JERSEY 2025-  the Royal Court dismisses Dishonest Assistance Allegations in Multi-Million Euro Dispute

Compliance Briefing: Halabi v Farrow and Ors [2025] JRC 326

1. Executive Summary

• This briefing analyses the Royal Court of Jersey's judgment in Halabi v Farrow and Ors [2025] JRC 326, where Commissioner Matthew John Thompson dismissed an appeal by the Plaintiff (Jacob Halabi) against Master Cadin's earlier decision to strike out claims for breach of fiduciary duty and dishonest assistance.
• The case involves allegations related to the 2019 sale of a French property (the "Chateau") held through a Jersey private trust company (Sijar Trust Company Limited).
• The Plaintiff, as assignee of Sijar's rights, claimed the sale was mishandled at an undervalue, with

• Directors breaching duties and
• Suntera Trustees (Jersey) Limited (formerly Helm Trust Company) is providing dishonest assistance.

• The appeal was dismissed on procedural and substantive grounds,

• Highlighting deficiencies in pleading dishonesty,
• The application of the "Multinational principle" (shareholder consent absolving directors of liability if acting in good faith), and
• The lack of a viable cause of action.

KEY LESSONS

• Key lessons for trust and fiduciary service providers include

• The need for robust documentation,
• Clear evidence of good faith decision-making, and
• Adherence to pleading standards when defending claims.

• This case underscores the Jersey courts' strict approach to striking out inadequately pleaded fraud-like allegations.

2. Background and Key Facts

• Parties Involved:

• Plaintiff/Appellant: Jacob Halabi, assignee of Sijar Trust Company Limited's ("Sijar") rights to pursue claims against its former directors and Helm.
• Defendants:

• Suntera Trustees (Jersey) Limited (Seventh Defendant, formerly Helm Trust Company and SMP Helm Trust Company Limited). Helm appointed the directors.
• DIRECTORS -  Six individuals (Claire Louise Farrow, Claire Louise Machin, Angela May Morris, Hugh Alan Le Vavasseur Dit Durell (deceased, estate not served), Lewis James Lees Buckley, Kelly Rondda-Watson) who served as directors of Sijar at various times, and

• Core Dispute:

• Sijar, a private trust company, indirectly owned the Chateau through a subsidiary (EHL). The property was sold in October 2019 to a buyer (Urgo/Le Lous) for an alleged undervaluation.
• KPMG facilitated the sale as receiver, appointed with a contingent fee structure (small upfront fee plus 0.5% of sale proceeds), which the Plaintiff claimed incentivised a rushed sale without exploring alternatives.
• Allegations included: mishandling the sale, disregarding viable options, exaggerating foreclosure threats, tricking a signatory (Mr Bees) into executing the agreement, and dissolving Sijar hastily post-sale.
• The Plaintiff claimed losses equivalent to the difference between the sale price and a "reasonable achievable price," or loss of chance for higher proceeds.
• Helm was accused of accessory liability for dishonest assistance in the directors' breaches, primarily through appointing the directors.

• Procedural History:

• Proceedings initiated in May 2023 via Order of Justice.
• Defendants filed a detailed Answer in July 2023, raising prescription (time-bar) defences.
• Plaintiff filed a Reply in August 2023, introducing unpleaded allegations of "deliberate or reckless and/or dishonest breach" (later retreated from).
• Master Cadin issued a Request for Information (RFI) Judgment in 2023 ([2023] JRC 251), ordering further particulars, especially on dishonesty.
• In June 2025 ([2025] JRC 169), Master Cadin struck out the claims as disclosing no reasonable cause of action, being scandalous/frivolous/vexatious/abusive, or warranting reverse summary judgment.
• Appeal heard by Commissioner Thompson sitting alone (procedural/legal issues only, no Jurats required).

3. Legal Issues and Court's Analysis

The judgment focused on procedural deficiencies in the pleadings and on the substantive merits under Jersey law (influenced by English principles).

• Pleading Standards (Especially Dishonesty):

• Citing Patel v JTC Company [2023] JRC 152 and Armitage v Nurse [1998] Ch 241, the Court emphasised that allegations of dishonesty (or equivalents like lack of good faith) must be expressly pleaded with full particulars. Facts consistent with innocence or negligence cannot imply fraud.
• The Plaintiff's pleadings were criticised as "shifting sands": inconsistent across seven documents (Order of Justice, Reply, RFI responses, skeletons), opaque, repetitive, and equivocal. For example:

• Collateral motives/conflicts: Pleaded vaguely as "strongly suggestive" but not particularised; responses to RFIs merely recited evidence without alleging specific dishonesty.
• False justification for KPMG appointment: Limited to Mr Durell's email statements (e.g., "litany of earlier attempts to sell"), but not sufficiently tied to dishonesty across all Defendants.
• Exaggeration of foreclosure threats: Insufficiently particularised.
• Tricking Mr Bees: Not as advanced as dishonesty.

