[8] On 11 th May 2004, Mrs. Moir made application to the Family Court of Australia at Adelaide seeking final orders in relation to property

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1 Re Nordea Trust Company (Isle of Man) Ltd. HIGH COURT OF JUSTICE OF THE ISLE OF MAN Chancery Division Judgment date: 2 November 2009 His Honour Deemster Kerruish Introduction [1] By re-amended Petition, Nordea Trust Company (Isle of Man) Limited [Nordea] seeks permission not to procure that proceedings are brought against Frederick Graham Moir or any other party with respect to a Deed of Gift [the Deed of Gift] dated 6 th May 2004 made between Mr. Moir of the one part and Nordea of the other part and one share [the Moir share] in F. Moir Investments PTY Limited ACN , a private company incorporated in Victoria, Australia [Moir Investments]; subject to such permission, further permission to retire as a trustee of the Chelsea Anne Moir Trust [the Trust] established by Deed of Settlement made on 4 th May 2004 of which Nordea was the original trustee and continues to be a trustee and subject to such permission an opinion of this court that on such retirement Nordea is entitled to the benefit of clause 22 of the Trust Deed. Parties [2] The parties to these proceedings are Nordea, Mr. Moir, Julie Moir, former wife of Mr. Moir, Freddie Wullf Nielsen, Natalia Franch Gallardo and Prebbin Sajar Kristensen. [3] Mr. and Mrs. Moir are the parents of Chelsea Anne Moir [Chelsea] a minor. Representation [4] At the hearing, Nordea was represented by Mr. Mark Hubbard, a licensed temporary advocate. There were no appearances by or on behalf of any other party. Summary of background facts [5] By deed of 4 th May 2004, the Trust was declared by the stated settlor, Mr. Nielsen. [6] Under the terms of the Trust Deed, the Trust is made subject to the laws of the Isle of Man and is irrevocable. The trust fund is held on broad discretionary trusts of income and capital for the beneficiaries and subject thereto and subject to powers of appointment exercisable before and on the expiry of the trust period for such of the beneficiaries as should then be living and if more than one, in equal shares per stirpes absolutely. The beneficiaries are defined as meaning the persons specified in the second schedule and any persons added to the class of beneficiaries pursuant to clause 10 of the Trust Deed. The beneficiaries set out in the second schedule are Chelsea and any charity or charities determined by the trustee at any time and from time to time. To date, no charity has been appointed a beneficiary. The trustee was given power to exclude and to add beneficiaries at their absolute discretion save for excluded persons who are listed and include Mr. Nielsen and Mrs. Moir. [7] By the Deed of Gift, Mr. Moir gave the Moir share to Nordea to hold on the terms of the Trust. The Deed of Gift, which was expressed to be irrevocable, was subject to the laws of Victoria, Australia and the parties submitted to the non-exclusive jurisdiction of the courts of that State. Clause 3 provided that Mr. Moir would use his best endeavours to procure the registration of the Moir share into the name of Nordea in the register of members of Moir Investments, and to execute all instruments, documents, authorities and to convene all meetings of directors necessary for that purpose. By such clause Mr. Moir declared that until Nordea was so registered, he would hold the share upon trust for Nordea in its capacity as trustee of the Trust and would apply and deal with the Moir share in such manner as Nordea might from time to time direct.

