National Bank Officers Association v McQuire [2006] SBHC 117; HCSI-CC 483 of 2004 (10 May 2006)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No: 483 of 2004

NATIONAL BANK OFFICERS ASSOCIATION

V

DENNIS JAMES McQUIRE

(Mwanesalua, J.)

Hearing: 14th November 2005
Judgment: 10th May 2006

C. Ashley for the Applicant
R. Radclyffe for the Respondent

JUDGMENT

Mwanesalua, J: By Originating Summons filed on 22nd October 2004, the Applicant seeks determination of a number of questions posed in paragraphs 1, 2 and 3 of its summons. It also seeks consequential orders in paragraphs A, B and C. On 29th April 2005, the Applicant amended its summons by filling an Amended Originating Summons expanding the scope of the same paragraphs 1-3 of its first summons referred to above. On 20th June 2005, the Applicant amended its Amended Summons by filing a Further Amended Originating Summons by extending the scope of the same paragraphs 1-3 of its amended summons referred to above. The questions posed for determination of this court in the Further Amended Summons are as follows:

1. Whether the spirit and intent of the Trust Deed dated 27th February 2002 between the Bank of Hawaii International Inc. as Settler and the Respondent, Dennis James McQuire as Trustee, is that the Respondent should make provisions for a Trust for the benefit of the local employees of the National Bank of the Solomon Islands for whom the Applicant, National Bank Officers Association represents?; and

2. If the answer to question 1 is "Yes", whether upon the proper construction and interpretation of the provisions of the Trust Deed, the Trustee would be acting in contravention of the known principles of Trust Law?; and in particular the following principles as read with the following clauses of the Trust Deed:-

(a) The Standard of Care and Skill – the duty of a trustee to exercise his powers in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between the different classes of beneficiaries; and as read with clauses 1 to 18 inclusive of the Trust Deed, in particular:-

(i) the "vesting date" under clause 1, 4 and 10.1(ee; and

(ii) the "trust declaration" under clause 2 and "trust objects" under clause 3; and

(iii) the "trust income" under clauses 1, 5, 6, 7, 8, 9, 10, 11, 12 and 18; and

(iv) the "variation powers" under clause 13; and

(v) the "appointment powers" under clause 14; and

(vi) the "title registration" under clause 15; and

(vii) the "jurisdictional discretion" under clause 16; and

(b) The duty not to personally benefit or profit at the beneficiaries detriment – a person occupying a position of confidence (such as a trustee or fiduciary) is prohibited from deriving any personal benefit by availing himself of his position in the absence of authority from the beneficiaries. In other words, the trustee should not place himself in position where his duty may conflict with his personal interest. If such a conflict does occur and the trustee obtains a benefit or profit, the advantage should be held on constructive trust for the beneficiaries; and as read with clauses 1 to 18 inclusive of the Trust Deed, in particulars:-

(i) the "trust income" under clause 5 to 12 inclusive; and

(ii) the "trustee’s powers" under clauses 13, 14 and 15; and

(iii) the "trustee’s immunity" under clause 18; and

(c) The duty to act personally – a trustee is appointed by a Settlor because of his personal qualities. He may possess a number of attributes which appeal to the Settlor – such as honesty and integrity, reliability and business skill. It is expected that the trustee will act personally in the execution of his duty; and as read with clauses 1 to 18 inclusive of the Trust Deed, in particular:-

(i) the "variation powers" under clause 13; and

(ii) the "appointment powers" under clause 14; and

(d) The duty to provide accounts and information – the beneficiaries are entitled to inspect the accounts as well as to be informed about matters concerning the trust; and as read with clauses 1 to 18 inclusive of the Trust Deed, in particular:-

(i) the "trust income" under clauses 1, 5 to 12 inclusive and 18; and

(ii) the "trustee’s powers" under clauses 13 to 17 inclusive; and

(e) The powers of investment – the trustee is required to consider the investment policy of the trust with the standard of care expected from an ordinary prudent man of business and always bearing in mind the best interests of the beneficiaries; and as read with clauses 1 to 18 inclusive of the Trust Deed, in particular:-

(i) the "trust income" under clauses '1, 5 to 12 inclusive and 18; and

(ii) the "trustee’s powers" under clauses 13 to 17 inclusive; and

(f) The power of advancement – the trustee is required to exercise his power of advancement in a fiduciary manner. The exercise will not be bona fide and will be void if the trustee advances trust funds not in the best interests of the beneficiaries; and as read with clauses 1 to 18 inclusive of the Trust Deed, in particular:-

