CI Trustees Ltd Plaintiff v 1. RDK 2. GMB Defendants
| Jurisdiction | Cayman Islands |
| Judge | The Hon. Justice Nigel Clifford |
| Judgment Date | 18 October 2016 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | Cause No FSD 199 of 2015 (NRLC) |
| Date | 18 October 2016 |
In the Matter of a Trust Known as the Ophelia Trust Made by Delaration of Trust Between the Settlor and the First Union Bank and Trust Company (Cayman) Ltd on 6 May 1996
And in the Matter of the Trusts Law (2011 Revision)
And in the Matter of GCR Order 85 Rule 2 (2)(a) or (b)
The Hon. Justice Nigel Clifford Q.C., IN CHAMBERS
Mr. John Machell QC (video link), Ms. Jessica Williams, Mr. Henry ManderandMs. Aleisha Brown(Harneys) for the Plaintiff
Mr. Hector Robinson and Mr. Christopher Levers (Mourant Ozannes) for the Second Defendant
This matter comes before the Court for a preliminary hearing to determine two short points of construction concerning a trust known as the Ophelia Trust (‘the Trust’).
The Court has previously held that these points of construction should be determined as preliminary issues. 1
The Trust, which is governed by a trust deed dated 6 May 1996 (‘the Trust Deed’), is the subject of proceedings begun by Originating Summons dated 9 December 2015. The Plaintiff is the current trustee of the Trust (‘the Trustee’). The settlor of the Trust (‘the Settlor’) died on 31 August 2015. The Trust Deed gave to the Settlor wide powers during her lifetime. 2
By article 1.2.1 of the Trust Deed it was provided that, upon the death of the Settlor, the Trustee shall hold the Trust fund ‘ upon the terms set forth in any Distribution Schedule to this Trust Deed which shall then be in effect.’ The article then went on to make provision in the event that there was no Distribution Schedule.
The Trust Deed had attached to it a Distribution Schedule headed ‘Distribution Schedule G’ (‘the original Distribution Schedule’) providing for the trust fund to be distributed to the Settlor's nephew and niece. This appears to be in a standard form with spaces for insertion of the date of the Trust Deed, the name of the Settlor, and the name and address, relationship and percentage allocation of each beneficiary. The insertions were in manuscript. This original Distribution Schedule was signed by the Settlor and on behalf of the then trustee to acknowledge receipt and acceptance.
There is provision in article 1.1.5 of the Trust Deed that:
‘The Settlor reserves the power to amend this Trust Deed by writing delivered to the Trustee, but subject to acceptance by the Trustee. Further, subject to acceptance by the Trustee, the execution and delivery to the Trustee of a Distribution Schedule shall constitute an amendment to this Trust Deed by (a) incorporating the provisions of such Distribution Schedule in this Trust Deed, and (b) revoking any prior Distribution Schedule executed by the Settlor, but without prejudice to the prior acts of the Trustee’
On 22 October 1996, the Settlor signed an ‘Amended Distribution Schedule G’ which incorrectly stated the date of the Trust Deed as May 21, 1996. This provided for the replacement of the remaindermen with the First Defendant (‘RDK’). The relationship inserted is ‘Friend’ and the percentage distribution inserted is ‘100%’. The insertions are type-written, save for the date and signature of the Settlor. The Amended Distribution Schedule was signed by the then trustee to acknowledge receipt and acceptance.
For reasons that are unclear, a further document headed ‘ Distribution Schedule G’ with the word ‘Amended’ inserted in manuscript, and additional insertions in manuscript naming RDK as to 100% of the Trust Fund, was executed on 2 October 2000. This too was signed as acknowledged and accepted by the then trustee.
The issue raised by these proceedings is whether the beneficiary of the Trust is RDK or whether she has been replaced as beneficiary by the Second Defendant (‘GMB’). GMB relies upon two documents as constituting a replacement Distribution Schedule:
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(a) a letter dated 13 July 2012 (‘the 2012 Letter’); and/or
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(b) the Declaration made on 6 March 2015 (‘the Declaration’).
The 2012 letter was written in Spanish and addressed to the Trustee's relationship manager at Wells Fargo in Miami. It states in material part (in its English translation):
‘Right now and/or through my representative (Wells Fargo), being in charge to manage directly my assets … in the Cayman Islands, I wish to fully establish [GMD], passport number [number], as sole heir. This request has to be included in the Trust… (as required by the guidelines of the Trust). This request is valid with the signature of this document and document to be signed in your presence, if you can make the visit… After signing this document the legality of any other heirs… are cancelled… May I ask that these requests are executed under the guidelines mentioned by me and as required by the articles of the Trust and that those are included under its legality from now on.’
