Cibc Bank and Trust Company (Cayman) Ltd v T and S
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, C.J.) |
| Judgment Date | 16 July 2021 |
| Court | Grand Court (Cayman Islands) |
(Smellie, C.J.)
Trusts — special trusts — cy-près — trustee to apply to court to reform special trust under Trusts Act (2020 Revision), s.104(1)(c) if execution of special trust in accordance with terms obsolete in that, by reason of changed circumstances, execution fails to achieve general intent of special trust — special trusts with general intent to provide for beneficiaries in tax efficient way reformed to avoid serious adverse tax consequences of beneficiary’s intended relocation to United States
	Held, ordering as follows:
	Section 104(1)(c) of the Trusts Act (2020 Revision) provided that if the execution of a special trust in accordance with its terms was or became in whole or in part obsolete in that, by reason of changed circumstances, it failed to achieve the general intent of the special trust, the trustee should apply to the court to reform the trust. The term “obsolete” meant no longer suitable for the present circumstances, or in the context of the present circumstances. The inclusion of the ground of obsolescence in s.104(1)(c) was intended to confer a wide jurisdiction to reform the purposes of STAR trusts. Section 104 did not require the court to identify a specific intent which could no longer be achieved, rather, the question was whether the execution of a special trust failed to achieve the “general intent.” The court accepted that the general intent of the trusts in the present case included an intent to provide for the beneficiaries in a tax efficient way in a politically stable environment that adhered to the rule of law. While the proposed reforms were far-reaching and transformative, they remained within the basic intention underlying the spirit of the settlor’s gifts. There was nothing to suggest that the settlor would have wished to curtail T’s choice of domicile as a condition of benefit. On the contrary, the family history suggested that T’s wish to relocate to the United States to fulfil his professional and entrepreneurial aspirations would have been in keeping with what the settlor would have expected. T’s decision to relocate and the need to reform the trusts to mitigate the adverse tax consequences were changed circumstances. US tax issues had been an irrelevant consideration in the exercise of the trustee’s administration of the trusts whilst no beneficiary had any connection with the United States and no intention to relocate there, but this had changed and the US tax provisions had to be taken into account by the trustee as they had become highly relevant considerations. The execution of the trusts had become obsolete by reason of those changed circumstances. It was appropriate to grant the order for reform of the trusts cy-près (para. 24; paras. 39–40; para. 44; paras. 48–49).
(1)	A Trust, In re, 2016 (2) CILR 416, referred to.
(2)	Al-Ibraheem v. Bank of Butterfield Intl. (Cayman) Ltd., 2000 CILR 88, referred to.
(3)	Alsop Wilkinson v. Neary, [1996] 1 W.L.R. 1220; [1995] 1 All E.R. 431, referred to.
(4)	Att. Gen. v. Haberdashers’ Co. (1834), 1 My & K 420, referred to.
(5)	B Trust, In re, 2010 (2) CILR 348, referred to.
(6)	BCD Trust (Confidentiality Order), Re, [2015] Bda LR 108, referred to.
(7)	Barclays Private Bank & Trust (Cayman) Ltd. v. C, 2014 (1) CILR 144, referred to.
(8)	Carne v. Long (1860), 2 De G. F. & J. 75, referred to.
(9)	Clark’s Trust, Re (1875), 1 Ch. D. 497, referred to.
(10)	Delphi Trust Ltd., In re (2014), 16 ITELR 885, referred to.
(11)	G Trust, In re, [2017] SC (Bda) 98 Civ; November 15th, 2017, referred to.
(12)	Jersey Evening Post Ltd. v. Al Thani, 2002 JLR 542, referred to.
(13)	Lepton’s Charity, Re, [1972] 1 Ch. 276, referred to.
(14)	Pease v. Pattinson (1886), 32 Ch. D. 154, referred to.
(15)	SPhinX Group, In re, 2017 (1) CILR 176, referred to.
(16)	T Trust, In re, 1999 CILR N–10, referred to.
(17)	Thomson v. Shakespear (1860), 1 De G. F. & J. 399; 45 E.R. 413, referred to.
(18)	Truman, Hanbury, Buxton & Co. Ltd.’s Application, Re, [1955] 3 All E.R. 559, considered.
(19)	Varsani v. Jesani, [1998] EWCA Civ 630; [1999] Ch. 219; [1998] 3 All E.R. 273, referred to.
(20)	Weir Hospital, Re, [1910] 2 Ch. 124, referred to.
Charities Act 2011 (c.25), s.61: The relevant terms of this section are set out at footnote 9.
s.62(1): The relevant terms of this subsection are set out at footnote 9.