2 [8] On 11 th May 2004, Mrs. Moir made application to the Family Court of Australia at Adelaide seeking final orders in relation to property settlements, spousal maintenance and parenting orders. [9] On 21 st July 2004, Moir Investments issued a share certificate in Nordea's name [the Nordea share certificate] apparently representing the Moir share. Such share certificate was sent to Nordea. The Nordea share certificate was signed by Mr. Moir and Kevin Vincent Benson, another director of Moir Investments. Nordea continues to hold the Nordea share certificate. [10] On 12 th July 2005, an order [the Family Court Order] was apparently made by consent in the matrimonial proceedings between Mr. Moir and Mrs. Moir in the Family Court of Australia. The Order recited that Mr. Moir's father and Mr. Moir each owned one of the issued shares in Moir Investments with a subsequent declaration that, pursuant to section 78 of the Family Law Act of Australia, Mr. Moir owned the Moir share. I pause to record that during the hearing I was referred in some detail to written opinions obtained by Nordea from Mr. Stephen Etkind of Minter Ellison, Australian counsel, and from Mr. Hubbard. In his opinion, Mr. Etkind recorded that the family proceedings between Mr. and Mrs. Moir were resolved prior to trial and that the terms of settlement were recorded by agreement under section 90C of the Family Law Act 1975, such agreement being comprised in sealed orders of the family court. Mr. Etkind stated that he assumed that the transfer of the Moir share from Mr. Moir to Nordea and the circumstances surrounding such transfer would have been fully debated in the family court and that that court would have taken such matters into consideration when declaring Mr. Moir's ownership of one of the two issued shares in Moir Investments. Mr. Hubbard took issue with such assumptions. He referred to the fact that the family proceedings between Mr. and Mrs. Moir had been resolved by agreement prior to trial, that Nordea had not been noticed to such proceedings, and to the inference which he argued could be reasonably drawn from the family court order by the lack of reference to Nordea and the declaration that Mr. Moir owned the Moir share. Mr. Hubbard argued that Mr. Moir's conduct subsequent to the execution of the Deed of Gift, and the obvious lack of full disclosure on his part relevant to issues of concern to Nordea, and in these proceedings provided not inconsiderable support for the reasonable and logical conclusion that Mr. Etkind's assumptions were not correct. [11] On 17 th October 2005, Nordea approved trust accounts for the period to 30 th June Such accounts indicated that the investments of the Trust consisted of the Moir share, and that additional capital of 16,967 had been introduced. Other than its claim to the Moir share, the remaining sole trust asset is the initial settlement monies of the Australian dollar equivalent of 100. The additional capital was introduced to meet the trustee's fees from time to time, and was paid by Mr. Moir. [12] On 14 th November 2006, Mr. Andrew Shaw of Shaw Lawyers, Adelaide, Australia, acting on behalf of Mr. Moir, wrote to Nordea indicating that Mr. Moir wished to liquidate Moir Investments following the sale of a body corporate, the shares in which were the sole or principal asset of Moir Investments. Mr. Shaw continued:- "I have advised Mr. Moir that, before resolving to liquidate [Moir Investments], he should obtain confirmation that [Nordea] has no interest in [Moir Investments] and no objection to [Moir Investments] being liquidated. The reason for this is that some time ago Mr. Moir proposed to make a gift to [the Trust] of a share in [Moir Investments]. However Mr. Moir decided not to go ahead with that gift after receiving legal advice. Mr. Moir and his father have at all times remained the sole shareholders of [Moir Investments]." Mr. Shaw concluded by referring to an attached deed which recorded that Nordea had no interest in Moir Investments and no objection to the liquidation of that company with a request that the same be signed and returned to him. Nordea did not accede to such request. Under cover of an of 6 th December 2006, Mr. Shaw produced a document signed by three directors of Moir Investments, Mr. Moir, Mr. Benson and Mr. Nicholas Craig Gurner, which document recited that the board of directors of Moir Investments had never resolved to register the transfer of any share in Moir Investments to Nordea in accordance with the constitution of Moir Investments or at all, that

