The Estate of the late Emmanuel Pantelis Tsakkos

• Jurisdiction: Bahamas
• Judge: Charles Snr. J
• Judgment Date: 06 September 2022
• Court: Supreme Court (Bahamas)
• Docket Number: 2021/CLE/gen/00621

Between

In the Matter of the Estate of the late Emmanuel Pantelis Tsakkos

And in the Matter of Section 77 of the Trustee Act 1998, Chap. 176 of Statute Law of the Bahamas, 2000

And in the Matter of an application by Pantelis John Tsakkos in his capacity as Executor of the Estate of Emmanuel Pantelis Tsakkos

BS 2022 SC 154

Before:

The Honourable Madam Senior Justice Indra H. Charles

2021/CLE/gen/00621

IN THE SUPREME COURT

COMMON LAW AND EQUITY DIVISION

Trust — Application under section of the 77 of the Trustee Act, 1998 — Opinion, advice and direction of the Court sought — Whether Executor should continue to defend the Main Action and engage accountant and surveyor — Indemnity costs — Whether Executor should be indemnified for costs incurred as a result of defending the Main Action which asserts fraud and breach of duty claims against the Estate he represents — Whether Executor should be removed because of alleged fraud, dishonesty and breach of duty personally against him — Plaintiffs' failure to bring application to carry on — Whether costs incurred in bringing section 77 Application should be paid out of estate

The Plaintiffs in the Main Action are the sole beneficiaries of their father's Will. Their father died in 1997 leaving their uncle, Emmanuel Pantelis Tsakkos, now deceased (“EPT”) as the executor and trustee of his Will since the Plaintiffs were minors. EPT died in 2020. Under his Will, he appointed the Executor as sole executor. The beneficiaries under EPT's Will are his widow, his nephew Peter (one of the Plaintiffs) and the Executor.

In their Amended Statement of Claim, the Plaintiffs alleged that EPT, his wife and the Executor dishonestly put to their own personal and beneficial use, money and property belonging to their deceased father.

The Plaintiffs further alleged that EPT and the Executor owe them, among other things, a fiduciary duty to exercise reasonable care and skill in administering their father's estate and they breached that duty by failing to administer the estate in accordance with his Will and failing to invest the funds of their father's estate for their benefit.

Since EPT, who was the original executor died, by virtue of section 48 of the Probate and Administration of Estates Act, 2011, the Executor of EPT's estate is also the executor of their father's estate.

The Executor brought this application, pursuant to section 77 of the Trustees Act, for the Court's opinion, advice and/or directions in respect of certain questions including: (i) whether he should continue to defend the Main Action having regard to the conflict caused by the chain of representation under section 48; (ii) whether he should engage a forensic accountant and a surveyor to defend the Main Action; (iii) whether he should be relieved and wholly excused from any liability and be fully indemnified for any acts or things done by him for defending the Main Action and (iv) whether his costs shall be borne preemptively by the Estate.

HELD: finding that the Executor should continue to defend the Main Action on behalf of the estate of EPT with a co-executor, be it a family member or a professional accountant, to be nominated by the Plaintiffs; that the issue of whether to appoint a surveyor and an accountant should be left to the trial judge in the Main Action and the Executor ought to be indemnified for the costs incurred thus far in the Main Action and reasonable costs of this Section 77 Application from the Estate. Thereafter the two executors acting jointly will be indemnified from EPT's Estate for future costs of defending the Main Action.

• 1. The appointment of neither of the Plaintiffs as executor of EPT's Estate would, in my judgment, resolve the issue of conflict. A different conflict would arise: persons suing the estate that they represent. The Second Defendant is also conflicted. As there are allegations of fraud, dishonesty and breach of duty now levelled against the Executor and since it was the wish of EPT for the current executor to be the Executor of his Will, I will not remove him as the Executor but he will carry on with the executorship of the Estate alongside a co-executor to be nominated by the Plaintiffs.

• 2. The question of whether an accountant and/or a surveyor are necessary for disposing of the issues between the parties in the Main Action should be left to the trial judge.

• 3. It will only be in exceptional circumstances that a trustee will be granted an indemnity by the court if he has not obtained the sanction of the court. Obtaining the court's sanction also removes the risk that an allegation will be made by a beneficiary that the trustee had acted in breach of duty, imprudently or improperly in engaging in litigation: In the Matter of the Stingray Trust Cause No. FSD 0085 of 2017 & FSD0248 of 2017 applied.

