Trident Trust Company (Singapore) Pte Limited v Purvi Deepak Modi & Ors

Web: www.martenwalshcherer.com MASTER BRIGHTWELL :

1. In my judgment given at a hearing on 27 March 2024, I set out the background to the present proceedings, and in particular to the issue concerning the property at 103 Marathon House, Marylebone Road, London NW1, in the following way: ‘1. This is an application by the claimant, Trident Trust Company (Singapore) Pte Limited, in its capacity as trustee of the Deposit Trust seeking a blessing of the court for its decision to sell the property known as 103 Marathon House, London, for a sum not less than £5.25 million. The claimant is the trustee or apparent trustee of this trust which was settled in December 2017. On the face of it, the trust was settled by the first defendant, Ms Purvi Modi. It is a discretionary trust in fairly conventional form for the benefit of Ms Modi, her children and her remoter issue.

2. The third defendant, Mr Nirav Modi, is Ms Modi’s brother. He is currently in custody in this jurisdiction awaiting extradition to India. He claims that he is the true settlor of the trust and that he was intended after a while to be appointed as a beneficiary of the trust. Alternatively, he claims that he is by virtue of being the settlor or the economic settlor of the trust for the purposes of the definitions in the trust instrument to be treated as a beneficiary. In the further alternative, he claims that he provided the deposit for the Marathon House property which was acquired in December 2017 for the purchase price of £6.25m and he claims to be entitled either to repayment of that sum or to an interest in the property accordingly.

3. The eighth defendant is the Enforcement Directorate of the Government of India. The Enforcement Directorate claims that the trust property of the Deposit Trust represents the proceeds of crime and that Mr Modi was involved in a large-scale fraud committed against the Punjab National Bank. Confiscation orders or at least one confiscation order has been made in India and the Enforcement Directorate claims to be entitled either through intergovernmental routes or otherwise to have a claim against the trust property. One of the bases of claim as it is put forward is that the trust property is subject to a pre-existing trust for the Enforcement Directorate or for the Government of India and is therefore held on a resulting or constructive trust accordingly.

4. The second defendant, Mr Levin, is the trustee of various liquidity trusts created in the United States for the benefit of the Punjab National Bank and others and he is the Chapter 11 trustee in the United States of various companies formerly associated with Mr Modi. In that capacity, he says that he has claims against the trust property but those claims have been effectively subordinated to the claims of the Enforcement Directorate and Mr Levin has essentially supported the position adopted by the Enforcement Directorate in these proceedings.

5. The first defendant has taken no active part in the proceedings. She has been served but by virtue of an agreement she has apparently reached with India she has adopted the Enforcement Directorate’s position as well.

6. Ms Modi’s adult children, who are on the face of the trust instrument beneficiaries, have been served with notice under rule 19.13 of the Civil Procedure Rules but they have not responded indicating they wish to participate in the proceedings.

7. Mr Modi does participate. He is now represented by solicitors and counsel, although at this hearing he has attended in person from prison by CVP link.

8. There have been four hearings in this claim before this one at which various directions have been given. Those hearings culminated in the most recent hearing on 11 March 2024 at which I gave directions requiring both Mr Modi and the Enforcement Directorate, if they are to do so, to issue claims setting out their entitlement to or in respect of the trust assets, with such claims to be issued by 7 June 2024.

9. The property at Marathon House is in fact owned by a company wholly owned by the trustee called 103 Marathon House Limited. I accept that the court has jurisdiction to give directions to the trustee in relation to actions to be taken by the directors of a wholly-owned trust company. The question of what was to happen to the [property] was first raised at the very first hearing on 7 June 2023. After discussion with the parties, I made the following orders at paragraphs 8, 9 and 10 of the order made on that occasion: “8. The Court approves the Trustee’s decision to procure the sale of the Property on the open market, as soon as reasonably practicable, subject to the following paragraph.

9. Before concluding the sale of the Property, the Trustee should provide particulars of the proposed contract of sale to the other parties and to Ms Javeri [who I note is Mr Modi’s wife] not less than 14 days before entering into such contract. For the avoidance of doubt, such particulars may be provided to Ms Javeri by email to the address referred to in paragraph 3, above. This paragraph is subject to paragraph 4, above [which I note related to Ms Javeri].

10. The other parties shall have permission to apply insofar as they object to the proposed contract of sale referred to in paragraph 9 above.”’