3 Nordea had never been entered in the register of members as the holder of a share in Moir Investments, and that Mr. Moir and his father were and had at all times been entered in the register of members as the holder of one share each. [13] By a document dated 14 th March 2007 entitled "Circular Resolution of the Board of Directors", with a shown distribution to Mr. Moir and Mr. Benson, and signed by them, the latter purported to resolve that the document described as share certificate number 5 dated 21 st July 2004 in the name of Nordea was thereby cancelled. [14] By letter dated 17 th May 2007 and disclosed to Nordea, Mr. Shaw advised Mr. Moir relevant to the status of the Moir share. Such advice disclosed that Mr. Moir had signed an instrument of transfer relating to the Moir share but alleged that for want of specifying the place of incorporation of Moir Investments, such instrument was allegedly not a "proper instrument of transfer" as required by Australian statute. The instrument of transfer has not been disclosed. However, Mr. Shaw's letter confirmed that such instrument of transfer existed and that it had been lodged with Moir Investments. The letter continued by alleging that Mr. Moir did not deliver the Moir share certificate to Nordea, asserted that there was no gift of the Moir share to Nordea, alleged that the Nordea share certificate was invalidly issued because Nordea was not registered as a member with respect to that share, that notwithstanding the declaration on the part of Mr. Moir in clause 3 of the Deed of Gift, the beneficial ownership in the Moir share had not been transferred to Nordea, that the Deed of Gift was void as being for an illegal purpose, that is to frustrate Mrs. Moir's claims in her matrimonial proceedings, and that any trust of the beneficial ownership of the Moir share was void for breach of the rule against perpetuity. [15] On 22 nd March 2007, Mr. Nielsen as the 'investment decision maker' of the Trust, purported to appoint himself, Ms. Gallardo, a teacher, and Mr. Kristensen, a journalist, as additional trustees of the Trust. I shall refer collectively to Mr. Nielsen, Ms. Gallardo and Mr. Kristensen in such capacity as 'the Additional Trustees'. [16] On 13 th June 2007, Nordea issued its original Petition seeking declarations as to the validity of the Deed of Gift and/or the appointment of the Additional Trustees and/or that Nordea might retire as trustee and that a Receiver of the Trust be appointed. Mr. Moir, Mrs. Moir, Mr. Nielsen, Ms. Gallardo and Mr. Kristensen did not co-operate in such proceedings and by an Order of 21 st November 2007 this court set aside service or deemed service upon them out of the jurisdiction. According to Mr. Etkind on 24 th December 2007, Moir Investments entered into voluntary liquidation. [17] On 8 th February 2008, Nordea served an amended Petition by which, pursuant to section 61 of the Trustee Act 1961, it sought the opinion of this court that Mr. Nielsen had validly exercised his power to appoint the Additional Trustees, that Nordea was entitled to rely upon the indemnities and releases offered to it by Mr. and Mrs. Moir and those contained in clauses 22 and 23 of the Trust Deed and thus upon retirement from the office of trustee, Nordea would be released from all claims in respect of its conduct as trustee, that Nordea might retire and that the question as to the ownership of the Moir share should not be determined. [18] On 29 th April 2008, Mr. Nielsen swore an affidavit relevant to the exercise of his power to appoint the Additional Trustees and as to the fitness of the Additional Trustees. On the following day, Mrs. Moir swore an affidavit, by which she consented to the making of orders consistent with the relief sought in the amended Petition and stated that, having taken legal advice on Chelsea's behalf, the making of such orders would be in Chelsea's interest. No legal advice was exhibited to Mrs. Moir's affidavit. Evidence was exhibited that the value of her assets was approximately AU$10,580,500. On 6 th May 2008, Mr. Moir swore an affidavit deposing that he had taken legal advice and that as a result he considered that an order such as that sought by the amended Petition was in Chelsea's interest. Mr. Moir did not exhibit to his affidavit a copy of such legal advice, and further did not indicate whether such advice had been sought on Chelsea's behalf or for himself. Evidence exhibited to Mr. Moir's affidavit disclosed that as at 11 th February 2008, the net value of

