Jersey Unreported Judgments

Trust - representation brought by the Third Defendant re artworks.

[2018]JRC140

Royal Court

(Samedi)

31 July 2018

Before     :

J A Clyde-Smith, Esq., Commissioner, and Jurats Blampied and Ronge.

 

AND IN THE MATTER OF THE REPRESENTATION OF THE THIRD DEFENDANT

 

Advocate W. A. F. Redgrave for the Third Defendant.

Advocate E B. Drummond for the Plaintiffs.

Advocate J. M. P. Gleeson for the First Party Cited.

judgment

the COMMISSIONER:

1.        The third defendant (-�BNP Jersey-�) brings a representation for orders to assist in the recovery of or enforcement against seven paintings discovered in Florida. 

2.        The full background is set out in the substantive judgment of the Court of 11^th September 2017 Crociani-v-Crociani [2017] JRC 146, which we will refer to as -�the Substantive Judgment-�, now formally registered as a judgment in Florida, but in brief:-

(i)        The Court found that on 9^th February, 2010 (-�the 2010 Appointment-�), substantial assets had been appointed out of the Grand Trust dated 24^th December, 1987, by the then trustees (the first defendant -�Madame Crociani-�, the second defendant -�Paul Foortse-� and BNP Jersey) in breach of trust to the Fortunate Trust dated 8^th September 1989.  Madame Crociani was the settlor of the Grand Trust and of the Fortunate Trust. 

(ii)       The trustees found liable for that breach of trust were BNP Jersey and Madame Crociani, Paul Foortse having been exonerated. 

(iii)      The assets appointed out under the 2010 Appointment included the one share in a company called Twenty-Three Investments Limited (-�23 Investments-�) which owned eight paintings (paragraph 681 of the Substantive Judgment), which it was unnecessary to name for the purposes of the Substantive Judgment.

(iv)      The Fortunate Trust already owned a greater number of paintings held through a company called Croc Investments SA.

(v)       Madame Crociani revoked the Fortunate Trust on 30^th June, 2011, so that all of its assets (which included those assets appointed out of the Grand Trust in breach of trust) vested in her, which she has dispersed around the world to destinations which she has refused to disclose (paragraph 850 of the Substantive Judgment).

(vi)      When the Court handed down the Substantive Judgment, it made a number of orders including the following:-

(a)       Pursuant to paragraph 9 of the Act of Court, it ordered an inquiry as to the value at that date of the shares in and loan account due by 23 Investments on the assumption that the eight paintings remained in its ownership.

(b)       Pursuant to paragraph 21(b) of the Act of Court, the Court ordered Madame Crociani and BNP Jersey jointly and severally to pay to the new trustee of the Grand Trust, namely the first party cited, Ocorian Trustees (Jersey) Limited (-�Ocorian-�), within 28 days of the completion of the inquiry, the amount of the valuation together with interest.

(c)       Pursuant to paragraph 22 of the Act of Court, upon payment of all of the sums specified in the Act of Court and upon BNP Jersey indemnifying Ocorian in respect of its reasonable costs incurred in so doing, the Court ordered Ocorian to execute such documents as may be necessary to assign to BNP Jersey any interest, title or rights, proprietary or personal, that Ocorian had in respect of the property that was transferred pursuant to the 2010 Appointment.  BNP Jersey was further ordered to account to Ocorian for any property it may recover in excess of the sum BNP Jersey had paid to Ocorian in respect of re-constituting the Grand Trust. 

(d)       Pursuant to paragraph 27 of the Act of Court, the Court ordered Madame Crociani to indemnify BNP Jersey in respect of all sums paid by it in complying with the compensation orders made against it and in respect of costs incurred by BNP Jersey in the litigation.  

(vii)     Madame Crociani, who had played a major role in defending the substantive Jersey proceedings, had abandoned the process shortly prior to the main hearing (paragraphs 43-45 of the Substantive Judgment).  She was and remains in breach of a world-wide freezing injunction (-�the Jersey world-wide freezing order-�) and disclosure order made by the Court on 4^th August, 2016, in favour of BNP Jersey (paragraph 38 of the Substantive Judgment).  The Jersey world-wide freezing order specified inter alia the eight paintings that had been the property of 23 Investments.

(viii)    Madame Crociani applied to the Court to have the Jersey world-wide freezing order and the disclosure order struck out and that application was refused by the Court on 25^th November 2016, for the reasons set out in the judgment of the Bailiff (Crociani v Crociani [2016] JRC 220B). The Court imposed a post judgment freezing order in substantially the same terms after the substantive Judgement had been handed down.

