-in-law had committed a crime which rendered her liable to an external confiscation order notwithstanding that she had never contributed anything to the trust and that in reality the likelihood of her benefiting was extremely remote.
35. Another example raised by the Court in argument was the contrast between a fixed trust and a discretionary trust. Let us assume a traditional settlement where the assets are settled upon A for life with the reversion in equal shares to his children B and C. Let us assume further that B commits a crime and is liable to have a confiscation order made against him. It is accepted by all parties that in those circumstances the saisie and any resulting confiscation order could only be made in respect of B's 50% reversionary interest. Yet, on the Attorney General's argument, where an offender has no right to any of the trust assets but merely a right to be considered for benefit at the discretion of the trustee, the whole of the trust fund can be taken.
36. In R v Waya [2013] 1 All ER 889 the Supreme Court considered whether in some circumstances the making of a confiscation order could amount to a breach of Article 1 of the First Protocol of the European Convention on Human Rights 2000 which provides:-
The Supreme Court emphasised that Article 1 requires a balance to be struck and imports the requirement that there must be a reasonable relationship of proportionality between the means employed by the State in, inter alia, the deprivation of property as a form of penalty, and the legitimate aim which is sought to be realised by the deprivation. It went on to hold that the mandatory provision of the relevant English statute (which required the court to make a confiscation order) had to be read down so as to provide that the court should not make a confiscation order which would be disproportionate and therefore in breach of Article 1.
37. In our judgment, to make a confiscation order in respect of the whole of a trust fund merely on the ground that the offender is a discretionary beneficiary would be disproportionate in that it would remove any possibility of the other (innocent) beneficiaries benefiting from the trust assets. It would therefore amount to a breach of Article 1 of Protocol 1.
38. Crown Advocate Belhomme responded by referring to Article 39 (1)(c) of the modified 1999 Law, which provides that the Court may register an external confiscation order if "it is of the opinion that enforcing the order in Jersey would not be contrary to the interests of justice". He submitted that the provision could be used to avoid the making of a disproportionate order. Thus the Court might refuse to enforce an external confiscation order where the only ground relied upon was that the person against whom the external confiscation order had been made was a beneficiary of a discretionary trust if it considered on the particular facts of the case that such an order would be disproportionate.
39. We accept that Article 39 (1) (c) does give the Court an ability to refuse to register an external confiscation order, but it is fairly limited and does not seem to us to provide a convincing response to some of the potential consequences of the interpretation contended for by Crown Advocate Belhomme.
40. Although it was not referred to by counsel, some support by analogy for the decision we have reached may be obtained from the decision of the Supreme Court in Prest v Prest [2013] 4 All ER 673. That case concerned the provisions of section 24 (1)(a) of the Matrimonial Causes Act 1973 which enables a court, on granting a decree of divorce, to order that a party to the marriage should transfer to the other party any specified property, being property to which the first mentioned party ".....is entitled, either in possession or reversion....". The judge at first instance found that the husband in that case was in complete control of certain companies and ordered the transfer of certain UK situated real properties owned by the companies to the wife on the ground that, in reality, because of his complete control of the companies the husband was beneficially entitled to the properties.
41. That approach was roundly condemned by a majority of the Court of Appeal [2013] 1 All ER 759, and that decision was upheld by the Supreme Court. As Lord Sumption said (at para 37) an "entitlement is a legal right in respect to the property in question". The court held that the husband was not beneficially entitled to the properties; on the contrary they belonged to the companies which were therefore beneficially entitled to them. The fact that it might be thought desirable for the Family Division of the High Court to have a wide power to achieve justice between divorcing parties did not entitle the court to depart from settled principles of property law. Lord Sumption said this at para 40:-
42. In our judgment, the arguments put forward on behalf of the Attorney General in this case would require the Court to overthrow fundamental principles of the law relating to trusts and there is no indication whatsoever, let alone irresistible clearness, that this was the intention of the legislature. In this connection we would repeat the observation of Lord Bingham in R v May that the exercise of the jurisdiction to make confiscation orders involves no departure from familiar rules governing entitlement and ownership.
43. We hold therefore that a beneficiary of a discretionary trust is not 'beneficially entitled' for the purposes of Article 2(1)(b)(iii) of the modified 1999 Law to any of the assets of that trust. If follows that the Court may not grant a saisie judiciaire over the assets of a discretionary trust merely on the ground that the offender (or suspected offender) is a beneficiary of such a trust.
44. However, that is not to say that a saisie may never be made against the assets of a discretionary trust. It will often be the case that there is evidence that the offender has contributed assets to the trust after the date upon which the alleged criminal conduct began. In those circumstances the trust assets are realisable property under Article 2 (1)(b)(ii) to the extent of any such gifts. It is not necessary that there be evidence that such gifts were the proceeds of the criminal conduct. That is to misunderstand the framework of the legislation which does not require there to be any link between the proceeds of crime and the realisable property. As Lord Walker and Sir Anthony Hughes said in Waya in relation to the equivalent legislation in England and Wales at para 27:-
This is equally the position in Jersey. Thus in re Smale [2003] JRC 099A, the Court said at paragraph 5:-
The fact that that observation was made in the context of drug trafficking whereas we are here dealing with the proceeds of other criminal conduct makes no difference to the validity of the observation.
45. It follows that, if on an application for a saisie judiciaire in support of an anticipated application to register an external confiscation order, there is evidence of gifts to a trust after the date upon which the criminal conduct in question began, it may well be appropriate to grant a saisie judiciaire in respect of the trust. In deciding whether to do so at that stage and, if so, the extent of the trust property to be covered by such a saisie, the Bailiff may have regard to the important policy objectives of the legislation in seeking to remove from offenders the benefit of criminal conduct but must at the same time have regard to the need for any order to be proportionate.
46. In the present case, there is evidence of gifts by the settlor to the Trust after the commencement of the alleged criminal conduct. Accordingly, at the conclusion of the hearing the Court maintained the saisie whilst directing that further investigations be carried out as to the extent and timing of any such gifts. In this respect the Court ordered the trustee of the Trust to provide information about gifts to the Trust. The application of the applicants therefore stands adjourned, but the Attorney General is, in our judgment, not entitled to maintain the saisie on the ground that all the assets of the Trust are realisable property by virtue of the settlor's position as a beneficiary of the Trust.