2. At the hearing on 27 March 2024, I then made an order ultimately by consent giving the trustee permission to enter into a sale of the property, provided that any such sale be for a purchase price of £5.25 million or above and on materially the same terms as the proposed sale which was in negotiation at the time, and to take any steps reasonably necessary to complete such sale. There were then further directions to take effect in the event that that sale did not complete. In the event, and perhaps unsurprisingly given the circumstances surrounding the proposed sale which were discussed at the hearing in March 2024, that sale did in fact fall through. The market has since deteriorated.

3. The trustee now applies by its application issued on 18 February 2025 for orders, first of all in relation to the position of the eighth defendant, the Enforcement Directorate acting on behalf of the Government of India, in relation to a bank account which is ultimately trust property and held with EFG Bank in Switzerland. The Enforcement Directorate has caused that account to be frozen. Separately, an order is sought, in the event that the eighth defendant does not confirm that it is willing to ensure that those EFG funds are available (which in the event it is not), that the claimant and the fourth defendant be authorised to sell the property for a gross purchase price of £4.25 million or above, and that the claimant shall be authorised to charge the property in substantially the same terms as set out in a term sheet issued by Century Capital Partners and dated 5 February 2025.

4. At the last hearing in February 2025, I gave Beddoe directions to the claimant in relation to its conduct of two hostile claims which had been issued by the third defendant and the eighth defendant, each of whom claim to be beneficially entitled to the trust property or to be beneficiaries of it.

5. One of the points put forward by the claimant at the February 2025 hearing with some force was the fact that the express beneficiaries of the Deposit Trust are not participating in these proceedings in circumstances which have been ventilated at previous hearings. The claimant was at pains to ensure that any position which might be articulated in their favour was before the court. It seemed to me that the trustee’s position was quite proper in this respect, and it was accordingly given permission to file a defence to the claims of the third and eighth defendants. That is material, because I have in mind in considering the present application that once again the express beneficiaries of the trust are not represented before me.

6. The application is not opposed by the eight defendant, but it is strongly opposed by the third defendant, who has been represented at today’s hearing by Mr James Kinman of counsel. His opposition to the application relates to the way in which the trustee’s decision-making process has been both carried out and evidenced. The evidence that I have of the decision is contained in the eighth witness statement of Mr Philip Munro, the solicitor at Withers LLP with conduct of the claim on behalf of the claimant. He sets out the background following on from his previous witness statements in these proceedings.

7. Mr Munro explains the correspondence which the trustee has had with both Prime Portfolio Ltd and Savills, who have provided advice to the claimant on the marketing of the property. He then indicates in paragraph 30 that the trustee has sought advice from a financial broker as to the possibility of borrowing against the property, in order to be able to discharge the trust’s immediate liabilities. The Trustee has obtained a non-binding indicative offer dated 5 February 2025 from Century Capital Partners, and terms are there set out. It is clear that only Century Capital Partners was prepared to make any offer. The borrowing rate is substantial for a term loan of 12 months, borrowing a net loan amount of just over £1.5 million. The proposed interest rate is 18% per annum.

8. There is also evidence before the court of the current liabilities facing the trust. I was referred to a schedule setting these out. At the date of the schedule there were around £200,000 of non-third party liabilities, including a liability to HMRC for inheritance tax arising on the creation of the trust, or on the transfer of assets into this trust. HMRC have security but have not indicated that they will forbear from enforcing the liability. More substantial than the third party liabilities are the trustee’s own outstanding fees and the trustee’s liability to both solicitors and to counsel previously instructed. The proposal put forward by the trustee is that the property should now be sold at a lower price than that previously directed, which will enable all of the liabilities to be paid off and will stop interest accruing.

9. Mr Rees, for the claimants, submits that the ability of the trustee to pay off all debts through realised finds in this way is a side effect of the sale of the property and that it is motivated by the need to pay off those third party liabilities where there have been demands, where there is a risk of enforcement.

10. Paragraphs 33 and 34 of Mr Munro’s eighth witness statement says this: ‘33. The financial situation the Trust is increasingly untenable. In the circumstances, the Trustee considers that there are three viable options: (a) The ]Enforcement Directorate] agrees to lift the freezing orders over the EFG Bank accounts to allow funds to be used to discharge the current and future liabilities. (b) In the absence of that agreement and the freezing orders being lifted, the Trustee borrows a sum from a lender charged against the Property which will be sufficient to discharge the current and future liabilities. (c) The marketing price for the Property needs to be much reduced in order to be able to generate interest and improve the prospect of a sale.

