Case Summaries

Ernest Ferdinand Perez De La Sala v Compañía De Navegación Palomar, SA [2020] SGCA 24

SUPREME COURT OF SINGAPORE

27 March 2020

Case summary

Ernest Ferdinand Perez De La Sala v Compañía De Navegación Palomar, SA [2020] SGCA 24
Civil Appeal No 193 of 2019

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Decision of the Court of Appeal (delivered by Steven Chong JA):

Outcome: Court of Appeal dismisses the appeal by the appellant, and declined to vary the proprietary injunction previously granted by the court over the enjoined sum of US$250m, pursuant to either s 56 of the Trustees Act (Cap 337, 2005 Rev Ed), or the inherent jurisdiction of the court in the administration of trusts.

Introduction

1 This was an appeal by Ernest Ferdinand Perez De La Sala (“Ernest”), the defendant in the underlying Suit No 178 of 2012 (“Suit 178”), against the High Court Judge’s dismissal of his application in Summons No 2794 of 2019 (“SUM 2794”). SUM 2794 was for a variation of an order of court dated 25 January 2013 (the “Proprietary Injunction”) (as previously varied pursuant to an order of court dated 6 April 2018), to allow the release of the following funds from the account holding the enjoined sums: (a) US$60,000 per month, to be released to Ernest’s personal bank account; and (b) US$6m as a lump sum for legal expenses reasonably incurred, to be released to Ernest’s lawyers.

2 SUM 2794 was filed in Suit 178, pursuant to s 56 of the Trustees Act (Cap 337, 2005 Rev Ed) (“Trustees Act”) and/or the inherent jurisdiction of the court. In essence, Ernest sought the court’s exercise of its jurisdiction to release, from trust assets, the requested moneys for his living and legal expenses.

3 The Judge below dismissed SUM 2794. Instead, he varied a previously-granted carve-out of a Mareva injunction (which is distinct from the Proprietary Injunction), such that Ernest was permitted to spend S$10,000 per week on living expenses and S$40,000 per week on legal expenses.

Background to the appeal

The parties

4 Ernest had taken over his family business and assets following his father’s death. This included the management of the first to sixth respondents (“the Companies”). In the course of such management, Ernest had transferred to himself certain assets of the Companies (“the Assets”).

5 Suit 178 was brought by the Companies to seek, in the main, (a) recovery of the Assets; and (b) a declaration that the Assets in each of their names belonged absolutely to each of them. Ernest’s defence was that he was the sole and beneficial owner of the Companies and the Assets. The key members of the family involved in the dispute in Suit 178 were Ernest’s mother and three siblings (referred to collectively as “JRIC”).

6 The seventh to ninth respondents in this appeal are individuals who were involved in the management of the Companies as directors.

Procedural history

7 The Proprietary Injunction was granted by an order of court dated 25 January 2013, following the Companies’ application in Summons No 1098 of 2012 for an injunction “to preserve and restore assets of the Compan[ies]”. Ernest had moved monies from the Companies out of their accounts, and the Proprietary Injunction compelled Ernest to procure the transfer of the sum of US$200m to a bank account in the name of the fourth respondent. The Proprietary Injunction was thereafter varied, and the enjoined sum was increased to US$250m.

8 On 22 March 2018, the Court of Appeal pronounced judgment on the appeals arising out of the High Court’s decision in Suit 178, as reported in Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA and others and other appeals [2018] 1 SLR 894. Therein, this Court found that Ernest is not the sole beneficial owner of the Companies or the Assets. The Companies are also not the absolute owners of the Assets. Instead, by operation of a presumption of resulting trust, the Companies hold the Assets on resulting trust for two Hong Kong companies, Northern Enterprises Ltd (“NEL”) and John Manners and Company Limited (Hong Kong) (“JMC”). Further, a significant portion of the Assets existed for the benefit of JRIC in addition to Ernest, and that Ernest and JRIC had beneficial interests in NEL and JMC. The court held that the issues of precisely who else had a beneficial interest in the Assets, and what the nature and proportion of that beneficial interest is, did not arise to be determined in Suit 178.

9 In March 2019, the Companies applied for, and were granted, a worldwide Mareva injunction over the assets in Ernest’s name and/or under his control up to US$430m (the “Mareva Injunction”). Alongside the Mareva Injunction, several conditions were imposed by the court. Notably, the Mareva Injunction was subject to a carve-out (the “Mareva Carve-out”): Ernest was allowed to spend S$5,000 a week towards his ordinary living expenses and S$20,000 a week on legal advice and representation.

