A recent decision of the Manx court (here) assisted the Joint Liquidators of an insolvent TCSP (Montpelier (Trust and Corporate) Services Ltd (“Montpelier”)) in dealing with the company’s trusteeship of hundreds of entities, and with comingled client money, which will eventually allow it to be finally dissolved.

The background to the liquidation is long and complex, but for the purposes of this article, it is sufficient to explain only that, on the making of a winding up order, Montpelier was trustee of upwards of one thousand trusts, as to which an agreement to sell had purportedly been entered into with another TCSP pre liquidation. That agreement was the subject of court proceedings (see this link by way of background) as a result of which an order was made mandating transfer of trust structures to the other TCSP within a given timescale. At expiry of that timescale it was apparent that hundreds of the client structures (approximately 800) would not transfer to the new TCSP and so the joint liquidators of Montpelier required the assistance of the Court to determine what should happen to the remaining untransferred trusts (“the Untransferred Trusts”). They also required court assistance as to the balance of a Montpelier company client account which had seen client funds paid in and out and therefore intermingled over many years. An application was therefore made seeking, inter alia, directions as to:

1. the future administration of the Untransferred Trusts;
2. the future administration of certain Contractor Trusts of which MTCSL was not the trustee;
3. how to address sums standing to the credit of the client account of MTCSL (“the Fund”), it being suggested that:
   1. The liquidators distribute the Fund according to criteria agreed by the Court and to be specified in a letter sent to all of Montpelier’s clients which may be entitled to claim as against the Fund; and
   2. The liquidators be allowed to apply up to 10% of the Fund to their costs of dealing with claims in respect of the Fund (a Berkeley Applegate order).

The application was made on notice to the Isle of Man Financial Services Authority, in its position as regulator of the business of Montpelier, the third party TCSP to which some business had already been transferred and to Montpelier’s Receiver Manager. By the application the liquidators of Montpelier provided suggestions to the Court as to how each of the aforementioned issues should be dealt with.

By and large the Court ordered as the liquidators had suggested in that:

1. Beneficiaries/settlors of the Untransferred Trusts should be contacted to ask that they arrange for the powers of transfer of trusteeship to a new TCSP of their choosing be exercised by a specified date and advising that, were this not to happen, then Montpelier may be dissolved in any event. In so far as any trust which had not transferred trusteeship may then require administration/transfer post dissolution, it will have to apply to the Court in separate proceedings so that new Trustees can be appointed. The Court also ordered that Montpelier was not required to expend any further time or costs in respect of the administration of any trusts post the date of the Court Order. This was seen as a practical, proportionate and reasonable proposal to deal with the Untransferred Trusts; and
2. There was no need to undertake further administration of the Contractor Trusts or of companies which were trustees thereof and which were controlled by Montpelier; and
3. There being no Isle of Man authority as to whether the Court could make an order as to administration and distribution of the Fund as proposed by the Liquidators (there is Manx authority as to the power of the Court to allow Berkeley Applegate relief), it referred to, and applied English jurisprudence and satisfied itself that it could make such orders. In doing so Deemster Khamisa specifically referred to Finers v Miro [1991] 1 WLR 35, at paragraph 45:

“What gives the court jurisdiction is the fact that the plaintiffs undoubtedly held assets for the defendant and are also potentially liable as constructive trustees at the suit of the insurance company. English law has always imposed strict liabilities on trustees but in return has been ready to allow trustees to come and seek directions of the court if they need to do so”.

The order obtained by the liquidators in this case highlights once again the willingness of Courts to come to the assistance of trustees and liquidators in unusual circumstances where their obligations may conflict with those owed to others, or at least where the strict imposition of obligations would otherwise be costly and time consuming.

Damian Molyneux is a director of M&P Legal specialising in, amongst other things, liquidations and debt recovery. He can be contacted on dpm@mplegal.im This article does not constitute legal advice and specific advice should be sought for individual circumstances.

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