IN THE COURT OF APPEAL
TURKS AND CAICOS ISLANDS
CIVIL APPEAL No. 3/2015
BETWEEN:
ATTORNEY GENERAL OF THE TURKS & CAICOS ISLANDS
APPELLANT
AND:
CLYDE BRADLEY ROBINSON
RESPONDENT
Before: The Right Honorable Sir Edward Zacca, President
The Honorable Mr. Justice Mottley, Justice of Appeal
The Honorable Mr. Justice Forte, Justice of Appeal
On: 16th September 2015, 4th February 2016
David Phillips QC with Patrick Patterson for the Appellant
Ariel Misick QC with Selwyn Hawkins for the Respondent
Mottley, JA
Two issues fall to be determined in this appeal. The first is whether the judge misdirected herself on the proper test to be applied when determining whether it was unconscionable for the respondent, as a knowing recipient of trust property to retain that property. The second issue is whether there was a liability to pay stamp duty under the provision of the Stamp Duty Ordinance on the transfer between the respondent and his wife.
BACKGROUND
1. On 20 February 2006, the respondent Clyde Bradley Robinson who at all material times was the Director of Planning in the Ministry of Natural Resources applied for a Residential Conditional Purchase Lease (CPL) of 1 acre of land situate at Long Bay Hill, Providenciales, which was one of four plots which before subdivision, made up parcel known as 61112/176. His intention was to build a single family dwelling at an estimated cost of $400,000.00. The land was approved for subdivision into four parcels by Mr. McAllister Hanschell, the Minister of Natural Resources.
2. By a Memorandum dated 21 March 2006 to Ms. Judith Campbell the Permanent Secretary in the Ministry of Natural Resources and copied to the Director of Planning and the Chief Valuation Officer, the Director of Lands and Survey, Mr. Leroy Charles, recommended the subdivision of Parcel 61112/176 into four lots for the purpose of Residential Development in accordance with the Crown Land Policy. The Memo stated that the subdivision had been approved by Executive Council "for residential development on the recommendation of the Department of Planning and in accordance with an earlier approval granted by the National Planning Board”. The Memo also referred to the "significant demand for land for residential development in Providenciales”. The Memo further stated the fact that the Lands and Survey Department had consulted with the Department of Planning and that Parcel 61112/176 was being subdivided "to create four (4) new parcels for residential development". The Memo indicated that the Director of Planning had been asked to review the proposed Subdivision of Parcel 61112/176 and to make any recommendation.
The Memo also contained a statement that the Chief Valuation Officer was being asked to determine "the current market value". At this stage I should state that in my view, it is clear from this Memo that the Director of Planning, Mr. Robinson would have been aware that the value of the land would be the “current market value” - this meant the market value at March 2006 when the recommendation was being made. Mr. Charles indicated that the above proposal had been made following information which he had been given by the Minister, Mr. Hanchell - that it had been decided that Mr. Robinson was to be allocated a plot in the subdivision.
3. In another Memo to the Permanent Secretary of the Ministry of Natural Resources sent earlier on the same day, 21 March 2006 and also copied to the Director of Planning and Chief Valuation Officer, Mr. Charles had informed the Permanent Secretary that Parcel 61112/176 would have been divided into four lots one of which was to go to Mr. Clyde Robinson. It was expressly stated that "The Open Market Value" of the parcel is currently US$750,000.00 but since it is proposed to mutate the parcel, the Open Market Value of the individual parcels must be determined by the Chief Valuation Officer. The Chief Valuation Officer, by a copy of the Memo was asked to determine the current market survey of lots 1-4 of Parcel 61112/176. The Respondent would have been therefore aware that in March 2006, the entire parcel was valued at $750,000.00 and that it was being mutated into four lots and that the lots would have been valued by the Chief Valuation Officer.
4. On 29 March 2006, a valuation was provided by Mr. Hoza MRICS the Chief Valuation Officer which indicated that value of lot 4, 1.4 acres which was to be transferred to Mr. Robinson was $725,000. This valuation was sent to Mr. Leroy Charles. However, on the following day, 30 March 2006, Mr. Hoza provided another valuation. In this valuation, Mr. Hoza pointed out that Mr. Charles had asked him not to use "the current figures" but rather he "should use the 2004 valuation figure for parcel 6112/176 into the formerly created lots". Mr. Hoza then stated the market value of the freehold interest in the parcels. The value of the lots allocated to Mr. Robinson was fixed at $280,000.00 for residential use. It does not appear from the Memos or e-mail that Mr. Robinson was aware that it was suggested that a 2004 valuation should be used rather than “the current market value.”