4 his assets amounted to AU$43,903,500. It was not clear from such evidence whether and if so how the value of the Moir share had been accounted for in determining Mr. Moir's wealth. [19] On 5 th June 2008, the amended Petition came before this court for what was anticipated to be the final hearing. However, on the evidence, I was not minded to grant the relief sought and considered that, inter alia, an opinion should be sought from Australian counsel as to the validity of the Deed of Gift and the effectiveness of the transfer of the Moir share. Also, I did not consider that full disclosure had been made of all relevant matters. Nordea instructed Mr. Etkind and received his opinion of 24 th September On 24 th November 2008, the proceedings were adjourned until 4 th February 2009 so that an opinion relevant to other issues could be obtained. On 14 th January 2009, Mr. Hubbard provided such opinion. [20] At the adjourned hearing on 4 th February 2009, Nordea was represented by Mrs. Hazel Smith, Mr. Moir by Mrs. Nicola Spencer, and the Additional Trustees by Mr. Bridson. There was no appearance by or on behalf of Mrs. Moir. I was not satisfied as to service upon Mrs. Moir of a copy of this court's previous order or Nordea's motion of 23 rd January 2009 by which it sought leave to re-amend the Petition. As to such motion, Mrs. Spencer indicated that unless Mrs. Moir sought copies of all or any evidence filed in support of the proposed re-amended Petition and/or to participate in the hearing of the same, Mr. Moir would adopt a neutral stance, and would not seek service upon him of any evidence in support of the proposed re-amended Petition or to participate in the hearing of the same but reserved his position as to costs. Mr. Bridson gave similar indications on behalf of the Additional Trustees. Having heard further brief addresses, I ordered that Mrs. Moir be served with a copy of the order of 4 th February, copy of the order of 24 th November 2008, copy of Nordea's motion of 23 rd January 2009 with draft re-amended Petition annexed and copy of the affidavit of Mrs. Hazel Smith (then Hammonds) in support thereof. I then proceeded to give detailed directions if Mrs. Moir filed an application opposing the motion to re-amend the Petition and/or to receive any evidence in support of the proposed re-amended Petition and/or to appear at the hearing of the re-amended Petition. I required Mrs. Moir to file any such application no later than twenty one days from the date of service of a copy of the order and other documents upon her with consequent provision for a further case management directions hearing. I also gave case management directions in the event that Mrs. Moir did not make any such application. Such latter directions required Nordea to file the re-amended Petition in the form of the draft attached to the motion with supporting evidence, which evidence was not required to be served upon any other party. Nordea was then required to file and serve upon the other parties, save Mrs. Moir, who in the absence of any application would be deemed to adopt a neutral stance, copy of its skeleton argument with authorities, brief background facts and reading list. Leave was granted to Nordea to file but not serve a supplemental skeleton argument and supplemental reading list, which properly in the context of these proceedings ought not to have been disclosed to the other parties and at the same time to apply for a hearing date of the re-amended Petition. [21] No application was made by Mrs. Moir. Nordea complied with the relevant directions, and the hearing of the re-amended Petition was scheduled for 9 th September Hearing [22] At the hearing on 9 th September 2009, an affidavit with exhibits as to service upon Mrs. Moir in compliance with the order of 4 th February 2009 was produced. I was satisfied as to service upon Mrs. Moir. Both Mrs. Spencer for Mr. Moir, and Mr. Bridson for the Additional Trustees were contacted and each stated that in the absence of any application by Mrs. Moir, neither proposed to attend the hearing but requested upon the delivery of judgment that the court set a date and time for applications relevant to costs, if any. Consequently, at the hearing on 9 th September 2009 which was part heard in Chambers and part in private, Nordea alone appeared by representation. Deed of Gift and Moir share [23] During the hearing I was referred in detail to the opinions of Mr. Etkind and Mr. Hubbard. Having considered such opinions and the submissions made during the hearing, I find that the only