34. Mr Modi has objected to reducing the asking price for the Property and the ED has not shown any willingness to consider lifting the freezing orders over the EFG Bank accounts. Even if the parties agree to reduce the asking price for the Property, the Trustee is still in a position whereby it needs to secure funds allowing it to discharge the Trust's most pressing liabilities. Unless the ED is prepared to undertake to take immediate steps to effect the lifting of the freezing orders over the EFG Bank accounts, that leaves the Trustee with little choice but to obtain financing from a lender whilst the Property is marketed at a lower price.’

11. Paragraph 36 of the witness statement can be taken as a statement of the decision which has been made; that is to market the property for sale at a lower price and to obtain financing because, it is said, the trustee has had no choice but to seek a blessing of such a decision.

12. The decision which the court faces, and I will come on to the test when it is required to decide an application for a blessing under the Public Trustee v Cooper jurisdiction where there is no surrender of discretion, is either to approve the trustee’s decision or to decline to do so. It does not appear to me that there are two separate decisions, one to sell the property and one to enter into a borrowing facility, which have been identified as separate decisions, such that I might bless one and not the other.

13. In my March 2024 judgment, I explained at paragraphs 22 to 27 why I considered that there was a conflict of interest and why I was nonetheless prepared to bless the decision then before me (which at that stage did not encompass borrowing on the security of the property, and where there was then no opposition to the blessing): ‘22. There can be no serious doubt in this case that the trustee representing the view of the director of the company which owns the property has in fact formed the opinion that the property should be sold for a price of not less than £5.25 million. I am going to consider second the third of the criteria, which is that the opinion is not vitiated by any conflict of interest. I would stress at the outset that Mr Salve does not press the point today that the decision was vitiated by a conflict of interest, although the skeleton argument which had been prepared on behalf of the Enforcement Directorate and which I have read sets out the argument why it was. The decision that I have been referred to in that context is a decision of Sir Michael Birt sitting in the Royal Court of Jersey, in Hawksford Jersey Limited v A [2018] JRC 171, in which the trustee sought the approval of the court for a decision to sell a property. It was a case where there was a dispute about the outstanding quantum of the trustee’s fees and where the trustee anticipated that a sale of the property would enable those fees to be paid. The Commissioner discussed the issues from [46] onwards. He said this: “46. …. It is patently obvious that the Trustee has a conflict of interest in relation to its decision to sell the Property. It had outstanding fees of some £120,000 as at the end of April 2018 and a sale of the Property is the most obvious way in which it will be able to recover such fees. The existence of a conflict of interest does not of itself mean that trustees may not take a decision or that the Court will not bless such a decision.”

23. He then referred to another Jersey case, Representation of Centre [2009] JRC 109 where the Commissioner quoted another part of the decision of Hart J in Public Trustee v Cooper as follows: “47. …. ‘Where a trustee has such a private interest or competing duty, there are, as it seems to me, three possible ways in which the conflict can, in theory, successfully be managed. One is for the trustee concerned to resign. This will not always provide a practical or sensible solution. The trustee concerned may represent an important source of information or advice to his co-trustees or have a significant relationship to some or all of the beneficiaries such that his or her departure as a trustee will be potentially harmful to the interests of the trust estate or its beneficiaries. Secondly, the nature of the conflict may be so pervasive throughout the trustee body that they, as a body, have no alternative but to surrender their discretion to the court. Thirdly, the trustees may honestly and reasonably believe that, notwithstanding a conflict affecting one or more of their number, they are nevertheless able fairly and reasonably to take the decision. In this third case, it will usually be prudent, if time allows, for the trustees to allow their proposed exercise of discretion to be scrutinised in advance by the court, in proceedings in which any opposing beneficial interests are properly represented, and for them not to proceed unless and until the court has authorised them to do so. If they do not do so, they run the risk of having to justify the exercise of their discretion in subsequent hostile litigation and then satisfy the court that that decision was not only one which any reasonable body of trustees might have taken but was also one that had not in fact been influenced by the conflict.’”

24. In the Hawksford case the Commissioner went on to say that that case fell within the third category and he said: “48. …. [W]e would have expected to have seen minutes in which, when reaching its decision, the Trustee acknowledged the existence of the conflict but went on to explain why, despite the conflict, it was nevertheless in the interests of the beneficiaries/trust estate that the Property be sold.”

