CI Trustees Ltd v RDK

• Jurisdiction: Cayman Islands
• Judge: Kawaley
• Judgment Date: 23 February 2018
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO. FSD 199 OF 2015 (IKJ)
• Date: 23 February 2018

In the Matter of a trust known as the O Trust made by declaration 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)

CI Trustees Ltd

Plaintiff

and

(1) RDK

(2) GMB

Defendants

Before:

The Hon. Justice Kawaley

CAUSE NO. FSD 199 OF 2015 (IKJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Validity of exercise of power to amend distribution schedule to trust deed to change sole beneficiary-capacity of settlor-legal test-burden of proof

Appearances:

Mr John Machell QC and Ms Aleisha Brown of Harneys on behalf of the Plaintiff (“the Trustee”)

Mr Hector Robinson QC, Mr Andrew Peedom of Mourant Ozannes on behalf of the 2 ^nd Defendant (“D2”)

The 1 ^st Defendant (“D1”) did not appear

IN OPEN COURT

REASONS FOR DECISION

Introductory

1 The present proceedings were commenced by the Trustee by Originating Summons dated December 9, 2015 with a view to determining who was the true beneficiary of the trust declared by the settlor (the “Settlor”) in respect of the 0 Trust (the “Trust”).

2 Three issues were identified as requiring determination:

• (1) whether the Trustee could accept an amendment to a distribution schedule made before the Settlor's death after her death;

• (2) whether the 2012 letter and the 2015 Declaration constituted an exercise of the power of amendment;

• (3) whether the Settlor had the capacity to exercise the power of amendment at the time of the 2012 letter or the 2015 Declaration.

3 Clifford J by a judgment dated October 18, 2016 on a trial of preliminary issues answered the first two questions in the affirmative and subsequently gave directions for the trial of the capacity issue.

4 At the beginning of the trial I acceded to a joint application by counsel and directed that, although the proceedings had been listed for hearing in open Court, the proceedings and judgment should be anonymised to protect the privacy (and safety) of the parties, in particular D2. I also directed that the file should be sealed so that any application to inspect the file would be on notice to the parties, rather than being dealt with administratively.

5 At the end of the trial on January 19, 2018, 1 decided that:

• (1) the issue before the Court was whether or not the Settlor of the Trust had capacity to instruct the Trustee to amend the Trust Deed by changing the beneficiary from D1 to D2 on:

  • (a) July 13, 2012 and/or

  • (b) March 6, 2015;

• ( 2) D2 was required to prove that capacity existed on a balance of probabilities;

• (3) I was satisfied, more clearly in relation to the 2012 letter and more marginally in relation to the 2015 Declaration, that the Settlor did have capacity to instruct the Trustee to amend the Trust Deed; and

• (4) (by consent) that the costs of the Trustee and D2 should be paid out of the Trust Fund on an indemnity basis.

6 I now give reasons for that decision.

Overview

7 It is helpful at the outset to set out a high-level overview of the context out of which the present legal and factual controversy arises:

• • the Settlor was at all material times a widow who emigrated from Europe to South America in her youth where she lived without children or other family members (apart from her late husband) until her death;

• • the Trust initially provided for the Settlor's nephew and niece, who lived in Europe, to be the ‘remainderman’;

• • on October 22, 1996, the Settlor's nephew and niece (who lived in Europe) were replaced as remainderman with a local trusted friend, Dl;

• • in March 2012, the Settlor revoked her Will and made D2, another local trusted friend, whose husband was the Settlor's lawyer, her sole beneficiary;

• • in July 2012, the Settlor sought to amend the Trust and make D2 the remainderman;

• • the Trustee, who had no direct and/or historic client relationship with the Settlor became concerned about the Settlor's capacity and declined to give effect to the amendment request;

• • the Settlor had historically dealt with relationship managers employed by the Trust's investment manager (the “Bank”) and communicating in Spanish. The Bank had since 1996 customarily dealt with D1 in respect of the Trust's and the Settlor's personal accounts;

• • the Trustee acquired the Bank's trust portfolio including the Trust in late 2010;

• • the Settlor sought to effect a change of relationship manager replacing her former managers with a new manager employed by an affiliate of the Bank. The Trustee insisted that this change could not be effected without a meeting with the Settlor and an independent medical examination;

• • arranging a meeting was problematic, in part because the employees of both the Trustee and the Bank were unable to travel to the Settlor's domicile because of security concerns;

• • the Trustee eventually met with the Settlor in Miami in February 2015 and attempted to arrange for her to be examined by an independent physician;

• • the Settlor returned to South America without being examined by an independent doctor acceptable to the Trustee. Instead she obtained medical reports from her own doctors;

• • in May 2015 the Settlor made a Declaration confirming and explaining the 2012 letter;

• • the Settlor died on August 31, 2015.