(i) the "trust income" under clauses 1, 5 to 12 inclusive and 18; and

(ii) the "trustee’s powers" under clauses 13 to 17 inclusive; and

3. If the answer to question 2 is "Yes", whether the Applicant through its members as beneficiaries of the Trust can exercise their rights to choose new trustees to replace the Respondent?; and

Where the answer to any or all of the above three questions is in the affirmative, the Applicant seeks the following orders:

A. An order that the Respondent Dennis James McQuire shall forthwith cease to act as the Trustee of the NBSI Employees’ Trust; and

B. An order that the Applicant shall within seven(7) days appoint its own trustee to represent the local employees of the National Bank of Solomon Islands; and

C. An order that the Respondent shall personally bear the costs of these proceedings.

The Facts

The Applicant is the National Bank Officers Association. The Applicant is a registered Trade Union representing the interests of the employees of National Bank of the Solomons Limited (the NBSI). The NBSI is a joint venture between the Solomon Islands National Provident Fund (NPF) and Bank of Hawaii International Corporation (the Settlor). The NPF holds 49% of the shares in the NBSI whilst the Settlor holds 51% of the shares, the issued capital of the NBSI is SBD2,000,000.00 comprising 2000,000 ordinary shares of SBD10.00 each.

The Settlor holds 102,000 ordinary shares whilst the NPF holds 98,000 ordinary shares. On 10th December 2001, the Settlor entered an agreement with the NPF for the sale of its 51% shareholding in the NBSI. The agreement fell through on 22nd February 2002 because the Central Bank of Solomon Island did not approve the transfer of the shares to the NPF. On 25th February 2002, the Settlor gave written notice to the NPF to terminate their agreement of 10th December 2001. The Settlor then decided to dispose of its shares by way of gift to three trusts called "The NBSI Health and Welfare Trust", "The NBSI Education Trust" and "The NBSI Employees Trust", which it proceeded to settle at the time. These Trusts have since been settled. Each Trust has a single trustee. The Settlor made a gift of 34,000 shares to each Trustee representing 17% of the 51% of its shareholding in the NBSI. The shares are held in accordance with the terms of each Trust. The trustee of the NBSI Employees Trust is Dennis James McQuire (the Respondent) in these proceedings. On 27th February 2002, the Settlor and the Respondent signed the Deed of Settlement (the Trust Deed) of the NBSI Employees Trust (the Trust). Also, on 17th April 2002, the Settlor and the Respondent signed a Deed of Gift. By this Deed of Gift, the Settlor assigned all its right, title and interest in 34,000 of its shares in the NBSI to Respondent.

Further, also on 17th April 2002, the share transfer certificate for the 34,000 shares made as gift to the Respondent was signed by the Settlor and the Respondent.

Determination of questions 1, 2 and 3.

Question 1.

Should the Respondent make provisions for a trust for the benefit of the Local Employees of the NBSI?

The Respondent is the Trustee of this Trust. He holds the "Trust Fund" on trust for the benefit of the employees of the NBSI who are the beneficiaries. The Respondent’s responsibility is to administer the Trust in accordance with the law and the provisions of the Trust. The prime duty of the Respondent is to carry out the terms of the trust and preserve safely the trust property – the "Trust Fund".

I consider that question 2 is a hypothetical question. It is being phrased as follows

"whether upon the proper Construction and Interpretation of the provisions of the Trust Deed the Trustee would be acting in contravention of the known principles of Trust law."

In the court ruling of 13th June 2005 the court said:

"The Applicant alleges that the Respondents is in breach of the principles of the trust law which it listed in paragraphs (a) to (g) in question 2 when looked against the provisions of the trust deed. However, the Applicant was silent on how such principles had been breach. It would only be right and fair that the Respondent knows the exact nature of such breaches before the full hearing of this case."

The Court then ordered the Applicant to provide further and better particulars within 7 days. The Amended Original Summons filed on 20th June 2005 was the response to that order. It would be noted that the Amended Summons still does not provide particulars of the alleged breaches and contravention of the trust law. The Applicant need to be clear about them so that all parties in this case can properly deal with them. There should be no room for speculation about them.

It is no function of this court to answer hypothetical questions. See in re staples [1916] ICH 322 and the Prime Minister v. Governor General Civil Appeal 14 of 1998.

Q3. whether the Applicant through it members as beneficiaries of the Trust can exercise their rights to choose a new trustee to replace the Respondent?

There is no power vested in the beneficiaries to choose a new trustee to replace the Respondent. The power to appoint a new trustee vests with the Responder pursuant to clause 14 of the Deed.

CONCLUSION AND ORDER

The questions raised in the Amended Origination Summons are answered:

1. No.

2. Refused to answer

3. No.

The consequential orders sought do not arise for determination.

The Applicant to pay the Respondent’s costs.

Francis Mwanesalua
Puisne Judge