25. In the event, the evidence of the trustee in that case did not deal with those matters and for that and for other reasons the court was not prepared to bless the trustee’s decision. However, the Commissioner said as follows: “51. Where there is a conflict of interest, the Court will give heightened scrutiny to the decision for which approval is sought. We are not to be taken as laying down a rule that, where a conflict of interest has not been acknowledged and disclosed, the Court will invariably refuse its approval. The decision may be so obviously appropriate that the Court should nevertheless approve it. However, failure to disclose and acknowledge a conflict of interest when reaching a decision, is likely to make it much more difficult for the Court to be satisfied that the decision has not in fact been influenced by the conflict.”

26. It seems to me that this is a case like Hawksford where there is a conflict of interest affecting the trustee. A sale of the property is not only the most obvious way in which the trustee’s outstanding fees will be paid, but is the only way in which those fees are going to be met. Mr Jones submitted that, on analysis, there is no conflict because of the other circumstances which militated in favour of a sale and which are set out in Mr Munro’s fourth witness statement (and as later updated). I consider, as I have indicated, that there was a conflict but that it was not the only or the most significant matter which pressed on the trustee when deciding to sell. It had been discussed with the parties at the 7 June 2023 hearing that the property needed to be sold, and it was apparent in the quite unique circumstances of this trust that one way or another it was not going to be a viable trust to continue in the future.

27. I also accept, and Mr Salve expressly accepted this himself, that there are other pressing requirements including the payment to HMRC which have to be met and for which there are no alternative sources of capital available. In those circumstances, I take the view that provided the decision is otherwise one which it is appropriate for the court to bless and provided the price which has been alighted on is the correct or appropriate price, this is a case where, despite a conflict of interest and despite that not having been acknowledged up front, it is still obvious that the decision should be blessed.’

14. A modern formulation of the applicable test for a category 2 Public Trustee v Cooper application is found in the decision of Vos LJ in Cotton v Brudenell-Bruce [2014] EWCA Civ 1312 . At [12], he said this: ‘12. In Public Trustee v. Cooper [2001] WTLR 901, Hart J repeated Robert Walker J's now well-known categorisation of cases in which trustees may seek the approval of the court. These proceedings fell into the second of Robert Walker J's categories (see page 923 in Cooper ), namely where there is no real doubt as to the nature of the trustees' powers and the trustees have decided how they want to exercise them “but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action”. In Cooper , Hart J said at page 925 that the duties of the court in a category 2 case depended on the circumstances of each case, but that in that case, it had to be satisfied, after a scrupulous consideration of the evidence, of three matters as follows:- i) That the trustees had in fact formed the opinion that they should act in the particular way relevant to that case; ii) That the opinion of the trustees was one which a reasonable body of trustees properly instructed as to the meaning of the relevant clause could properly have arrived at; iii) That the opinion was not vitiated by any conflict of interest under which any of the trustees was labouring.’

15. Then, by reference to other authority, including notably the decision of the Privy Council in Marley v Mutual Security Merchant Bank [1991] 3 All ER 198 , Vos LJ went on to highlight two factors: (1) The requirement of the trustee to give full and frank disclosure, of all the relevant facts and documents on which its decision was based, when applying for a blessing. (2) That the court should keep in mind that if it gives its approval then the beneficiaries will in future no longer be able to bring any claim against the trustee claiming that it has breached its duties in relation to exercise of the power which is under scrutiny.

16. I have also been referred today, as I was at the hearing in March 2024, to the decision of Sir Michael Birt, Commissioner, in the Jersey case of Hawksford Jersey Limited v A [2018] JRC 171. I have mentioned above what he said about how the court approaches the question whether to bless a momentous decision with heightened scrutiny where the trustee is acting under a conflict of interest and duty.

17. As I think will be apparent from the questions that I have put to Mr Rees during this hearing, I am not satisfied that I even have the material before me to carry out the heightened scrutiny which the case law suggests that I should apply to the decision which is before the court.

18. First of all, there is no clear statement of what the decision in fact is. I have explained that it ca be taken to be that which is set out in paragraph 36 of Mr Munro’s witness statement. There is no record of a decision, as one might expect, in the form of a resolution or even of the note of a meeting.

19. Furthermore, the evidence does not disclose who made the decision. I am quite prepared to accept that Mr Munro would not have given his evidence unless he was satisfied that the trustee had in fact made a decision, and I have no doubt that the trustee consulted solicitors closely during the relevant process, but there is no indication of which human minds applied themselves to the relevant questions.

20. There is ambiguity as to what the trustee proposes to do with the borrowed funds in the period after the loan facility is taken out and whilst the property is being marketed. The position would appear to have developed, in certain respects, since the date of the application and Mr Rees indicated in his submissions that careful consideration would be given as to whether any particular liabilities needed to be satisfied. It does not seem to me that is something which featured in the trustee’s initial decision-making process.

