The substantive issue - was there a Fuller Bare Trust?
61 The real issue in the case is whether the loan made by St Helier to the Wilkinsons was, as at the date of Mr Fuller's bankruptcy, held upon a bare trust for Mr Fuller as senior counsel for Mr Wily submits, or whether, as the Respondents submit it was held upon the trusts of the Vilnius Trust.
62 It is important to note here that it is not suggested that the trust deed establishing the Vilnius Trust was a sham in the legal sense of that word: cf Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449. An instrument, or a transaction will be a sham if there was a common intention of the parties to it that the instrument or transaction was a disguise for some other and real transaction or no transaction at all. The onus would lie upon the trustee in bankruptcy to establish that a trust deed apparently validly entered into was but a facade or a disguise. Once it is accepted that the deed establishing the Vilnius Trust was not a sham the case for Mr Wily really amounts to no more than a submission that because Mr Fuller exercised a remarkable degree of control and direction, it necessarily followed that St Helier, which generally observed his directions, held assets upon trust for Mr Fuller. It is important here to recognise, as indeed Sharrment makes clear, that control is not necessarily to be equated with ownership, particularly equitable ownership.
63 The starting point in an analysis of the relationship among St Helier, Mr Fuller and the Wilkinsons is the profit made on the sale of the options in Independent Resources Limited. It is conceded, as I have already noted, that this profit accrued to St Helier in its capacity as trustee of the Chinook Trust. It was also conceded by senior counsel for Mr Wily in opening that the terms of the Chinook Trust were either the same or similar to those which governed the Vilnius Trust. That is to say, the only beneficiaries specifically named in the trust deed were charities. More importantly, Mr Fuller was not named as a beneficiary in the trust deed.
64 There are two possible ways that the assets of the Chinook Trust were thereafter dealt with by St Helier. The first is that St Helier, acting as trustee of the Chinook Trust exercised the power in the Chinook Trust deed to apply the assets of the Chinook Trust to another trust having as a beneficiary at least one of the persons named as a beneficiary of the Chinook Trust. The second is that St Helier acted in flagrant breach of its obligations as trustee of the Chinook Trust and applied the whole of the assets of that trust by thereafter holding them as trustee for Mr Fuller.
65 As has already been noted there was power in the Vilnius Trust deed (and the Chinook Trust deed is conceded to be in similar form) to apply the assets of the Chinook Trust to another trust having at least one beneficiary in common with the Chinook Trust. Thus Clause 2(1)(c)(ii) of the deed provided:
(1) The Trustees shall during the Discretionary Period have the following powers of dealing with the capital and income of the Trust Fund which they may exercise from time to time at their absolute discretion:
(a)…
(b) The Trustees may pay transfer apply or deal with the whole or any part of the capital to or in any manner which is in their opinion for the benefit of all or any one or more of the Beneficiaries
(c) In the exercise of the power mentioned in paragraph (b) above the Trustees may (without prejudice to the width and generality of that paragraph)
(ii) transfer or cause to be transferred the whole or any part of the capital of the Trust Fund to another trust created either by the Trustees or by any other person in any part of the world provided the Trustees are satisfied that the transfer is for the benefit of all or any one or more of the Beneficiaries and notwithstanding that such other trust is governed by a law different from the proper law applicable to this Trust or contains trusts powers and provisions (discretionary or otherwise) in favour of persons or objects other than the Beneficiaries."
66 St Helier was a professional trustee. I would not lightly infer that it would act deliberately in breach of trust. Indeed, when later it was requested to apply the assets of the Vilnius Trust to another trust for the benefit of Mr Wilkinson, St Helier refused to do so because, there being no common beneficiary, it would have been in breach of trust so to do. The more likely situation is that St Helier acted in accordance with the provision in the Chinook Trust deed in terms similar to clause 2(1)(c)(ii) of the Vilnius Trust deed and applied the assets of the Chinook Trust to itself to hold on the terms of the Vilnius Trust deed, those terms being virtually identical and referring to the same persons or entities as were named as beneficiaries in the Chinook Trust deed.
67 If St Helier, holding upon the trusts of the Chinook Trust were to purport to have resettled the assets of the Chinook Trust upon itself as bare trustee for Mr Fuller, as senior counsel for Mr Wily would suggest, not only would it have acted in breach of trust, but also Mr Fuller, having notice of the terms of the Chinook Trust would in equity hold those assets upon constructive trust for the benefit of the beneficiaries of the Chinook Trust and upon the terms of that trust. Hence, the purported attempt would be legally ineffective. The assets would not, as Mr Wily would submit, become part of the bankrupt estate of Mr Fuller, but rather would continue to be held under and upon the terms of the Chinook Trust deed.
68 It can readily be inferred that Mr Fuller had notice of the terms of the Chinook Trust, if only because when the resettlement occurred, it was done on the instructions of Mr Fuller who was present at the meeting of 15 October 1986, along with Mr Wilkinson and Mr Cook. Clearly the initial arrangement involving Gloucestershire, Sovereign Trustees and other entities was negotiated among the same parties including Mr Fuller and Mr Wilkinson. Whatever steps were taken to ensure that the Chinook Trust became entitled to receive the $US3,000,000 were taken by Mr Fuller and Mr Wilkinson with or without Mr Cook and Mr Somes.
69 Accordingly whichever possibility one accepts the result is that the assets that were formerly held on the terms of the Chinook Trust (or, at least one third of those assets) became as and from 15 October 1986 held by St Helier upon trust for beneficiaries other than Mr Fuller.
70 It is true that, except as stated earlier, St Helier thereafter acted in accordance with Mr Fuller's wishes. There was nothing in the provisions of the Vilnius Trust deed which in any way referred to a memorandum of wishes. On the face of that trust deed, St Helier was legally entitled to disregard Mr Fuller's wishes. No doubt there was an understanding between St Helier and Mr Fuller that it would in fact heed those wishes and comply with them, at least so long as it would not be in breach of trust in so doing. The concept of a memorandum of wishes is not unusual in tax havens such as the Channel Islands. It may be that a court in equity might, having regard to the circumstances in which a trust such as the present comes into existence, compel the trustee to act in accordance with such a memorandum. It may, in an appropriate case, be the situation that a person who has the power to nominate his or her wishes could be held to have a power of appointment, particularly if that person could nominate who the beneficiaries of the trust might be, including himself or herself. It may be that such a power of appointment might be held to be property of the bankrupt and vest in the trustee in bankruptcy. These questions do not arise here. Any such argument was eschewed by senior counsel for Mr Wily. It is accordingly not necessary to seek to address it.
71 For these reasons I am of the view that the debt owed by the Wilkinsons was not held by St Helier upon a bare trust for Mr Fuller. I would accordingly dismiss the application and order Mr Wily to pay the costs of the Wilkinsons. Mr Fuller was unrepresented. He made no attempt to have the proceedings dismissed against him until the hearing and in these circumstances there should, in my view, be no order made in respect of any costs he may have incurred.
I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.