5. On 20 April 2006, the Director of Lands and Surveys informed the Permanent Secretary in the Ministry of Natural Resources that it was proposed that the Residential Conditional Purchase Lease should be considered in respect of Mr. Robinson in the following terms. The area was stated as 1.40 acres. The Open Market Value was stated as US$280,000.00 and the Freehold Purchase under the terms of the Crown Land Policy was $70,000.00 and Land Rent of $7,000.00.
6. By letter dated 21 April 2006 to Mr. Robinson, Ms. Campbell stated that "in accordance with the Authority granted to the Hon. Minister of Natural Resources by Executive Council, the Hon. Minister approved on 21st April 2006 the grant of a Residential Conditional Purchase Lease" of Lot 4 for the purpose of constructing a dwelling house in accordance of the terms of the Crown Land Policy. The letter indicated that the rent would be $7,000.00 per annum and the Freehold Purchase on completion of the development would be $70,000.00.
7. Less than 3 weeks later, Construction Advisory Services Ltd on his instruction and at his request provided Mr. Robinson a valuation of Lot 4. The property was examined on 5 May 2006, 2 weeks after Mr. Robinson had received the letter dated 21 April 2006 stating that the land which was to be leased to him had been valued for Freehold Purchase Price of $70,000.00. The valuation expressly stated that there was "evidence of increasing market activity in the residential property market during 2005 and 2006 throughout Providenciales. The rationale behind the valuation was set out:
"A number of large completed developments are currently listed on Long Bay Beach. None are directly comparable to the subject property and there is no recent evidence of an actual sale of a beach front house. However, our research reveals that there is currently strong interest in the various developments currently listed in the area, as summarized herein, and the various local realtors we have approached expressed strong confidence that sales will be achievable during 2006.
We have been unable to ascertain any details of a recent sale or listing of a directly comparable property. Therefore, we have considered current listings in the Long Bay area as follows:
• Wind Song: Situated on the adjacent plot, the property comprises approximately 7,000 square feet of accommodation on a 2.5 acre lot. The house is of modern construction providing six bedroom and eight bathrooms. Further features include a pool, a games room and spilt air-conditioning. Wind Song is listed at a price of US$3,500,000.
• Villa Escencia: Built in 1999, this property provides a main two bedroom apartment on the upper floor with large decks and extensive ocean views. The lower level comprises two, two bedroom apartments. The property is located on a 2.5 acre lot and the listing price is US$1,750,000.
• Ocean Front Villa: This newly built property is located on the northern section of Long Bay beach. Comprising 2,650 square feet on a 0.54 acre site, the property has been constructed to a very high standard with features including an infinity edge pool, mahogany floors, marble, granite and limestone finishes. The property is listed at a price of US$1,400,000.
The following plots of vacant land are currently listed on Long Bay beach:
• Two acres of vacant land registered as 61105/94 with approximately 150 linear feet of beach frontage is currently listed at US$995,000.
• Two acres of vacant land to the north of the subject parcel with approximately 155 linear feet of beach frontage is currently listed at US$1,220,000.
Therefore, in our opinion, the current market value of the subject property as described above would be in the region of US$1,500,000 (One million five hundred US Dollars), assuming free and clear title with no restrictive covenants. "
The valuation stated that "in our opinion the current market value of the subject property ... would be in the region of US$1,500,000". In the circumstances it was clear that Mr Robinson was aware that the current market value of the land on which he was granted a CPL had a market value in May 2006 of US $1,500,000.