8 From the outset, it appeared to me that the Trustee's concerns about the Settlor's capacity in 2012 might well have been based on an understandable misreading of the facts in circumstances where key elements of the communications between the Trustee and the Settlor were ‘lost in translation’. My own preliminary view, of course, was based on a combination of hindsight and information not available to the Trustee at the relevant time. By the time of the 2015 Declaration, however, it seemed far more plausible that capacity issues might well exist.

THE ORAL EVIDENCE

The Plaintiff's case

Nicholas Quin

9 Mr Quin, a lawyer by training, was the Trustee's Managing Director from October 2010, having previously worked for three years as in-house counsel. He gave his evidence under cross-examination in a straightforward, non-argumentative manner and was a generally impressive witness whose credibility was not challenged. His first direct involvement with the matter was in January 2015 shortly before the February 2015 meeting with the Settlor took place. The most significant aspects of Mr Quin's evidence may be summarised as follows:

• • in late January before the meeting took place, he consulted with a relationship manager at the Bank who advised him that “the Settlor was a very gullible and lonely person and had been taken advantage of in the past”;

• • he received advice from an in-house counsel, Ms Ahmed, and prepared questions to put to the Settlor designed to assess her capacity to amend the Trust;

• • when the first meeting took place on February 17, 2015 (between Mr Quin, his Spanish-speaking colleague Ms Batista and the Settlor), the prepared questions were put. The Settlor appeared unaware of the value of her estate or the Trust assets, and was only clear about wanting to replace D1 with D2 as beneficiary. Her repeating a desire to help those whom had helped her appeared to be rehearsed;

• • as a result of this meeting he was not satisfied of her capacity, and broke to consult with his team. In the resumed second meeting (with additional attendees being D2 and her husband Dr PE) he advised the Settlor and her party that the Trustee wished her to undergo an independent medical assessment. The Trustee was unable to arrange a medical assessment before the Settlor was scheduled to leave Miami;

• • before alternative medical examination arrangements were concluded, on March 17, 2015 the Trustee received from Miami attorneys Marcell Felipe a copy of the 2015 Declaration;

• • while the Trustee was still seeking to agree a doctor to carry out the medical examination, on April 22, 2015 Marcell Felipe forwarded four medical reports from doctors in the Settlor's domicile;

• • the Trustee was not satisfied with these reports, and continued efforts to arrange an independent examination. On June 19, 2015 a call was placed to the Settlor who sounded lucid but complained of health problems, particularly with her eyes.

Fauzia Ahmed

10 Ms Ahmed is an Ontario-qualified lawyer who at all material times was employed by the Trustee as Senior In-house Counsel and/or Assistant Managing Director. She joined the Trustee in or about September 2010 and became Chief Compliance Officer of Royal Trust Corporation of Canada in February 2016. She also gave her evidence under cross-examination in a straightforward non-argumentative manner and was a generally impressive witness whose credibility was not challenged. The most significant aspects of Ms Ahmed's evidence may be summarised as follows:

• • she first became directly involved with the Trust in July 2012 when a relationship manager who had known the Settlor for 20 years (GG) referred the 2012 letter (dated July 13, 2012) to her on July 16, 2012;

• • GG expressed concerns about the letter, describing it as “very odd” and inconsistent with previous correspondence from the Settlor, an assessment Ms Ahmed was not able to verify;

• • on July 20, 2012, she took part in a conference call with GG, a Trustee colleague who spoke Spanish (Mr Kimbert Solomon) and the Settlor. In the course of this conference call, in which her colleague, after introductions by GG, did all the talking, the Settlor appeared confused, said her memory was bad and was unable to identify what day it was or where she was. Ms Ahmed fairly conceded that it was possible that the Settlor did not want to speak to Mr Solomon;

• • at the time, as a result of the call, she was very concerned about the Settlor's capacity to amend the Trust Deed and recorded these concerns in an email that same day to GG;

• • three days...