(1) Pandelis Christos Lemos (2) Marika Christos Lemos (3) Pandelis Georgios Lemos (A Minor) (by Georgios Pandelis Lemos his father and next friend) (4) Aspasia Georgios Lemos (A Minor) (by Georgios Pandelis Lemos her father and next friend) (5) Aikaterini Georgios Lemos (A Minor) (by Georgios Pandelis Lemos her father and next friend) Plaintiffs v (1) Coutts (Cayman) Ltd (2) Coutts (Jersey) Ltd (3) Seaton Trustees Inc. (a company incorporated in the Turks & Caicos Islands) (4) Parthenon Trustees Inc. (a company incorporated in the Turks & Caicos Islands) Defendants

JurisdictionCayman Islands
JudgeChief Justice Anthony Smellie
Judgment Date04 January 2002
Judgment citation (vLex)[2002] CIGC J0104-1
Docket NumberCAUSE NO. 458 OF 1998
CourtGrand Court (Cayman Islands)
Date04 January 2002

In The Matter of trusts of a Settlement made 5 January 1984 made between Captain Pandelis Christos Lemos as Settlor and Roywest Trust Corporation (Cayman) Limited and others as Trustees (known as the Trofos Foundation)

Between:
(1) Pandelis Christos Lemos
(2) Marika Christos Lemos
(3) Pandelis Georgios Lemos (a minor) (by Georgios Pandelis Lemos his father and next friend)
(4) Aspasia Georgios Lemos (a minor) (by Georgios Pandelis Lemos her father and next friend)
(5) Aikaterini Georgios Lemos (a minor) (by Georgios Pandelis Lemos her father and next friend)
Plaintiffs
and
(1) Coutts (Cayman) Limited
(2) Coutts (Jersey) Limited
(3) Seaton Trustees Inc. (a company incorporated in the Turks & Caicos Islands)
(4) Parthenon Trustees Inc. (a company incorporated in the Turks & Caicos Islands)
Defendants
[2002] CIGC J0104-1
Before:

Chief Justice Anthony Smellie

CAUSE NO. 458 OF 1998
IN THE CHAMBERS IN THE GRAND COURT OF THE CAYMAN ISLANDS
RULING
1

The plaintiffs sue the defendants who are their former trustees for damages for breach of trust. This is an application by the defendants for directions that certain issues be tried as preliminary issues. If those issues are resolved in favour of the defendants, a long and expensive trial could be avoided.

2

The matter has a complex history.

3

The plaintiffs and other members of the Lemos family were beneficiaries of a trust settlement known as the Trofos Foundation which was established by a Deed of Settlement dated 5th January 1984. It was made between Captain Pandelis Christos Lemos (‘Captain Lemos’) as settlor and four trustees who are the defendants.

4

Captain Lemos who was himself a beneficiary of the Trofos Foundation, died in 1989. The plaintiffs are his grandchildren. They are the children of sons of Captain Lemos who challenged the validity of the Trofos Foundation after his death by the bringing of an action in Greece claiming that the assets of the Trofos Foundation belonged to Captain Lemos' estate. One of the sons and his two children, also brought an action in this Court by which they sought the removal of the trustees and other remedies citing, among other complaints, allegations of breach of trust.

5

The result of those challenges was a compromise which was approved by this Court in March 1994 in which the plaintiffs acknowledged the validity of the Trofos Foundation and the settlement of its assets upon it.

6

Among other things, the compromise provided for payments of capital out to the sons in settlement of any interests they might have had under the Trofos Foundation. They and their spouses were removed as beneficiaries under the trusts of the Trofos Foundation.The action against the Trustees and the Foundation was dismissed. There were other important aspects of the compromise which are relevant here.

7

The beneficiaries who had raised them, released the allegations of breach of trust by way of executed deeds of release and an application was made and granted under section 64 of the Trust Law for a release which would be binding upon the minors, unborn and unascertained beneficiaries.

8

Finally, certain amendments were agreed to the Deed of Settlement and along with a Statement of Investment Policy and Guidelines which was presented by the Trustees, a Revised Settlement was approved by this Court.

9

This was done as part and parcel of the approval of the compromise. In the Revised Settlement certain provisions were introduced which, on a different basis than earlier provisions in the original settlement, provided the Trustees with exculpation or protection from liability arising in the course of their trusteeship.

10

These provisions will be considered more fully below.

11

Reference must be made here to the Trustees' Statement of Investment Policy and Guidelines as some aspects of it arise for consideration in the present context. In broad terms, it stated that the Trustees would continue to manage the assets of the Trust Fund as divided between a General Capital Fund and a Shipping Capital Fund. The General Capital Fund would comprise all the issued shares of named investment companies which in turn would hold that Fund's cash and equity investments.