8. In her judgment, the judge found the proper inference to be drawn from the conduct of Mr. Hanchell that it was he who requested that an out-of-date Valuation be used. The judge concluded that in the circumstances Mr. Hanchell would have been in breach of his fiduciary duty owed to the Government and people of the Turks and Caicos Islands. The judge had no difficulty in finding that the first two elements of the claim of knowing receipt by Mr Robinson had been made out on the basis that there was a breach of his fiduciary duty by the Minister Mr. Hanchell. The judge had previously accepted what was said by Sir Terrence Etherton in Richard Arthur v The Attorney General of the Turks and Caicos [2012] UKPC 30 at paras 31 and 32-:
"31. A defendant incurs an equitable liability for knowing receipt when he or she acts unconscionably by receiving and retaining trust property with the knowledge that it was transferred in breach of trust. Liability for knowing receipt can also be incurred when property is transferred in breach of a fiduciary duty other than a breach of trust. An obvious example would be the transfer of a company's property in breach of the directors' fiduciary duties, a director not being a trustee of the company's assets. That is also the basis of the claim in the present case since it is not alleged that the Property was held by or for the Crown on trust, but rather that the Minister acted in breach of fiduciary duty to the Crown in authorising the transfer to the appellant.
32. The essential requirements of knowing receipt were stated by Hoffman LJ in El Ajou v Dollar Land Holding plc 2 All ER 685,700, as follows:
"For the purpose the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipts by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty."
9. The third element which the judge was required to determine was whether there was knowledge on the part of the defendant that land which he received was traceable to the breach of the fiduciary duty which the Minister owed to the Government.
10. After reviewing the factual circumstances surrounding the grant of the land to Mr. Robinson, the judge determined at para 76 of her judgment:
"76. Mr. Robinson did not, in my judgment have such knowledge as would make it unconscionable for him to retain the land."
11. The judge went on to state:
"90. I am not persuaded that Mr. Robinson owed the Crown any relevant fiduciary duty. He was not concerned with valuations or allocations of land or the transfer of Freehold Titles under the Crown Land Policy. He dealt with issues of planning. The seniority of his post could not fix him with a greater fiduciary obligation than that which arose out of his contract of employment with the Crown. Simply put, Mr. Robinson as an employee was not a fiduciary in relation to Crown Land or any other assets of the Crown - including information - which did not form part of his duties.
91. The disposition of Crown Land not being one of his duties, if he benefits from a disposal of Crown Land in his favour he does not breach any fiduciary duty owed by virtue of his office. As an employee, I am satisfied and find that he was not required to pursue his employer's interest at the expense of his own and disclose that he had received a valuation for the Land which was greater than the stated open market value at which the Land was offered to him.
92. The claim of knowing receipt on the ground that Mr. Robinson breached a fiduciary obligation owed to the Crown by virtue of his office in accepting a transfer of the Freehold Title to the Land on the ground that he knew or ought to have known that the Land had been offered to him at an undervalue is not made out. The claim of knowing receipt on the ground that he failed to alert the Crown in breach of that duty to the possibility that the Land was being disposed of at an undervalue is also not made out."
12. It is from this finding that the appellant appeals.
13. Knowing receipt and the recipient state of knowledge are issues dealt with in the judgment of Nourse LJ in Bank of Credit and Commerce International (Overseas) Ltd and another v Akindele [2000] EWCA Civ 502 At para 68, Nourse LJ stated:
"68. In Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, which is now the leading authority on knowing assistance, Lord Nicholls of Birkenhead, in delivering the judgment of the Privy Council, said, at p 392G, that "knowingly" was better avoided as a defining ingredient of the liability, and that in that context the Baden categorisation was best forgotten. Although my own view is that the categorisation is often helpful in identifying states of knowledge which may or may not result in a finding of dishonestly for the purposes of knowing assistance, I have grave doubts about its utility in cases of knowing receipt."
The Lord Justice continued at para 69:
"69. All that is necessary is that the recipient's state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt.
70. ...I have come to the view that, just as there is now a single test of dishonestly for knowing assistance, so ought there be a single test of knowledge for knowing receipt. The recipient's state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt. A test in that form, though it cannot, any more than any other, avoid difficulties of application, ought to avoid those of definition and allocation to which the previous categorisations have led. Moreover, it should better enable the courts to give commonsense decisions in the commercial contest in which claims in knowing receipt are not frequently made..."