• 4. Although it is prudent for a trustee to make a Beddoe application before defending the Main Action, an application can be made later and, if so made, the trustee (in this case the Executor) will be allowed to retain his costs out of the trust property if, had the application been made at the outset it would have been granted: In the Matter of the Stingray Trust (supra) and Lewin on Trusts (19 ^th Edn) relied upon.

• 5. The Court has an exceptional jurisdiction, which is analogous to that exercisable on an application for a pre-emptive cost order in hostile litigation, where a trustee has become involved in a trust dispute which amounts to an attack on the validity of the settlement. The court will look carefully at the merits of the case and the relative costs to the overall value of the trust assets: Alsop Wilkinson v Neary [1996] 1 WLR 1220 at 1224 and In the Matter of the Stingray Trust applied.

• 6. A trustee/executor is entitled to be paid his costs out of the estate as he is defending the suit for the benefit of the estate; though he is at the same time defending his own character: Walters v Woodbridge (1878) 7 Ch D 504 at 510 applied.

• 7. The instant case is one of an exceptional circumstance. What is special about this case is that the Executor is not only defending allegations of fraud and breach of duty made against him but made against the person whose estate he represents. I think this has a big effect. The fact that he did not bring the application until after he filed a defence does not have that great of an effect. It is difficult to conceive that he should pay the expenses personally. Further, he is acting in the best interest of EPT's estate by defending the action because the assets alleged to be misappropriated from DT's estate are traced as being now part of EPT's estate so any damages would come from EPT's estate.

• 8. Considerations that should guide the court's exercise of the discretion to make pre-emptive costs orders include: (1) the strength of the party's case; (2) the likely order as to costs at the trial; (3) the justice of the application; and (4) any special circumstances: Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 applied.

• 9. This is a Section 77 Application whereby the Executor seeks the opinion, advice and direction of the Court. The law is that, in such an application, the normal rule is that, absent misconduct, the costs of the trustee (or in this case an executor) will be paid out of the trust fund: Davies v Watkins [2012] EWCA Civ 1570 at para 26. See also: section 36(2) of the Trustee Act which provides that, “a trustee may reimburse himself or pay or discharge out of the trust property all expenses incurred in or about the execution of the trusts or powers.” The allegations of fraud, dishonesty and breach of duty levelled against the Executor only surfaced after the section 77 Application was filed in the Plaintiffs' Amended Statement of Claim.

• 10. The failure of the Plaintiffs to make an application for an order appointing a person to represent the estate is not fatal. The Main Action is still in its infancy as the Executor himself acknowledged. In any event, given the outcome of this Section 77 application, it is unnecessary for the Plaintiffs to make such an application.

Appearances:

Mrs. Sophia Rolle-Kapousouzoglou with Mr. Valdere Murphy of Lennox Paton for the Executor, Pantelis John Tsakkos

Mr. Michael R. Scott KC with him Ms. Marnique Knowles for Nomiki Tsakkos and Peter Tsakkos (the Plaintiffs in the Main Action)

RULING

Charles Snr. J

Introduction

1 Pursuant to section 77 of the Trustee Act, 1998, Pantelis John Tsakkos (“the Executor”), in his capacity as the Executor of the Estate of Emmanuel Pantelis Tsakkos (“EPT”) seeks the opinion, advice and/or direction of the Court with respect to the following matters:

• (1) Whether he (the Executor) should defend the Main Action on behalf of EPT's Estate including, but not limited to the engagement of (i) a forensic accountant to consider and opine on the claims in the Main Action from a quantum perspective and (ii) a surveyor to confirm whether the location of the commercial property in the name of Trebert Holdings Limited as per the Satisfactions of Mortgage dated 28 January 2010 and 7 July 2011 conforms with the legal description of the property which is the subject matter of the Main Action;

• (2) (In the event of an affirmative answer to the questions in paragraph [1] (1) above), a declaration that the Executor is presently under no duty to renounce his executorship vis-à-vis EPT's Estate;

• (3) (In the event of a negative answer to the question in paragraph [1](1) above), directions as to whether the Executor may continue to serve as the executor of EPT's Estate;

• (4) Whether the Executor should be granted leave to respond to and/or refute the claims in the Joint Tsakkos Affidavit and the First Peter Tsakkos (“PT”) Affidavit, filed in Supreme Court Action No. 2021/CLE/gen/00621 on 20 May 2022 but made in response to the Statement of Sebastian Masnyk (“the Masnyk Statement”) lodged with the Court...