A Deed of Settlement Dated 1 October 2003 Constituting the T Trust (The “Trust”) v Section 48 of the Trusts Law (2017 Revision) and GCR Order 85, Rule 2
| Jurisdiction | Cayman Islands |
| Judge | Mr. Justice Raj Parker |
| Judgment Date | 26 February 2019 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | Cause No.: FSD 188 of 2017 (RPJ) |
| Date | 26 February 2019 |
In the Matter of a Deed of Settlement Dated 1 October 2003 Constituting the T Trust (The “Trust”)
And in the Matter of Section 48 of the Trusts Law (2017 Revision) and GCR Order 85, Rule 2
The Hon. Mr. Justice Raj Parker
Cause No.: FSD 188 of 2017 (RPJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Section 48 Trusts Law (2017 Revision) — originating summons issued by Trustee seeking declarations — applications by beneficiaries who had commenced proceedings in Florida against different parties — strike out — Order 18 r.19 — inherent jurisdiction — abuse of process — case management stay — exercise of discretion and approach — only appropriate if very strong reasons outweighing disadvantages to applicant Trustee — analysis of nature of case in Florida proceedings and relief sought by Trustee in Cayman.
Ms. Shelley White, Ms. Lucy Diggle and Mrs. Sarah Gavin of Walkers on behalf of the Plaintiff
Mr. Robert Lindley of Conyers Dill & Pearman on behalf of the Defendants
Pursuant to an Order dated 1 December 2017 these proceedings are subject to strict confidentiality requiring, among other things, the parties, the Protector of the Trust to which these proceedings relate, and any identifiable property, to be referred to by alphabetical letters on the face of all court documents.
The Plaintiff Trustee (“TCo”) is a Cayman Islands licensed trust company and the sole trustee of the T Trust established by way of a deed of settlement dated 1 October 2003 (“the Settlement”) between AA as settlor and TCo.
The T Trust is governed by the laws of the Cayman Islands and the Settlement includes an exclusive jurisdiction clause in favour of the Cayman Islands in which the courts of the Cayman Islands are to be the “… forum for the administration of this Trust” see clause 2.2 of the Settlement.
All the defendants (AA-EE) are beneficiaries of the Trust (the defendants) and are US citizens.
AA, BB, CC and DD (together, “the AA Family”) brought a claim in the Florida court on 11 August 2017 against FLCo which is a sister company based in Florida of TCo, (with the same parent company and in the same group,) and its Managing Director Jo Ann Englehardt (“JE”). The Complaint alleges breach of fiduciary duty, inducement and negligent misrepresentation. Damages are sought for alleged losses suffered in connection with the purchase and maintenance of certain life insurance policies which were purchased and/or transferred into the T Trust.
The Complaint is dated 11 August 2017 and was filed with the circuit court of the 15th judicial circuit in and for Palm Beach County Florida (“the Florida proceedings”).
On 11 September 2017 TCo issued an originating summons under section 48 of the Trusts Law (2017 Revision) (the “section 48 application”) as a consequence of the Florida claim, seeking advice and direction from this court in respect of the alleged acts and omissions in the Florida proceedings which, it argues, concern its purchase and management of the life policies.
By a summons dated 19 January 2018 the AA Family seek an order pursuant to GCR 0. 18, r.19 and/or the inherent jurisdiction of the court that the originating summons should be struck out as an abuse of process of the court and in the alternative an order that the section 48 application be stayed pending the determination of the Florida proceedings.
The Florida proceedings have not been brought against TCo, which is not a party to them and no claim or allegation is made directly against TCo in those proceedings.
However, the allegations in that claim are said by TCo to concern the administration of the Trust and in particular the purchase and administration of the life insurance policies which it says involves TCo and entitles it to the relief it seeks from the Cayman court.
There has been litigation between the parties to date concerning the proper forum for the resolution of the AA Family's claims which the defendants initiated in Florida.
Following the issuing and attempts at service of the section 48 application by TCo, the AA Family commenced proceedings in the US courts contesting the validity of service of the originating summons (the “foreign service applications”), as well as in the Cayman Islands.
TCo sought an injunction from this court restraining the defendants from prosecuting the foreign service applications.
I gave judgment on 13 March 2018 refusing TCo's application and declaring that there had been valid service on a beneficiary in Missouri, but not in respect of the other defendants.
TCo appealed and by a Consent Order dated 25 October 2018 the appeal was allowed, recording an agreement between the parties that the exclusive jurisdiction clause in the Settlement conferred exclusive jurisdiction on the courts of the Cayman Islands to determine the Trustee's section 48 application, and providing for the foreign service applications to be dismissed in the US courts. The jurisdiction and service points were thereby dealt with by consent in relation to the s.48 application and it continues.
Meanwhile FLCo and JE applied unsuccessfully to dismiss the Florida proceedings on the basis that the defendants had not joined TCo and that the proper forum to resolve the AA Family's claim was the Cayman Islands. At a Florida court hearing on 23 April 2018 the court also dismissed the arguments made by FLCo and JE that the Florida proceedings should be stayed pending determination of the Cayman proceedings, or for arbitration, or struck out as a ‘sham pleading’. The Florida proceedings therefore also continue.
By consent on 26 November 2018 the parties also agreed that TCo's application in the Cayman court to restrain the defendants from prosecuting the Florida proceedings and from commencing any further proceedings in any other jurisdiction save for the Cayman Islands in respect of the administration of the Trust, be withdrawn.
The result of this is that there are two parallel sets of proceedings, the first in time being the Florida claim and then the section 48 application in the Cayman court brought by TCo which was issued as a consequence and by design to have matters determined in Cayman that concern TCo's purchase and administration of the relevant policies.
The defendants now apply to strike out or to stay the Cayman s.48 application pending the determination of the Florida proceedings.
Mr Robert Lindley appeared for the defendants. He submitted that to issue the section 48 proceedings in Cayman a month after the commencement of the Florida proceedings was an unnecessary ‘kneejerk’ reaction by TCo. The Florida proceedings do not concern TCo or the administration of the T Trust by TCo. The nature of the Florida proceedings and the relief sought by the defendants is against FLCo and JE and is distinct from and does not encroach upon the matters TCo wishes to have determined in Cayman.
There are no allegations against TCo and by making its premature and unnecessary application TCo has acted in an ‘untrustee like’ manner which will waste the Trust assets in costs and is unnecessary and duplicative. TCo's application should be struck out as an abuse of process.
Alternatively, it should be stayed pending the determination of the Florida proceedings as otherwise there is a significant risk of prejudice to the defendants in terms of wasted costs to the T Trust fund in the event that the claim in Florida is successful. Further there would be a duplication of issues because TCo would seek to argue matters relating to the purchase of the policies in the section 48 proceedings in Cayman at the same time that such issues are determined in the Florida proceedings, with the risk of inconsistent findings of fact.
Ms Shelley White appeared for TCo. She submitted that the Trustee had properly invoked the jurisdiction of the court pursuant to section 48 of the Trusts Law (2017 Revision). The Trustee is seeking declarations in respect of clearly defined and delineated aspects of its management and administration of the T Trust. It is in the best interests of the T Trust that the Trustee should be entitled to obtain declarations on the matters concerning its administration that are being called into question by the defendants in the Florida proceedings.
She submitted that the Trustee is not a party to the Florida claim which will not be dispositive of the issues raised in the originating summons. These are matters which the parties have agreed can only be determined by the Cayman court. The Trustee's application is not an...
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