The letter was signed by the Settlor and stated her Venezuelan passport number. It also included her fingerprint.
No issue has been raised as to the authenticity of the signature of the Settlor on the 2012 Letter, nor as to its delivery to the Trustee. However, the evidence shows that the Trustee had concerns about the Settlor's capacity to execute a replacement Distribution Schedule.
There then followed the Declaration. This was described as a ‘ Statement’ of the Settlor of the Trust using the powers vested in her ‘ as established in section 1.1.1 of the Trust and (in its English translation) was as follows:
‘1. Herewith I state my irrevocable and absolute intention to remove ail and any of the beneficiaries that have been named so far by any means. This document replaces and substitutes totally any document executed up to this date being opposite or contrary to this one.
2. Herewith I state my irrevocable and absolute intention to name with immediate effect [GMB] identified by Id card [number] issued by the Bolivarian Republic of Venezuela as the sole beneficiary of the TRUST under the conditions established by the trust [GMB] has the unilateral right to liquidate her interest in the TRUST only after my death and without any further requirement
3. I herewith give explicit instructions to the Trustee … to implement the changes mentioned in this document immediately.
4. It is my intention that this statement should satisfy the requirements established in Section 1.1.1 of the TRUST and the changes should take effect immediately.’
The Declaration was signed by the Settlor. Again no issue has been raised as to the authenticity of the signature. However, the ongoing concern on the part of the Trustee was as to the capacity of the Settlor.
In the event neither the 2012 Letter nor the Declaration was accepted by the Trustee as constituting a replacement Distribution Schedule prior to the Settlor's death. A number of issues about this are raised on the pleadings. GMB asserts that now she, rather than RDK, is the rightful beneficiary of the Trust. RDK has chosen not to participate in the proceedings.
Against this background it has been deemed appropriate for there to be a determination of preliminary issues.
The position of both the Trustee and GMB is that, on the proper construction of the Trust Deed, the power to accept a replacement Distribution Schedule continues after death of the Settlor. If that contention is right, and (a) the 2012 Letter and/or the Declaration constituted a valid exercise of the power in article 1.1.5, and (b) the Settlor had capacity, then the Trustee has indicated that it will exercise its power of acceptance. In this scenario GMB will become the beneficiary.
Reaching that conclusion would require the Court to find that:
Issues 1 and 2 raise the short points of construction which now fall to be determined.
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(a) On the proper construction of the Trust Deed, the power to accept a replacement Distribution Schedule continues after death of the Settlor (‘Issue l’);and
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(b) The 2012 Letter and/or the Declaration constituted a valid exercise of the power in article 1.1.5 (‘Issue 2’); and
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(c) The Settlor had capacity at the time of the 2012 Letter and/or the Declaration (‘Issue 3’).
As indicated, the issue is whether, on the proper construction of the Trust Deed, the Trustee's power pursuant to article 1.1.5 to accept an amendment made by the Settlor before her death continues after her death. Although both the Trustee and GMB contend that the power of acceptance may be exercised after the death of the Settlor, given the position of RDK, it is an issue which the Court nevertheless needs to resolve. As RDK has not been represented, the Trustee has very properly put before the Court the possible contrary arguments.
Under the terms of the Trust Deed, the Settlor had, during her lifetime, very substantial powers. She had power to:
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(a) appoint the income and capital of the Trust Fund to herself or to any other person she designated: article 1.1.1;
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(b) revoke the Trust, in whole or in part: article 1.1.4;
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(c) amend the Trust Deed (subject to acceptance by the Trustee): article 1.1.5.
The provision in article 1.1.5 (in the terms set out above) gave the Settlor the power to decide who were to be the beneficiaries after her death by the execution and delivery to the Trustee of a Distribution Schedule. As already referred to, article 1.2.1 goes on to provide that upon the death of the Settlor the Trustee shall hold the Trust Fund upon the terms set forth in any Distribution Schedule which shall then be in effect.
The principles for the interpretation of a document are well established by authority. In Chartbrook Ltd v Persimmon Homes Ltd3, in the House of Lords, the question was said to be one of...
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