Henry v Sommerset Ltd [1994] CKHC 11; Plaint193.94 (20 December 1994)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)

PLAINT 193/94

BETWEEN:

DONALD W. HENRY
of 5525 Oakdale Avenue, Suite 165, Woodland Hills, California 91364,
United States, Receiver pursuant to the Stipulation of the Parties to
Appointment of Permanent Receiver and Order thereon dated July 17, 1994
in the United States Federal District Court, Central District, California
Plaintiff

AND:

SOMMERSET LIMITED
a company incorporated pursuant to the International Companies Act 1981-82
First Defendant

AND

THE WILLIAM A. COOPER TRUST aka THE W.A. COOPER TRUST
an International Trust registered pursuant to the provisions
of the International Trust Act 1984
Second Defendant

AND

TRAVIS W. COOPER
of Sacramento, California, United States
Third Defendant

AND

PADEN A. COOPER
of Villa Park, California, United States
Fourth Defendant

AND

TRUST NET (COOK ISLANDS LIMITED)
a Company incorporated in the Cook Islands and carrying on business there
and elsewhere as a trustee, including as Trustee of the Trust
Fifth Defendant

AND

E. ROBERT BERENDS
Costa Mess, California, United States Attorney
Sixth Defendant

AND

WILLIAM E COOPER
Villa Park, California, United States
Seventh Defendant

AND

TERRI A. COOPER
Villa Park, California, United States
Eighth Defendant

Mr. Manarangi for the Plaintiff
Mr. Arnold for the Fifth Defendant

Date of Hearing: International Conference Call 20 December (NZ time)
Date of Decision: 20 December (New Zealand time)

JUDGMENT OF DILLON J

A Mureva Injunction has already been granted to the Plaintiff against the eight defendants.

This is an application for the replacement of Trust Net (Cook Islands Limited) and the Fifth Defendant by a new Trustee, Resolution Limited.

HISTORY

The original Trust was established by Mr. and Mrs. Cooper - the Seventh and Eighth Defendants respectively. Under that Trust the Fifth Defendant was the duly appointed Trustee.

As result of criminal proceedings in the United States, guilty pleas were admitted by the Seventh Defendant to mail and wire fraud, theft and embezzlement of pension funds, as well as interstate and foreign transportation of stolen property and property taken by fraud. A plea bargaining agreement followed whereby the Seventh Defendant was to provide the full details of the Trust which, it is at alleged the plaintiff was the recipient of the criminal activities already referred to.

The Seventh Defendant has instructed the Fifth Defendant to make available to the Plaintiff full details and information of the Trust property. The Fifth Defendant refuses to disclose those details on the grounds that the Eighth Defendant jointly established the Trust; that there are separate funds in the Trust belonging to the Eighth Defendant; and that the Fifth Defendant is having difficulty securing adequate instructions from the Eighth Defendant.

APPLICATION

The application is for the replacement of the Fifth Defendant by the appointment by the new Trustee, Resolution Limited. It is alleged that it is expedient to appoint this new Trustee and that it is inexpedient and impracticable to do so without the assistance of a Court Order. This application follows the provisions of Section 43 of the Trustee Act 1956 which provided for the appointment and discharge of Trustees.

Mr Arnold appeared for the Fifth Defendant who opposed the application. He confirmed the difficulties already referred to of identifying the property claimed by the Eighth Defendant. The affidavit in support of the application alleges that the whole of the Trust property results from the criminal activities of the Seventh Defendant. However the Plaintiff cannot confirm by independent examination of the Trust records whether either the allegations of the Seventh Defendant or of the Eighth are correct or partly so in relation to their respective claims that they make to the Trust property. This is because of the Fifth Defendants refusal to permit the Plaintiff an inspection of the Trust records even though directed by the Seventh Defendant.

DECISION

It may very well be that the Eighth Defendant has some assets in the Trust quite independent of the assets resulting from the criminal activities of the Seventh Defendant. Clearly therefore the Fifth Defendant should meantime remain as Trustee in order to protect the interests of the Eighth Defendant. There is a clear conflict interest which the Fifth Defendant is unable to cope with. The Seventh Defendant, one of the settlers of the Trust, has directed the Fifth Defendant to make disclosure. The Fifth Defendant refuses. Clearly it is expedient that a new Trustee be appointed in order to resolve this conflict of interest.

For that reason the objection by the fifth Defendant is disallowed; Resolution Limited is appointed a new and additional Trustee pursuant to the provisions of Section 51 of the Trustee Act 1956

This additional appointment will enable the new Trustee to examine the Trust property and so permit the Plaintiff to proceed with the enforcement of the plea bargaining agreement. It will also permit the Fifth Defendant to continue acting for the Eighth Defendant since it has acknowledged that it is no longer acting for the Seventh Defendant due to its non-compliance with the specific instructions that were provided to the Fifth Defendant and which have been complied with.

While this Order will enable the two Trustees to act separately, one for the Seventh Defendant and the other for the Eighth Defendant, there could be a potential conflict in the event that the Trustees cannot agree on the identification of the Trust assets once a full assessment has been carried out. If for that reason or any other reason there is not unity between the Trustees then leave is owned to any party to make application to the Court for directions

Costs on the application are reserved.

Dillon J