12

The Shipping Capital Fund would comprise all the issued share capital of the ship owning companies. At no time should the value of the Shipping Capital Fund exceed 50% of the overall value of the assets of the Foundation.

13

Importantly for present purposes as it relates to the appointment of shipping investment advisors, section 2.11 of the Statement of Investment Policy and Guidelines (‘the S.I.P.’) stated:

‘2.11 The Trustees shall apply the following criteria where appointing Investment Advisors for the purposes of Clause 16 (iii) (e) of the [(Revised)] Deed of Settlement:-

  • (a) the advisor must have demonstrated experience and success in its field of expertise;

  • (b) the appointment will not be made on terms that the advisor is relieved from liability for negligent or wrongful acts;

  • (c) the advisor must be an individual or company of substance;

  • (d) the advisor will not normally be appointed for a term of more than two years at a time;

  • (e) the advisor must not be precluded from acting by any conflict of interest’.

14

Also of importance for present purposes section 3.1 of the S.I.P. stated:

‘The Trustees shall operate a fleet of bulk of carriers so long as they consider that such operations are capable of generating an adequate long term return on capital employed. The Trustees are not to engage in the trade of buying and selling vessels for profit’.

15

That sets the context for Article 16 of the Revised Deed of Settlement which in relevant part provides:

  • (i) Subject to the proviso following Clause (vi) hereof, every discretion or power hereby or by law conferred on the Trustees shall be an absolute and uncontrolled discretion or power and no trustee shall be held liable for any loss or damage accruing as a result of the Trustees concurring or refusing or failing to concur in an exercise of any such discretion or power.

  • (ii) No trustee hereof shall be liable for any error of judgment or mistake of law or other mistake or for anything save wilful misconduct or wilful breach of the Trusts hereof by such trustee and except in the case of such wilful misconduct or wilful breach the Trustees shall be indemnified and held harmless out of the Trust Fund against any claims, losses, death duties, taxes and impositions arising in connection with the Trust Fund or any part thereof.

  • (iii) (a) The Trustee may from time to time and at any time on such terms as it may think fit whether for a fixed period of time or subject to a fixed period of notice or otherwise and either in relation to the whole of the Trust Fund or to such part or parts thereof as may for the time being be invested in any particular country or group of countries act as Investment Advisor or employ any person, firm or company including without prejudice to the generality of the foregoing any company being the parent company or otherwise associated with the Trustee as an Investment Advisor.

    (c) No trustee shall incur any liability or be in any way responsible for any loss which may be incurred as a result of anything done or not done as a result of advice or recommendation given or purported to have been given by such Investment Advisor (whether in writing or by cablegram or orally or by telephone) or for any non-receipt of such advice or recommendation from such Investment Advisor.

  • (iv) Notwithstanding any other provision of the Deed the Trustee shall exercise the powers of investment and related powers conferred upon the Trustee by this Deed in accordance with the Investment policy from time to time approved by the Court pursuant to an application under sections 45 or 60 of the Trusts Law (Revised) of which reasonable notice has been given to all the Beneficiaries for the time being living and the Trustees shall not be entitled to the protection afforded by subclauses (i), (ii), (iii) and (v) of Clause 16 of this Deed unless the Trustees shall have complied with the said investment policy or any modification thereof approved as aforesaid.

16

(It is common ground that the reference here to ‘the said investment policy’ is a reference to the S.I.P.).

(v) Provided that the Trustee shall have complied with its stated investment policy and guidelines in relation to the Shipping Capital Fund, the Trustee shall not be liable or accountable in any manner or circumstances for any loss caused by failure to diversify the investments compromised in theShipping Capital Fund and for greater clarity, it is hereby declared that it is specifically intended (and indeed the Trustee is so directed by the Settlor) that the Scheduled Company [(the Noel Corporation — the ultimate ship holding company of the Shipping Capital Fund)] will indirectly through its subsidiary companies acquire own and manage ships and other cargo vessels and generally engage in the business of shipping with all the risks that the shipping business entails this settlement having been constituted inter alia for this express purpose. The Trustee may continue to hold the shares in the Scheduled Company for as long as the Trustee may in its sole discretion think fit despite any capital losses arising from time to time and the Trustee is specifically hereby indemnified and held harmless out of the Trust Fund in respect of any losses of any kind whatsoever arising in respect of the said Scheduled Company. This Clause shall be read and construed as affording full and complete protection to the Trustee in accordance with the wishes of the Settlor’.

17

Finally, as to the relevant provisions of the Deed of Settlement, Clause 7 vested the Trustees with what on the face of them appear to be wide discretionary powers of investment but which were subject to the...

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