(ix)      The burden of paying equitable compensation to Ocorian, pursuant to the Court-�s order of 11^th September, 2017, has fallen upon BNP Jersey, and it is seeking to enforce its indemnity against Madame Crociani and her assets and to recover from her the assets appointed out of the Grand Trust in breach of trust.  

3.        Following the handing down of the Substantive Judgment, BNP Jersey initiated discovery proceedings in the United States against Huntington T. Block Insurance Agency, Inc, (-�Huntington-�) a fine art insurance broker based out of Washington DC.  The material disclosed dealt with the insurance and location of the paintings up to the end of 2016.  Later discovery proceedings brought in the US in early 2018 against Gurr Johns, Inc, an art appraisal and acquisition company with offices in the United States, demonstrated that the following seven paintings were stored at Museo Vault, a company located in Miami, Florida that provides storage and transportation services for fine art:-

(i)        Vincent Van Gogh, -�Les Canots amarrés-�

(ii)       Alexei Jawlensky, -�The Blue Mouth-�

(iii)      Henri Fantin-Latour, -�Panier de Fleurs (Still Life)-�

(iv)      Henri Fantin-Latour, -�Vase de Fleurs-�

(v)       Paul Cézanne, -�Paysage de L-�Ile de France-�

(vi)      Henri Rousseau, -�Femme à l-�ombrelle dans la forêt exotique-�

(vii)     Maurice Utrillo, -�Eglise de la Couronne, Charente-�

We will refer to these seven paintings together as -�the Miami paintings-�.

4.        On 26^th February, 2018, the Florida Court granted BNP Jersey an injunction over the Miami paintings (-�the Florida Freeze Order-�).  Disclosure orders revealed that Museo Vault held the Miami paintings pursuant to a storage agreement entered into on 6^th November, 2017, with -�The Apollo Trust-�, c/o Gregory Elias of United Trust Company NV, based out of Curacao. 

5.        United Trust (Anguilla) Limited (-�United Trust Anguilla-�), identifying itself as the trustee of the Apollo Trust, applied unsuccessfully to have the Florida Freeze Order set aside.  We have been shown a copy of the declaration filed by United Trust Anguilla in support of its application executed by Gregory Elias, a director of United Trust Anguilla who stated that he lives and works in Curacao, confirming its ownership of the Miami paintings and denying the jurisdiction of the Courts of Florida.  No information was provided as to how it came to own the Miami paintings, who the settlor of the Apollo Trust was, who the beneficiaries of the Apollo Trust are or why the paintings were in Miami. 

6.        United Trust Anguilla has filed an appeal against the Florida Freezing Order which we understand may be heard this August. 

7.        On 26^th March,2018, BNP Jersey brought this representation and the plaintiffs, Madame Crociani and United Trust Anguilla were convened, United Trust Anguilla as a second party cited for the purposes of the representation.  The extensive steps taken by BNP Jersey to serve the representation upon Madame Crociani and United Trust Anguilla are set out in a second affidavit of Lynne Catherine Gregory, a senior associate at Baker & Partners, a Jersey law firm acting for BNP Jersey, dated 16^th April 2018 and we are satisfied that they have been duly served and have had due notice of this hearing.

8.        The representation of BNP Jersey recites that of the Miami paintings, the following four were owned by 23 Investments, namely:-

(i)        Vincent Van Gogh, -�Les Canots amarrés-�

(ii)       Alexei Jawlensky, -�The Blue Mouth-�

(iii)      Henri Fantin-Latour, -�Panier de Fleurs (Still Life)-�

(iv)      Henri Fantin-Latour, -�Vase de Fleurs-�

We will refer to these as -�the Grand Trust paintings-� and the remaining three paintings as -�the non Grand Trust paintings-�.

9.        The representation, which was issued in March 2018, sought orders for the transfer of the Grand Trust paintings from United Trust Anguilla, as trustee of the Apollo Trust, to Ocorian, as trustee of the Grand Trust, and for the transfer of the non Grand Trust paintings to BNP Jersey pursuant to the indemnity.  In essence, orders were sought by BNP Jersey to enforce the Substantive Judgment by restoring to the Grand Trust assets lost in the 2010 Appointment (the Grand Trust paintings) and to enable BNP Jersey to enforce its indemnity judgment against Madame Crociani (in respect of the non Grand Trust paintings).  As is noted below in paragraph 33, BNP Jersey does not now seek the restoration of the Grand Trust paintings to the Grand Trust, but rather seeks, via an assignment of Ocorian-�s rights, to acquire the Grand Trust paintings for itself following the payment of equitable compensation to the Grand Trust.  Neither Madame Crociani nor United Trust Anguilla have responded to BNP-�s representation. 

