Baker, Michael A (executor of the estate of Chantal Burnison, deceased) v BCS Business Consulting Services Pte Ltd and others

• Court: Court of Appeal (Singapore)
• Judge: Steven Chong JCA
• Judgment Date: 21 September 2022
• Neutral Citation: [2022] SGCA(I) 8
• Citation: [2022] SGCA(I) 8
• Published date: 24 September 2022
• Hearing Date: 26 July 2022
• Docket Number: Civil Appeal No 3 of 2022
• Plaintiff Counsel: Woo Shu Yan, Tay Hong Zhi Gerald and Lim Qiu Yi Regina (Drew & Napier LLC)
• Defendant Counsel: Thio Shen Yi SC, Ee Eng Yew Justin, Kevin Elbert and Goh Enchi Jeanne (TSMP Law Corporation)
• Subject Matter: Equity,Remedies,Account

Steven Chong JCA (delivering the judgment of the court): Introduction

It is an essential duty of any trustee to maintain and render a proper and accurate account of trust assets. That duty is part of the irreducible core of obligations owed by trustees to beneficiaries. Any unexplained failure or omission of a trustee to properly account to the beneficiaries may result in a court resolving doubts against such a trustee. That is entirely a consequence of the court placing the burden of proof on trustees to discharge their duties to the beneficiaries in providing complete, proper and accurate account of the trust assets.

The present case turns on role of the burden of proof in deciding whether certain expenses that were reflected in the trustees’ account of trust assets had been properly incurred. The beneficiaries had sought to falsify numerous expenses which were broadly termed as “Other outgoings including miscellaneous costs and expenses” (“Other Outgoings”) and amounted to nearly US$3.66m. Supporting documents were not furnished for these expenses and only bare assertions were provided by the trustees in respect of them. The Singapore International Commercial Court (“SICC”) found substantially in favour of the beneficiaries, but declined to falsify two deductions of US$340,000 and US$50,000 (the “Deductions”) on the basis that the explanations for them were reasonable. The present appeal only pertains to the Deductions.

We heard the present appeal together with CA/CA 70/2021 (“CA 70”). Our decision for CA 70 may be found in BCS Business Consulting Services Pte Ltd and others v Baker, Michael A (executor of the estate of Chantal Burnison, deceased) [2022] SGCA(I) 7. That judgment being released simultaneously with this, we adopt the same terms of reference and abbreviations employed therein for this judgment unless otherwise specified.

Background facts

The appellant is Mr Michael A Baker, the executor of the estate of Ms Chantal Burnison (the “Estate” and “Chantal”). The respondents are Mr Marcus Weber (“Weber”) and two companies he controls, namely BCS Business Consulting Services Pte Ltd (“BCS”) and Renslade Holdings Limited (“Renslade (HK)”).

The present appeal is against the decision of the SICC in Baker, Michael A (executor of the estate of Chantal Burnison, deceased) v BCS Business Consulting Services Pte Ltd and others [2022] 3 SLR 252 (the “Judgment”) to decline to allow the beneficiaries to falsify two expenses in the respondents’ account of the trust assets. This followed the decision of the SICC in SIC/S 3/2018 (“Suit 3”) in Baker, Michael A (executor of the estate of Chantal Burnison, deceased) v BCS Business Consulting Services Pte Ltd and others [2020] 4 SLR 85 (the “Suit 3 Judgment”), in which the SICC found that there was a trust constituted by an oral agreement between Chantal and Weber. The SICC found that BCS and/or Renslade (HK) held the rights to the inventions and patents of the compound “Ethocyn” and the income or proceeds generated therefrom (collectively, the “Trust Assets”), and/or the moneys paid by Nu Skin International Inc to BCS (the “Trust Moneys”) on trust for the Estate. Accordingly, the SICC ordered that the respondents provide a detailed account of all transactions that had taken place in respect of the Trust Assets and/or Trust Moneys, and granted an order that the respondents pay to the appellant all the sums due to it on the taking of the account. This decision was subsequently upheld on appeal in CA/CA 76/2020.

Following the Suit 3 Judgment, on 13 October 2020, the respondents filed an affidavit, Weber’s 19th affidavit, to account for the Trust Assets and Trust Moneys (the “Partial Account”). Following the exchange of correspondence between the parties, the respondents filed a further affidavit on 19 April 2021, Weber’s 20th affidavit, providing a combined account of the Trust Assets and Trust Moneys for the period from 2000 to 2021 (the “Combined Account”). Subsequently, after the respondents disagreed with the sum demanded of it in the aggregate sums of US$14,377,533.52 and CHF1,721,816.99 (comprising the sums due on the taking of account, namely US$10,361,395.25 and CHF1,662,894.67 plus accrued interest) and consequently did not pay over the amount, the appellant filed SUM 25 on 14 May 2021 seeking, inter alia¸ orders that the respondents pay over the sums of US$10,361,395.25 and CHF1,662,894.67 plus interest.