5 way in which Nordea can establish its rights to the Moir share would be by issuing proceedings in the Australian courts against Mr. Moir and/or others. [24] I consider that even if, for technical or other reasons, there is good argument against the legal title to the Moir share having vested in Nordea, there is a strong case that the beneficial ownership of such share vests in Nordea. If, as appears, Moir Investments has been dissolved, then Nordea would have a strong claim against Mr. Moir for compensation for breach of trust. [25] On the evidence, I am content that the arguments raised by Mr. Shaw in his disclosed letter of 17 th May 2007 to Mr. Moir may be viewed as without merit, or misconceived or can be met with considerable strength of argument to the contrary. [26] However, whilst on the evidence and the opinions of Mr. Etkind and Mr. Hubbard, I have concluded that Nordea has a strong case relevant to its rights to the Moir share and/or for compensation against Mr. Moir for breach of trust, I agree that the lack of full and frank disclosure on the part of Mr. Moir will mean that before proceedings could be taken, further inquiry would have to be made in Australia. Thus, whilst I have concluded that Nordea has a strong case, I cannot conclude that it is compelling. Also, the conduct of Mr. Moir to date may reasonably be viewed as indicative of the attitude he would adopt if Nordea issued proceedings against him and/or one or more others relevant to the Moir share or sought compensation in respect thereof. Thus, it is not unreasonable to assume that any proceedings taken by Nordea would not only be complex but also lengthy and expensive. On the face of it, but subject to matters to which I shall refer shortly, it would be Nordea's duty as a trustee of the Trust to do all in its power to establish Nordea's entitlement to the Moir share or to pursue Mr. Moir for compensation in respect thereof. There can be no doubt that successful resolution will not be achieved without court proceedings which it appears would most appropriately be brought in Victoria, Australia. [27] Ordinarily, Nordea would have a duty to seek to recover the Moir share or its value for the benefit of the Trust. However, I refer to that part of the judgment of Kekewich J in Tudball v- Medlicott (1889) 59 LT 370 at 374, which part reads:- " In the first place, I know of no rule of the court, and I am satisfied that there is no case which establishes any such rule, or even hints at it, that a trustee is bound to bring an action at his own expense to recover the trust property. I can quite understand the position that they should now bring an action at their own expense, because it is said that they are in default, and that the estate is gone. I can quite understand it being argued, and being held, that if they have let the estate go, and time has been lost, a greater expense will now be incurred by reason of their neglect, that to some extent, perhaps to the whole extent, they should bear the costs of any such action to recover the estate. But that is not the case made here. " [28] I also refer to that part of the judgment of Danckwerts J in In re Grimthorpe deceased (1958) 1 Ch. 615 at 623, which part reads:- "It is commonplace that persons who take the onerous and sometimes dangerous duty of being trustees are not expected to do any of the work on their own expense; they are entitled to be indemnified against the costs and expenses which they incur in the course of their office; of course, that necessarily means that such costs and expenses are properly incurred and not improperly incurred " [29] In Bradstock Trustee Services Limited and another v- Nabarro Nathanson (a firm) (1995) 1 WLR at 1405 the plaintiffs were independent trustees of a pension scheme. They issued a writ against the defendants alleging that the advice given to their predecessor trustees as to the propriety of certain payments was given negligently. The action proceeded to close of pleadings. At that point the plaintiffs took stock. They were advised that the costs of the action on both sides might exceed the total assets of the scheme. Although they could expect to be indemnified for the costs of the action, even if unsuccessful, out of the assets of the scheme, subject to compliance with any directions of the court on a Beddoe application, they would be exposed to a personal risk in respect of costs if the assets in the scheme were insufficient. They were told that they were not obliged to run that risk and decided not to do so. In his judgment, Judge Paul Baker QC, sitting as a High

6 Court judge, found that the conduct of the plaintiffs did not amount to a failure by them in the performance of their duty to protect the trust estate. It was true that they were unwilling to incur personal liability, but, before that point was reached, the entire trust fund would have been exhausted in indemnifying the plaintiffs. Thus, he concluded that the plaintiffs could reasonably take the view that they should not put the fund to that risk. [30] Thus, the rule may be stated that absent default on their part, trustees are not bound to take proceedings at their own expense to recover trust estate. Whilst ordinarily Nordea would have a duty to seek to recover the Moir share or its value for the benefit of the Trust, such duty is limited by the rule