10.      The evidence before the Court comprised affidavits by Lynne Gregory and Michael A. Pineiro, a US attorney from the South Florida law firm of Marcus Neiman & Rashbaum LLP, exhibiting documents obtained in discovery in the main proceedings in Jersey and the discovery proceedings in the United States.  Also exhibited was a transcript of the oral deposition of Diane Jackson, an employee of Huntington, by order of the Washington D.C. Court.

The Grand Trust paintings

11.      Working from the evidence before the Court, 23 Investments was incorporated in the British Virgin Islands on 1^st December, 1989, as an asset of the Grand Trust.  

12.      Pursuant to the 2010 Appointment, and in breach of trust, the one share in 23 Investments was appointed to the Fortunate Trust, which had been established to hold Madame Crociani-�s valuable art collection and of which Madame Crociani was the principal beneficiary (see paragraphs 244 and 245 of the Substantive Judgment). 

13.      Shortly before the revocation by Madame Crociani of the Fortunate Trust on 30^th June, 2011, the effect of which was to vest all of its assets in her, all of the paintings owned by 23 Investments (which included the Grand Trust paintings) and by Croc Investments SA (which included the non Grand Trust paintings) were transferred to a BVI company called Montfire Limited, which also belonged to the Fortunate Trust. 

14.      23 Investments was dissolved on 23^rd November, 2011, as at that time it had no assets.  BNP Jersey have instructed lawyers in the BVI to restore it to the BVI companies register as a pre-requisite to bringing a proprietary claim to the Grand Trust paintings. 

15.      On 16^th July, 2012, Montfire Limited transferred ownership of the paintings previously owned by Croc Investments SA to Madame Crociani, and on 7^th September. 2012, Montfire Limited transferred ownership of the paintings previously owned by 23 Investments to Madame Crociani.  Thus all of the paintings vested in her.  On 17^th December, 2012, Montfire Limited was dissolved as it no longer had any assets. 

16.      The records received from Huntington show that by 2016, all of the paintings were insured in the name of Madame Crociani or the fifth defendant, her daughter (-�Camilla-�).  That remained the position after the Jersey world-wide freezing order had been made on 4^th August, 2016, in which all of the paintings were specifically listed (some twenty nine in all including the Miami paintings) in order to prevent Madame Crociani-�s disposition or disposal of them. 

17.      Documentation from Huntington in particular makes it possible to track the movement of the Miami paintings:-

(i)        Between 1^st July, 2011 and April/May 2012, that they were stored with Rodolphe Haller SA, Port Franc in Geneva.

(ii)       In April/May 2012, they were shipped to Christie-�s Fine Art Storage in Singapore in the name of Madame Crociani.  To place this in context, by 25^th April, 2011, the relationship between the first plaintiff (-�Cristiana-�) and Madame Crociani and Camilla had broken down and lawyers had been consulted (paragraph 19 of the Substantive Judgment).

(iii)      On 25th November 2016, after the imposition of the Jersey world-wide freezing order and on the same day that it was confirmed by the Court in the presence of Madame Crociani-�s legal representative, the paintings were shipped back to Switzerland to be held by Im Hackacker 2, 8902 Urdorf, Zurich, Switzerland, again insured in the name of Madame Crociani.

18.      It is not known when the Apollo Trust was created and ownership of the Miami paintings purportedly transferred to it, but the earliest document before us is a confirmation of ownership signed by Mr Elias, as managing director of United International Trust NV, on 19^th December, 2016, which lists the Miami paintings as the property of the Apollo Trust.

19.      On 22^nd December, 2016, Madame Crociani terminated her insurance policy with Huntington by e-mail, making it difficult to track the further movement of the remaining paintings the destination of which is not known. 

20.      The Miami paintings appear to have been received by Museo Vault on 3^rd November, 2017, where they remain to this day.  The storage agreement with the Apollo Trust states that storage charges were deemed to commence on 6^th November, 2017. 

Gregory Elias and Madame Crociani

21.      The evidence shows a close link between Gregory Elias and Madame Crociani.  He is chairman of United International Trust NV, a Curacao based trust company which is part of the United group, which has a number of entities established in Curacao that are involved with the Crociani family and the Croci Group.  He is also chairman of another entity within the United Group, namely United Trust Company NV, which is referred to in the Museo Vault papers. 

22.      United International Trust NV is a director of Croci International NV, which was beneficially owned by Madame Crociani, and which ultimately owned substantial assets quite separate from the Grand Trust (see paragraph 8 of the Substantive Judgment). 

