Wong v Morgan Trust Company of the Bahamas Ltd

• Jurisdiction: Bahamas
• Judge: Havton, A.J.
• Judgment Date: 28 July 2000
• Court: Supreme Court (Bahamas)
• Docket Number: 1226 of 1999
• Date: 28 July 2000

Supreme Court

Havton, A.J.

1226 of 1999

Wong

and

Morgan Trust Company of the Bahamas Limited

Appearances:

Mr. Ralph Seligman Q.C. and Mr. Ferron Bethel for the plaintiff.

Mr. Brian Simms and Ms. S. Fitzcharles for the defendant.

Mr. Michael Barnett for Mrs. Dorothea Wong.Mr. Luther McDonald for Beneficiaries interested in Capital.

Trust - Administration of trust — Whether the defendant, trustee, was in contravention of section 89 (2) of the Trustee Act, 1998 by failing to keep a fair balance between those interests in income and those interest in capital as accorded in the trust deed.

Havton, A.J.

1 The plaintiff life tenant claims to be aggrieved within s.89(3) of the Trustee Act, 1998 by the defendant Trustee's failure under s.89(2) to keep a fair balance between those interested in income and those interested in capital, taking account of the provisions of the Trust Deed. This is intended finally to resolve issues dealt with in a judgment of the Chief Justice in No. 958 of 1997 given on 28 March 1998 and in a further judgment of 3 September 1999, elucidating matters raised by the original judgment.

2 In her further judgment, the Chief Justice, after elucidating matters further, stated that she was functus officio as a matter of procedure when considering Order 74 and Order 20 of the Rules of the Supreme Court. She concluded

“if I am wrong about the procedure adopted in this case (and it must be remembered that no considered arguments were made in that regard), then my decision would be as indicated earlier.”

3 Counsel for the defendant Trustee mentioned that the Chief Justice had not considered whether s.77 of the 1998 Trustee Act conferred jurisdiction upon her to advise the parties, while pointing out how unwise it would be for the Trustee to ignore the wisdom contained in her further judgment.

4 Counsel for the plaintiff submitted that the further judgment should be ignored, the Chief Justice having had no further jurisdiction once giving her original judgment of 28 March 1998 that had not been appealed from.

5 Strictly speaking, I am exercising my independent judgment on this new matter raised under the 1998 Trustee Act, albeit this requires consideration of two issues adjudicated upon by the Chief Justice in her original judgment. To the extent any ambiguity arises upon these two issues I can take account of the Chief Justice's views in her further judgment even if not binding upon the parties. Thus, I reject plaintiff counsel's submission that I should ignore the further judgment.

6 The key clauses in the Trust Agreement of 6 March 1990 (which is expressly governed by Bahamian Law) are as follow:

Schedule B Clause (C)

“Upon the death of the Settlor, if the Settlor's son, John Wong is then living, the Trustee shall hold the Trust Fund in further trust, shall manage, invest and reinvest the Trust Fund, shall collect the income therefrom and, after deducting all proper charges, shall pay or apply to or for the use of John Wong the greater of US dollars 800,000 or the net income of the Trust Fund annually in quarterly or more frequent installments, such payments to be made from income to the extent available, but if not from principal”

Schedule B Clause (D)

“…compensation shall be charged one half to income and one half to principal.”

7 Article 9 & Schedule E Trustee's Powers: pares 8 and 13

• “8. To lend money to any beneficiary or to any company, the shares of which are held in the Trust Fund, either free of interest or on such other terms as to payment of interest and generally as shall be deemed advisable” ….

• 13. To allocate to income or to principal as shall be deemed advisable any dividend, receipt or distribution.”

8 As envisaged by Article 1 since inception a private investment company, Scottsdale Holdings SA, owned and controlled by the Defendant Trustee, has conducted the investment activity of the Trust Fund based on an authorised interest-free loan of 10 million US dollars of trust money to Scottsdale.

9 If this money had been directly invested by the Trustee in its own name on trust for A for life remainder to B absolutely how would trust law determine what is income to pay to A and what is capital to pass to B? Land having originally been the subject-matter of trusts, the land was regarded as capital to pass to B while A had the right to harvest the land and live on it. Thus capital is regarded as the tree and income as the fruit of the tree.

10 In contrast, economists and investors regard income as the maximum amount an individual can spend or consume in a year and still expect to be as well off at the end of the year as he or she was at the beginning of the year, whether because of income yields being good or...