that a trustee who has not caused by default the need to bring proceedings is not required to bring an action to recover property at its own expense and risk. [31] The only trust asset of any real value is the claim relevant to the Moir share whether in law or equity or for compensation relevant to the same. As trustee, Nordea does not have any material amount of cash or any other asset by which to bring such proceedings or from which to indemnify itself in the event of an adverse costs order. [32] By letters of 19 th, and 26 th January to the Additional Trustees and Mrs. Moir, Nordea enquired as to the availability of funding for litigation. In her affidavit of 23 rd June 2009 to which such letters were exhibited, Mrs. Smith stated that she had received no offer of funding in response. [33] I find that there is no fault or breach of trust on the part of Nordea which would require them to take the proposed proceedings at their own expense. The requirement for proceedings is consequent upon the conduct and action of Mr. Moir and, to a lesser extent, one or more other persons. I find that the assets of the Trust are woefully insufficient to reasonably contemplate proceedings and that there is no reason to assume that such situation will improve. I further find that no other person, including Mrs. Moir, will fund the proposed proceedings. In such circumstances, Nordea is granted permission not to procure that proceedings are brought against Mr. Moir or any other party with respect to the Deed of Gift and the Moir share and/or in pursuit of compensation in respect of the Moir share. [34] Having granted such permission, I grant further permission for Nordea to retire as a trustee of the Trust on the grounds that, if no proceedings are brought, there will be no prospect of the Trust being made solvent, and there is no likelihood that the Trust will be in a position where any distribution to any beneficiary would be possible. Thus, there is no purpose served by Nordea remaining as a professional trustee of the Trust. [35] I refer to clauses 22 and 23 of the Trust, which clauses read:- "22. INDEMNITY TO RETIRING TRUSTEE If a Trustee retires or is removed from the trusts hereof, or becomes by reason of residence or place of incorporation incapable of acting as a trustee hereof, such trustee shall be released from all claims, demands, actions, proceedings and accounts of any kind on the part of any person (whether in existence or not) actually or prospectively interested under this Settlement for or in respect of the Trust Fund or the income of the Trust Fund or the trusts of this Settlement or any act or thing done or omitted in execution or purported execution of such trusts other than and excepting only actions: (1) arising from any fraud or fraudulent breach of trust in which such trustee or (in the case of a corporate trustee) any of its officers was a party or privy; or (2) to recover from such trustee trust property or the proceeds of trust property in the possession of such trustee or previously received by such trustee (or in the case of a corporate trustee any of its officers). 23. TRUSTEE INDEMNITY In the execution of the trusts and powers hereof no trustee shall be liable for any loss to the Trust Fund arising in consequence of the failure, depreciation or loss of any investments made in good faith or by reason of any mistake or omission made in good faith or of any other matter or thing except wilful and individual fraud and wrongdoing on the part of the trustee who is sought to be made liable."

7 [36] During the hearing, Mr. Hubbard in particular referred to clause 22(1) and suggested that if a trustee retired knowing that the continuing trustees, in this case the Additional Trustees, would not pursue claims on behalf of the Trust, then such retirement could be viewed as facilitating a breach of trust which might then lead to an argument that such retirement may come within the provisions of clause 22(1). Whilst Mr Hubbard raised such potential challenges, he submitted that in the circumstances of this case, Nordea's retirement would not give rise to liability of the kind excepted from the release contained in clause 22 of the Trust Deed and therefore that Nordea is entitled to be released from all liability on its retirement. I agree and am of the opinion that upon Nordea's retirement, it is entitled to the benefit of clause 22 of the Trust Deed. [37] Having addressed the relief sought by Nordea at the hearing, pursuant to paragraph 6 of the order of 4 th February 2009 upon delivery of this judgment, I shall set a date and time for applications relevant to costs, if any, by Nordea, Mr. Moir, Mrs. Moir and/or the Additional Trustees. (from Isle of Man Courts, Judgments Online)