23.      BNP Jersey-�s current understanding is that the company that now heads the Croci structure is International Future Ventures & Investments N.V. of which the current directors are Mr Elias and Centennial Management NV, another company within the United Group, of which Mr Elias is chairman.

24.      The Curacao commercial register shows that United International Trust NV, Centennial Management NV and International Future Ventures & Investments NV all have the same registered address in Curacao, which is the same as that given by the Apollo Trust to Museo Vault. 

25.      Discovery in the main proceedings shed further light on Mr Elias-�s role within Croci International NV.  For example, the minutes of the meeting of Croci International NV held on 20^th May, 2011, list Mr Elias as a proxy for Madame Crociani, and chairman of the shareholder meeting.  Mr Elias was also referred to in the secretly taped meeting held between Madame Crociani and her various advisers on 14^th June, 2011 (paragraph 431 of the Substantive Judgment).

26.      Finally, we have seen a declaration of trust signed by Mr Elias on behalf of Centennial Management NV on 12^th July, 2012, confirming that it holds a share in a company called Ruysdael Investments Inc on trust for Madame Crociani. 

Decision

27.      Whilst we have not seen the original documentation by which 23 Investments acquired the Grand Trust paintings, there appears to be no question that as at the date of the 2010 Appointment it had unencumbered title to them and had owned them for many years. 

28.      This Court has set aside the 2010 Appointment, by which the share in 23 Investments was transferred to the Fortunate Trust, as being void and of no legal effect, a finding that has not been appealed.  It follows that the Fortunate Trust never received the share in 23 Investments and had no right to deal with that company and its assets.  Accordingly, any transfer of the Grand Trust paintings subsequent to the 2010 Appointment, other than to a bone fide purchaser for value without notice, is equally void and of no effect, and 23 Investments is entitled to have title to those paintings restored to it.  

29.      Neither Madame Crociani nor United Trust Anguilla have put forward any explanation as to how the Apollo Trust claims to have acquired title to the Miami paintings from Madame Crociani, but on the evidence presented to us, and in particular, taking into account the long association between Madame Crociani and Mr Elias, we draw the inevitable inference that United Trust Anguilla, as trustee of the Apollo Trust, is not a bona fide purchaser for value of the Grand Trust paintings without notice. 

30.      Madame Crociani submitted to the jurisdiction of this Court in the Substantive Proceedings, actively taking a lead in their defence and this up until the eve of the hearing.  She is bound, therefore, by this Court-�s orders.  The Jersey world-wide freezing order restrained Madame Crociani from disposing of or dealing with or diminishing the value of any of her assets up to a value of $194 million.  This prohibition expressly extended to all of the paintings which have been transferred to her by Montfire Limited, and which were individually listed.  The list includes the Miami paintings.

31.      Paintings were transferred firstly to Montfire Limited and then to Madame Crociani so that well before the Jersey world-wide freezing order, she had sole control over all of them.  It follows that:-

(i)        The shipment by Madame Crociani of the Miami paintings from Singapore to Zurich on the 25^th November, 2016, and from there to Miami was made in breach of the Jersey world-wide freezing order. 

(ii)       The transfer of the Miami paintings to the Apollo Trust was made in breach of the Jersey world-wide freezing order. 

32.      If United Trust Anguilla had acquired the Miami paintings as trustee of the Apollo Trust for value, without notice of the Jersey proceedings and in particular, the Jersey world-wide freezing order, then we would expect it to say so in the clearest terms at the earliest opportunity.  It has not done so.  The close connection between Madame Crociani and Gregory Elias leads us to the inevitable conclusion that this all forms part of Madame Crociani-�s strategy of placing these assets beyond the reach of her judgment creditors.  It is consistent, in our view, with the way she has previously conducted herself; see, for example, her conduct as described in paragraphs 436 - 443 of the Substantive Judgment and the actions of the fourth defendant, Appleby Trust (Mauritius) Limited, at her behest (paragraph 612 of the Substantive Judgment).  See also her refusal to comply with the disclosure order made against her on 4^th August, 2016, and her subsequent abandonment of the Jersey proceedings.

Structure of the orders of 11th September 2017

33.      In its representation in so far as it concerned the Grand Trust paintings, BNP Jersey sought an order that they be returned to the Grand Trust, but now accepts that this would not be in accordance with the orders made on the 11^th September, 2017.  The underlying position in law is explained in paragraphs 676 - 679 of the Substantive Judgment, but in short, where trust assets have been wrongfully transferred away and at the date of the trial cannot be restored, then the defaulting trustees must pay sufficient compensation to put the trust back to what it would have been had a breach not been committed. 