14. In Armstrong GmbH v Winnington Network Ltd [2012] 3 WLR 835 the court applied the test set out in Akindele when considering the state of knowledge of the part of the defendant which renders the receipt of trust property as unconscionable. The court expressly stated at para 132 of the judgment:
" It is not necessary to show that the defendant realised that the transaction was "obviously" or "probably" in breach of trust or fraudulent; the possibility of impropriety or the claimant's interest is sufficient."
15. Adopting this approach, the test may be stated in this way; was the defendant's state of knowledge such as to make it unconscionable for him to retain the benefit of the receipt. In applying this test, it is not necessary to show that the defendant knew that the transaction was obviously or possibly a breach of trust or fraudulent. The possibility of impropriety is sufficient.
16. In determining whether the defendant was aware that the possibility existed it is necessary to ascertain Mr Robinson’s state of mind at the time of the receipt.
17. At para 22 of the appellant's skeleton argument, counsel for the appellant advanced the reason why it would have been unconscionable for the respondent to retain the benefit of this receipt. I accept and adopt the reasoning as my own.
"22. If that approach had been adopted by the judge the only possible conclusion would have been that it was unconscionable for Mr. Robinson to retain the benefit. We advance the following reasoning-
(1) Mr. Robinson knew that the belonger discount purchase price was 25% of the Crown valuation. He therefore knew that the Crown valuation was $280,000.
(2) Mr. Robinson's private valuation valued the land at $1,500,000.
(3) The disparity between the Crown valuation and Mr. Robinson's private valuation is enormous. It plainly called for some explanation. It cannot be explained by a difference of professional opinion, and went far beyond what could be regarded as a good bargain. Mr. Robinson knew that something had gone wrong. As he stated in evidence, he was "pleasantly surprised".
(4) The relationship between Mr. Robinson and the Crown was not an arm's length caveat emptor relationship. Apart from the fact that he was receiving the belonger discount, Mr. Robinson was a highly placed Government official. As Director of Planning he had responsibilities for land use and development, and had been copied in on correspondence concerning this very transaction. He was therefore in a special position. Mr. Robinson should therefore have taken steps to satisfy himself of the true position: it was not open to him to secure so great a benefit by simple inactivity.
(5) The failure to take such steps makes it unconscionable for Mr. Robinson to retain the benefit. That is not a conclusion that requires a detailed, semantic analysis of Mr. Robinson's state of mind. It is one that is inescapable from the facts of this particular case."
18. In addition, I would state that the private valuation which he received less than 3 weeks after the CPL had been approved ought to have alerted or suggested to Mr. Robinson or have caused him to make further inquiry as not only was it greater than the $280,000.00 placed on the land by the employees of the government but it was 5 times greater. While he stated that he was pleasantly surprised, a valuation 5 times greater than that placed on it by the Government ought to have alerted him or caused him to be concerned that there was a possibility of impropriety in so far as the valuation was concerned. There was no evidence that before the land was actually conveyed to him he took any step to bring the valuation he obtained from Construction Advisory Services Ltd. to the attention of the appropriate officer of Government. He appeared to have turned a blind eye to the question of any possible impropriety.
19. As stated earlier, Mr. Robinson would have been aware from the Memo dated 21 March 2006, which was copied to him that the Chief Valuation Officer was being asked to provide the current market value. While, as stated earlier, he would not have known that the Minister had requested the official to provide, as the current market value, a valuation based on the 2004 valuation he would have been aware that the valuation to be used was the “ current market value.” Once armed with the private valuation from CAS provided less than 3 weeks after being informed that the land had been valued at $280,000.00. Rather than being “pleasantly surprised” Mr. Robinson ought to have been alerted that something was amiss. This, in my view, would give rise to the possible existence of impropriety. In his capacity of Director of Planning, it would not be unreasonable to assume that Mr. Robinson was fully aware of the Government's land policy in relation to Belongers.
20. For the reasons set up above, I would conclude that in the circumstances had the proper test been applied the Chief Justice should have concluded that it would be unconscionable for Mr Robinson to retain the receipt of the land.
21. In the circumstances the appeal is allowed and the matter returned to the Chief Justice to apply the correct test and to make the appropriate order. Costs of the appeal are to the Appellant to be taxed if not agreed.
___________________
Mottley JA
I agree.
____________________
Zacca, P
I agree.
______________________
Forte, JA