10 From this juncture onwards, both the Mareva Injunction and the Proprietary Injunction were in force concurrently.  

11 On 12 March 2019, Originating Summons No 317 of 2019 (“OS 317”) was filed by the Companies for a determination of the precise beneficial interests in the Assets found to be held on resulting trust by the Companies for NEL and JMC. OS 317 was pending before the courts at the time the Court of Appeal heard this appeal.

12 The application which was the subject of this appeal, SUM 2794, was filed in June 2019 for a variation of the Proprietary Injunction to permit trust assets (ie, the Assets held on trust by the Companies) to be released, in the amount of US$60,000 per week for living expenses and a lump sum of US$6m for legal expenses incurred before or after the date of SUM 2794. The Judge dismissed SUM 2794, and instead doubled the Mareva Carve-out: Ernest was thereby allowed to spend S$10,000 a week towards his ordinary living expenses and S$40,000 a week on legal advice and representation. Ernest thereafter brought this appeal against the Judge’s dismissal of SUM 2794.

The Court of Appeal’s decision

13 The Court of Appeal dismissed the appeal. It was inappropriate for the court to exercise its power to vary the trust pursuant to either s 56 of the Trustees Act or the inherent jurisdiction.

14 Section 56 of the Trustees Act, like its predecessor s 59(1) of the Trustees Act (Cap 337, 1985 Rev Ed), contemplated the following elements: (a) an act unauthorised by a trust instrument; (b) to be effected by the trustees thereof; (c) in the management or administration of the trust property; and (d) which the court will empower them to perform if in its opinion the act is expedient (at [22]).

15 The objective of s 56 of the Trustees Act is to ensure that trust property is managed as advantageously as possible in the interests of the beneficiaries as a whole and, to that end, to authorise specific dealings with the property in situations where the court is of the view that it cannot be achieved by way of its inherent jurisdiction (at [25]).

16 Applications under s 56 of the Trustees Act may be made “by the trustees, or by any of them or by any person beneficially interested under the trust”: s 56(3) of the Trustees Act.  The Court of Appeal held that the term “any person beneficially interested under the trust” should be construed to mean “beneficiaries of the trust”. Therefore, short of being a trustee or a beneficiary of the trust, one does not have locus standi to apply under this provision (at [27]).

17 The Court of Appeal held that Ernest did not have standing under s 56(3) of the Trustees Act. The mere fact that Ernest had beneficial ownership in the beneficiary companies, NEL and JMC, was insufficient, as shareholders qua shareholders have no proprietary interest in the company’s assets (at [28] and [30]).

18 In any event, the Court of Appeal held that the relief sought by Ernest fell outside the “management or administration” of the Assets (at [32]). In this case, the proportion of beneficial interest in the Assets remained a hotly contested subject, and was pending the court’s determination in OS 317. The Court of Appeal explained that a direction that the resulting trustees release the sums of monies sought by Ernest would amount to (at least a tentative) determination that Ernest is beneficially entitled to those sums, and an impermissible alteration of the nature of Ernest’s beneficial interest in the shares of NEL and JMC. This would clearly fall outside mere “management or administration” of trust assets (at [36]).

19 In addition, the Court considered that Ernest did not discharge his burden of satisfying this court that granting the relief sought would be expedient (at [37]). First and most crucially, the transaction is expedient only if it facilitates the management and administration of the trust as a whole. However, as the Court of Appeal already found, the relief sought does not involve the management and administration of the trust at all. Second, Ernest’s application essentially sought a distribution of the Assets for the purpose of funding his legal representation in proceedings against other potential beneficiaries of the trust. The Court of Appeal was of the view that s 56 of the Trustees Act could not be used to assist one potential beneficiary in adversarial proceedings against other potential beneficiaries, as such a course would not be in the beneficiaries’ interests as a whole (at [40]).

20 The Court of Appeal further held that Ernest’s alternative case that the court should exercise its inherent jurisdiction did not fall within any of the narrow, established classes of cases in which the court’s inherent jurisdiction can be exercised to vary the trust (at [48]).

21 Ernest bears the burden to demonstrate that he has no or adequate assets unaffected by the Proprietary Injunction from which he can meet his living and legal expenses or that he has no other sources of funds unaffected by the Proprietary Injunction. The Court of Appeal found that he failed to do so (at [61]).

This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s judgment.

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