34.      None of the assets transferred away under the 2010 Appointment were recoverable at the date of the trial, and accordingly, it was accepted by BNP Jersey that the liability of the defaulting trustees was to pay compensation to put the trust fund back to what it would have been had the 2010 Appointment not been entered into (paragraph 682 of the Substantive Judgment). 

35.      Thus, the orders made on 11^th September, 2017, in so far as they related to 23 Investments, were structured in this way:-

(i)        An inquiry was ordered into the value of the paintings held by 23 Investments.

(ii)       Following the determination of that inquiry, BNP Jersey and Madame Crociani jointly and severally would have 28 days in which to pay the sum so assessed, together with interest.

(iii)      Following BNP Jersey making payment in full in respect of all the inquiries ordered, Ocorian would assign any rights it has in the property transferred pursuant to the 2010 Appointment to BNP Jersey, which would account to Ocorian for any property it may recover in excess of the sum which BNP Jersey has paid in respect of re-constituting the Grand Trust. 

36.      The position, therefore, is that Ocorian has received some, and will shortly receive the balance, of the compensation due from BNP Jersey in relation to 23 Investments, and will not be involved in the recovery of either the share in 23 Investments or the Grand Trust paintings.  Indeed Ocorian is not under any duty to seek the return of the paintings.  Title to the share in 23 Investments will be assigned to BNP Jersey so that it can, through 23 Investments, once restored to the register, recover the Grand Trust paintings and set their sale proceeds off against the compensation it has paid and will pay.  The terms of the assignment between Ocorian and BNP Jersey are currently under discussion. 

37.      BNP Jersey sought an order that Ocorian should -�take all necessary steps to support action taken on behalf of BNP Jersey to claim the Miami [  ] paintings.-� It is not appropriate for such an open-ended order to be made against a trustee, but suffice to say that Ocorian is supportive of the action being taken by BNP Jersey to recover the Grand Trust paintings to set against the compensation it has paid and will pay, but if it is necessary for Ocorian to take any steps to support BNP Jersey-�s actions, then BNP Jersey can apply to the Court on notice. 

Non GT paintings

38.      BNP Jersey asserts that the three non Grand Trust paintings should be regarded as Madame Crociani-�s property, and thus liable to enforcement at the instance of BNP Jersey pursuant to its judgment indemnity.  Despite being nominally held by the Apollo Trust, BNP Jersey will assert either:-

(a)       That the purported transfer to the Apollo Trust should be set aside as a fraud on a creditor, or

(b)       Notwithstanding the purported transfer, Madame Crociani still controls and benefits from the paintings, under the true terms of the arrangements she has made with United Trust Anguilla.

No order is sought from this Court in this respect.

Convening of Camilla

39.      The Court has received a letter from Advocate Hoy of Voisin Law, who represents Camilla, and who is aware of this application.  Camilla, had taken an active part in defending the substantive Jersey proceedings and like her mother, had made a deliberate decision to abandon the process on the eve of the trial (see paragraphs 40 and 45 of the Substantive Judgment), but Advocate Hoy questioned whether she should be convened to this representation as a beneficiary of Camilla-�s trust (within the Grand Trust).  She had not made an application to be convened, because he said she would be at risk as to costs if it was unsuccessful. 

40.      The Court was satisfied that for the purposes of the order it was being asked to make, the interests of the beneficiaries of Camilla-�s trust were adequately represented by Ocorian, but we could see that if BNP Jersey were successful in its current appeal in respect of its liability to compensate Camilla-�s trust (which it has been), then it might be appropriate for her to be convened as a party, subject to the Court being satisfied that she had fully complied with the disclosure orders made against her on 11^th September, 2017.  Ocorian and the plaintiffs also suggested that Camilla be given notice of the terms of the proposed assignment to BNP Jersey.

Conclusion

41.      For all these reasons, we therefore order that upon restoration to the BVI companies registry of 23 Investments, both United Trust Anguilla as trustee of the Apollo Trust and Madame Crociani shall take all necessary steps to transfer formal title and possession of the Grand Trust paintings to 23 Investments. 

42.      We authorise Ocorian to enter into an assignment of the share in 23 Investments with BNP Jersey on terms which Ocorian is satisfied with, subject to 14 days prior notice being given to Cristiana and Camilla, with liberty to BNP Jersey, Ocorian and Cristiana to apply and liberty to Camilla to seek leave to apply. 

43.      Finally, BNP Jersey shall pay the costs of Ocorian and the plaintiffs of and incidental to this representation on the indemnity basis to be taxed if not agreed.  

Authorities

<Crociani-v-Crociani [2017] JRC 146.

<Crociani v Crociani [2016] JRC 220B