Trusts Act (2020 Revision), s.99: The relevant terms of this section are set out at footnote 3.
s.103(1): The relevant terms of this subsection are set out at footnote 6.
s.104: The relevant terms of this section are set out at para. 21.
	A trustee applied to reform two trusts.
	The plaintiff was the trustee of two Cayman Islands STAR trusts. The trusts were established by “Dr. T,” the father of the first defendant (“T”) and the husband of the second defendant (“Madam S”). The trusts were established for the benefit of Dr. T, Madam S, T and any children T might have. Dr. T died in 2013.
	T was 33 years old, unmarried and had no children. He had originally also been a trustee of the trusts, but had resigned in 2013. Since then the plaintiff had been the sole trustee. T had decided to relocate to the United States. In preparation for his move, T obtained tax advice that his relocation would have serious adverse tax consequences for him unless mitigating steps were taken. The plaintiff applied to the court pursuant to s.104 of the Trusts Act (2021 Revision) for orders to reform the trusts cy-près. Section 104(1) provided:
	“(1) If the execution of a special trust in accordance with its terms is or becomes in whole or in part—
(a)	impossible or impracticable;
(b)	unlawful or contrary to public policy; or
(c)	obsolete in that, by reason of changed circumstances, it fails to achieve the general intent of the special trust,
the trustee shall, unless the trust is reformed pursuant to its own terms, apply to the court to reform the trust cy-près or, if or insofar as the court is of the opinion that it cannot be reformed consistently with the general intent of the trust, the trustees shall dispose of the trust property as though the trust or the relevant part of it has failed.”
	The application was made on the basis that the execution of the trusts in accordance with their terms had become obsolete in that, by reason of T’sdecision to relocate to the United States, it failed to achieve the general intent of the trusts which was said to be to benefit the beneficiaries in a tax-efficient way in a politically stable environment. The plaintiff asked the court to reform the trusts by inserting a new power into each trust to enable the plaintiff to transfer the assets of the trusts to new trusts or to T directly, thereby leading to a substantial mitigation of the US tax which would otherwise arise.
S. Warnock Smith, Q.C., R. Reynolds and A. Partridge for the plaintiff;
B. Carey and C. Duncan for the first defendant.
1 SMELLIE, C.J.: On October 29th, 2020, I granted certain orders which had the effect of reforming two trusts which are established in the Cayman Islands, in keeping with s.104 of the Trusts Act. A confidentiality order had earlier been granted on October 19th, 2020 for the anonymization of the proceedings, the court having been satisfied that the preservation of confidentiality, about the identity of beneficiaries and the affairs of the trusts, was necessary to ensure the proper administration of justice in the proceedings.1 Upon granting the orders on October 29th, I promised to providewritten reasons as soon as time allowed. I now do so, notwithstanding the regrettable but unavoidable delay.
2 The orders were granted upon the plaintiff’s application, brought by origination summons pursuant to s.104 of the Trusts Act in its capacity as trustee of two Cayman Islands STAR trusts, which I will refer to as the “A.R. Trust” and the “Ta trust” (together “the trusts”). As their titles suggest, the trusts are both governed by the provisions of Part VIII of the Trusts Act (2021 Revision), STAR being an acronym for “Special Trusts—Alternative Regime”, the heading of Part VIII. Such “special trusts” differ from ordinary trusts in various ways as will become apparent below. Of particular significance, is the disapplication by s.104(2) of the jurisdiction vested in the court under s.72 of the Trusts Act which, in the case of ordinary trusts permits the court, in certain circumstances described in s.72, to consent to variations of trust.2 Instead, in the case of a STAR trust, as will become apparent below, the relevant power to effect changes in circumstances such as those which arose here, is vested directly in the court, as set out in s.104 itself.
3 The reason for the plaintiff’s application to the court, and the grounds on which it is made, are the same for both trusts. In summary it is that, as a result of the decision of the primary beneficiary, the first defendant, T (“the first defendant” or “T”), to relocate to the United States, in the words of s.104(1)(c): “the execution of [the trusts] in accordance with [their] terms” has become “(c) obsolete in that, by reason of changed circumstances, it fails to achieve the general intent of [the trusts] …”
4 In such circumstances s.104(1) goes on to provide that: “the trustee shall, unless the trust is reformed pursuant to its own terms, apply to the court to reform the trust cy-près …”
5 No attempt has been made by the plaintiff to reform the trusts pursuant to their own terms because, for the reasons examined below, it is not considered that the trustee has such a power. The enforcers have a power given under the trust to reform “the purposes” of the trusts but, for the reasons also examined below, it was thought probable that the power could not...
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