The Deductions that are the focus of CA 3 are part of a single entry (S/N 430) in the Combined Account that was described as “Other Outgoings”. This was incurred over various dates and amounted to a very substantial sum of US$3,659,469.30. Other alleged expenses which came under this entry included consulting services provided by Weber to develop and expand the Ethocyn business as well as general and administration expenses incurred by Renslade Singapore Pte Ltd (“Renslade (S)”) for the Ethocyn business from 2000 to 2007 in the sum of about US$1.03m.

As regards the US$340,000 deduction, Weber had deposed that:

In our[sic] around 2010, Ms Burnison informed me that a former friend of Heika, a French attorney, was blackmailing Heika. She did not give me any details, but informed me that this was a very serious situation. To resolve this, Ms Burnison asked me to pay the French attorney the amount of USD 340,000. I paid it as requested.

As for the US$50,000 deduction, he had deposed that:

For the establishment of the Amarillis Foundation I had expenditures of about USD 50,000, including but not limited to the following: (a) legal fees for the preparation of the deed of incorporation and the Regulations of the Amarillis Foundation (Panama) by Mr Wehinger [a Swiss attorney]; (b) expenses for the incorporation of the Amarillis Foundation in Panama; and (c) follow-up costs for the administration of the foundation (e.g. levy for the maintenance of the foundation).

The Amarillis Foundation (the “Foundation”) is mentioned earlier in that affidavit as being first discussed between Chantal, Mr Wehinger and Weber in Zurich in 2014. Based on this, Weber deposed that he: (a) developed a concept for the transfer of Ethocyn Rights and revenues to a foundation under Panamanian law; (b) discussed the concept of the foundation at several meetings with Ms Burnison and Heika as well as with Mr Wehinger who later prepared the Regulations of the Foundation; (c) assigned lawyers to set up the foundation; and (d) made arrangements to transfer assets into the foundation.

Details of the Foundation were furthermore discussed at a meeting between the appellant, Chantal, Weber and Mr Wehinger in Los Angeles in May 2016, where according to Weber, Chantal agreed to the by-laws of the Foundation. In the Suit 3 Judgment, the SICC noted Heika’s evidence that at a meeting with Weber and Mr Wehinger in Zurich in July 2016, they had spoken to her about the Foundation, which was explained as a vehicle to return the alleged Trust Assets/Moneys to Chantal (see the Suit 3 Judgment at [171]). The Regulations of the Foundation were shown to Heika at the meeting and were included in the Agreed Bundle.

The respondents submitted that the entry relating to “Other Outgoings” reflected various expenses that were incurred by them for “the extensive work done for the Ethocyn business and/or with [Chantal’s] approval over the course of about 20 years”. Further, although they had not been able to locate supporting documents for these expenses, they had provided evidence on the work done and expenses incurred which fell under this head of expense.

The appellant deposed that the alleged US$340,000 deduction was “preposterous” since:

… To the best of my knowledge, there was no payment made to a French attorney regarding any issue of blackmail. There is not a single piece of documentary evidence to support Weber’s allegation. In fact, there is no supporting document, such as invoices or emails from Chantal, Birka, Heika or me to show that the aforementioned payments were requested/approved by us or to verify the amounts paid.

[emphasis in original]

The appellant also submitted that, in respect of the US$50,000 deduction, there was also no evidence of such a payment.

The appellant argued that the US$3,659,469.30 claimed under this entry was made without the production of any documents to show what, when and to whom the amounts were paid. It was submitted that given the precision of the sum (down to the cent), the respondents ought to have documents to at least verify the amount incurred. Yet there were no supporting documents or even a specific breakdown for the amount. The appellant observed as well that although the total amount was calculated as US$3,659,469.30 in the Combined Account, this was later increased in Weber’s 21st affidavit to US$3,683,376.22, and no explanation was given for the increase. It was claimed that in all likelihood, the respondents had arrived at the sum via “backwards engineering”: they had probably deducted the other expenses incurred from the total income and derived this balance amount which they labelled as “Other Outgoings”. This would ensure that the respondents would not have to pay any further amount to the appellant.

Decision below

The SICC observed that when a beneficiary falsifies an entry in the account, the beneficiary is challenging or disputing the alleged use of the trust funds. The burden then lies on the trustee to prove that the disbursement was authorised (see the Judgment at [21], citing Cheong Soh Chin and others v Eng Chiet Shoong and others [2019] 4 SLR 714 (“Cheong Soh Chin”) at [78] and Dextra Partners Pte Ltd and another v Lavrentiadis, Lavrentios and another appeal and another matter [2021] SGCA 24 (“Lavrentiadis (CA)”) at [46]). However, a trustee is also entitled to be indemnified out of trust property for costs and expenses properly incurred in the course of managing...