A Foundation which had hoped to build an opera house in Lucerne Switzerland has been given the green light to continue with their feasibility investigations by Chief Justice Ian Kawaley, who was presiding over the case.

The Supreme Court case pitted a Swiss arts foundation against Butterfield Trust Bermuda Limited (BTB). Trustees for pharmaceutical billionaire and philanthropist Christof Engelhorn’s Bermuda-based Art 1 Trust, which was providing the support for a proposed state-of-the-art musical theatre, Salle Modulable, pulled the plug on the project.

Salle Modulable Foundation went to court seeking the reinstitution of the $100 million in funding they say was committed for their project.

Cox Hallett Wilkinson, for the Foundation, released the following statement:

“The judge of the competent court in Bermuda has ruled that the withdrawal of funding for the Salle Modulable in Lucerne took place unlawfully and that Butterfield Trust (Bermuda) Limited must fulfil its obligations.

“The Salle Modulable Foundation has won its case before the Supreme Court of Bermuda: the withdrawal of funding for the Salle Modulable by Butterfield Trust (Bermuda) Ltd (Butterfield) in October 2010 has been ruled unlawful.

“The presiding judge has found that a contract of donation governed by Swiss law was entered into in the summer of 2007 and that Butterfield must meet its obligations arising from it.

“If the Salle Modulable Foundation submits a feasibility study, adapted to the new circumstances, for a venue with flexible arrangements for experimental music theatre in the City of Lucerne, Butterfield is bound to honour the promise of finance it originally made in the amount of up to CHF 120 million.

“The feasibility study will be updated and adapted as part of the New Theatre Infrastructure Lucerne (NTI) Project.

“Butterfield’s counter-claim was rejected in its entirety. The judge has not yet made any final pronouncement on other questions.

This will entail a further hearing. The judgment may yet be referred to the Bermuda Appeal Court.

Hubert Achermann, Chairman of the Salle Modulable Foundation, says: “Naturally we are very pleased with the outcome and believe that justice has been done. Our expense and effort have paid off, and I thank everyone who has supported us in these lengthy proceedings.

“Still, we remain far from our objective. First, we expect the opposing party to accept this judgment and desist from further time-consuming and costly legal proceedings.

“Then we have to produce an updated and authoritative feasibility study, in cooperation with the Canton and City.

“For this purpose, we can build on the work done so far. We have a fine opportunity to create something unique for Lucerne, as the City of Culture and Festivals, and for its institutions, not least in memory of the great patron, Christof Engelhorn.”

Butterfield Bank also issued a statement, claiming: “The Chief Justice of Bermuda today handed down a 121 page (356 paragraph) judgment in the action brought by two Swiss charitable foundations against Butterfield Trust (Bermuda) Limited (“BTBL”) as Trustee of the Art I Trust.

“The Plaintiffs claimed CHF 120 million (approximately US$137 million) against BTBL which it was alleged was due under a binding promise to fund the construction of an opera house, the Salle Modulable in Lucerne, Switzerland.

The Plaintiffs’ primary claim, made under Swiss law, for payment of CHF 120 million was dismissed by the Court.

All of the Plaintiffs’ alternative claims under Bermuda law were also dismissed.

The Court found that as a matter of Bermuda law BTBL was entitled to terminate funding for the project at any time.

The conduct of BTBL, as trustees of a Bermuda law trust, was therefore completely vindicated from the point of view of Bermuda law.

However, the Court did find that the alleged contractual obligation to pay CHF 120 million was governed by Swiss law.

Under Swiss law, in contrast to Bermuda law, there was a binding obligation to donate up to CHF 120 million to construct the Salle Modulable, provided only that the Plaintiffs were able to demonstrate within a reasonable time that the project was feasible.”

“Feasibility” meant that (a) the preliminary and construction costs should be such as to be achievable with the benefit of a donation of BTBL of up to CHF 120 million (including preliminary costs), (b) that a sustainable operating model was established with operating costs funded from other sources, and (c) that all necessary political approvals in Lucerne were obtained.

The Court found then that, under Swiss law, BTBL had acted prematurely in withdrawing its support for the project.

However, the Court also found that the BTBL had not acted in bad faith in so doing, and that the Plaintiffs had suffered no loss, and were therefore not entitled to any damages.

The remedy to which the Court said the Plaintiffs were entitled was to be allowed a further opportunity to establish, within a reasonable time, that the Salle Modulable project was indeed viable.

If that was done within 12 months, then BTBL would be bound, under Swiss law, to pay for the construction of the Salle Modulable up to the maximum amount of the donation.

The Plaintiffs have failed, on two previous occasions, to prove the feasibility of the project. The Court has made no order in relation to costs, and invited counsel to make submissions regarding who should pay the costs of the action.

A further hearing will take place to decide the issue of costs and finalise the terms of the Court’s order.

Jan Woloniecki, one of the barristers representing BTBL in this matter, said: “The effect of the decision is that, regrettably, there is as yet no complete finality in the dispute. The Plaintiffs will not receive the CHF 120 million lottery win which they were claiming at trial.

“However, the Salle Modulable project, which was thought for all practical purposes to be dead, is now on a judicial life support machine. BTBL is presently considering its options, including a possible appeal on the grounds that the Court did not have the power to give the Plaintiffs any further time for the production of a new feasibility study, and anyway should not have applied Swiss law.

“Had the Court concluded that Bermuda law was the law applicable to the Plaintiffs’ claims in the case, then the case against BTBL would have been dismissed in its entirety.”