21. Mr Rees also submitted that the trustee had relied on the evidence of borrowing which had been obtained from Mr Coleman, and which is contained within the bundle. It is clear however, from the face of Mr Coleman’s report and from emails to which I have been referred, that he was not instructed to provide advice until 26 February 2025, at least some weeks after the decision had already been made.

22. There are further points. Mr Rangeley, the expert surveyor and valuer whose opinion is relied on, gives an opinion, or a report, dated 11 June 2025. The advice which had been relied on by the trustee was the advice of Prime Portfolio and Savills, which I consider it is reasonable advice for the trustee to have relied on in relation to the likely current value of the property. There is, however, a slight discrepancy in Mr Rangeley’s calculation of the value of the property which ranges between £4.3-odd million and £4.5-odd million as against the £4.25 million which the trustee had been advised to market at. If that were the only point in issue it may be that the way in which Mr Rangely deals with that discrepancy would be sufficient to deal with a consideration of whether the trustee’s decision should be blessed, but it seems to me it is one more point added to others which ought to have addressed.

23. A further point is that neither the evidence nor any record of the trustee’s decision making process, or no such record has been put in evidence, acknowledges the fact of the conflict of interest. It seems to me, in circumstances where the conflict was identified at the last hearing, together with the relevant case law and the steps which a trustee should take when faced with such a conflict, that this is a notable omission from the evidence which has been filed.

24. The trustee will, if the property is sold, be enabled to satisfy its own fees out of the sale proceeds and also to pay its lawyers. I specifically asked the question whether the solicitors/lawyers were demanding payment or indicating that they were going to take any steps in relation to any requirement taken to pay it. The indication was that no such steps were being taken. I make clear I am not suggesting that solicitors should be required to continue to act without being paid pro tem in circumstances such as these, but that does not obviate the requirement of a trustee in such circumstances to ascertain what its own solicitor’s position is. It seems tolerably clear that the trustee’s solicitors were prepared to continue acting, presumably on the basis that they knew that their fees would ultimately be paid and that they would be entitled to contractual interest on them. It is, however, unclear to what extent the perceived need to pay its own lawyers informed the trustee’s thinking.

25. For all of those reasons, it seems to me that I am not in a position to carry out the heightened scrutiny which I am required to carry out in order to assess the trustee’s decision. In particular Mr Kinman makes the point, it seems to me with some force, that it would be possible for the trustee to borrow a much smaller sum, potentially with a larger facility in place, to enable the most pressing liabilities to be met whilst the property was rented rather than merely marketed. There is evidence before the court of the likely rental value of the property. It would certainly not enable a high level of borrowing to be serviced, and it would seem likely that there would be upfront costs to be incurred. Set against that, the letting would obviate the requirement to pay the ATED charge that would apply to an unlet property, to which the property is currently subject.

26. The question for me is not whether that would be a better decision than the decision which the trustee has reached. The point, as it seems to me, is that the evidence does not disclose that the trustee has given proper consideration, or indeed any consideration, to this option in circumstances where such points were being made in correspondence by BCL months ago and the points are again set out in the evidence filed on behalf of Mr Modi in response to the present application.

27. The point is also made that an immediate sale of the property could well not be advantageous, given the fact that, as Mr Rangely states, the property has been subject to a protracted marketing campaign which will likely adversely affect its value in the short term. I stress; it seems to me by no means self-evident that Mr Modi’s proposal would be a better option. The point is that it has not been considered.

28. For all of the reasons that I have given, I do not consider that I am in a position to bless the decision which has been reached by the trustee. Despite the criticisms I have implicitly made in this judgment I do not wish to be heard to be criticising the claimant more generally in the way in which it has held the ring in this dispute. It seems to me that I ought to give Mr Rees an opportunity if he seeks it to ask me, rather than just simply to dismiss the application, to adjourn it to enable the trustee’s decision making to be better evidenced and/or reconsidered and then better evidenced. Alternatively, the trustee will be entitled to proceed with its decision without the blessing of the court.

29. I have particularly in mind, as I indicated as the outset, that I do not have the express beneficiaries of the trust before me. The objections I have heard have been made on behalf of Mr Modi. I have borne in mind that those submissions might ultimately be made on behalf of whoever is ultimately held to be entitled to the trust assets. - - - - - - - - - - Digital Transcription by Marten Walsh Cherer Ltd 2 nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP Tel No: 020 7067 2900. DX: 410 LDE Email: [email protected] Web: www.martenwalshcherer.com