• Specific Defendants: Claims against the Fourth Defendant (deceased) lapsed due to non-service. The Sixth Defendant was not a director until 2020; the de facto director allegation was unparticularized.

• Substantive Claims:

• Breach of Fiduciary Duty: Directors owed duties to promote Sijar's success, act with skill/judgment, and avoid conflicts. However, the sale was approved by Sijar's shareholder, invoking the "Multinational principle" (Multinational Gas & Petrochemical Co v Multinational Gas & Petrochemical Services Ltd [1983] Ch 258, applied in Jersey via Federal Republic of Brazil v Durant [2012] (2) JLR 356). This principle holds that directors are not liable for acts ratified by unanimous shareholders if done in good faith. Absent properly pleaded dishonesty, no viable breach claim.
• Dishonest Assistance: Required proof of underlying breach plus Helm's knowing assistance. Since no primary breach was viable, this failed. Helm was not a Sijar director, but was accused via director appointments; pleadings lacked specifics regarding dishonesty.
• Sijar Dissolution: Alleged as "extreme haste" but not linked to actionable loss or dishonesty.
• Prescription: Raised but not decisive, as claims were struck out on other grounds.

• Strike-Out Grounds:

• No reasonable cause of action: Pleadings failed to disclose viable claims.
• Scandalous/Frivolous/Vexatious/Abuse: Opaque wording obscured issues; equivocal dishonesty allegations breached pleading rules.
• Reverse Summary Judgment: Defendants are entitled to judgment as the claims had no prospect of success.

The Commissioner upheld Master Cadin's thorough 96-paragraph analysis, finding no error in applying the principles or in evaluating the pleadings.

4. Court's Decision

• Appeal dismissed in full.
• Plaintiff's Order of Justice and Reply struck out.
• Reverse summary judgment granted to Defendants (First to Third, Fifth to Seventh).
• No costs or further orders detailed in the judgment excerpt, but typical in such cases.

5. Compliance Implications for Trust and Fiduciary Service Providers

This case illustrates risks in trust administration, particularly in asset sales and director appointments. Jersey's trust industry (governed by Trusts (Jersey) Law 1984) emphasises fiduciary integrity, and courts will not tolerate poorly pleaded attacks but will protect providers acting in good faith.

• Risks Highlighted:

• Inadequate Documentation: Vague or rushed decisions (e.g., receiver appointments, fee structures) can invite scrutiny. The contingent KPMG fee was challenged as incentivising undervaluation, even if it was not proven to be dishonest.
• Pleading Deficiencies in Defence: While the Plaintiff failed here, providers must ensure defences highlight pleading gaps early (e.g., via RFIs, strike-out applications).
• Good Faith and Shareholder Consent: Reliance on the Multinational principle requires clear records of informed, unanimous consent and absence of conflicts.
• Dishonesty Allegations: Courts demand high standards; equivocal claims are struck out, but genuine ones could proceed to trial if particularised.
• Director Appointments: Appointers (like Helm) face accessory liability risks; due diligence on appointees and ongoing oversight are crucial.
• Asset Sales in Distress: Foreclosure threats and undervaluation claims underscore the need for independent valuations, exploration of alternatives, and beneficiary consultation (even if not direct in PTC structures).
• Dissolution Processes: Hasty wind-ups post-transaction can suggest impropriety; ensure compliance with Jersey Companies Law.

• Broader Industry Context:

• Aligns with Jersey's reputation for robust trust regulation (e.g., JFSC oversight). Similar cases (e.g., Patel) reinforce that fraud-like claims must be "properly pleaded" to survive a motion to strike.
• Potential for prescription defences in older transactions (here, not pivotal but relevant for time-bars under Article 57 of Trusts Law).

6. Recommendations

• Internal Policies:

• Mandate independent valuations and multiple bidder processes for asset sales.
• Document all decisions with minutes showing good faith, conflict checks, and rationale.
• Train staff on fiduciary duties under the Trusts (Jersey) Law 1984 and the Companies (Jersey) Law 1991.

• Risk Management:

• Conduct regular audits of PTC director appointments and performance.
• Use RFIs aggressively in litigation to force particulars on dishonesty claims.
• Insure against fiduciary claims; review policies post-this case.

• Training and Monitoring:

• Deliver workshops on pleading standards and the Multinational principle.
• Monitor JFSC guidance for updates on dishonest assistance.

• Next Steps: Review any similar transactions in your portfolio for vulnerabilities. If involved in comparable structures, consult legal counsel for a mock audit.

This briefing is based on the judgment facts and does not constitute legal advice. For tailored guidance, please engage Jersey-qualified advocates.

SOURCE