Hahn v Bank Intercontinental Ltd

• Jurisdiction: Cayman Islands
• Judge: (Hull, J.)
• Judgment Date: 28 August 1987
• Date: 28 August 1987
• Court: Grand Court (Cayman Islands)

Grand Court

(Hull, J.)

HAHN

and

BANK INTERCONTINENTAL LIMITED

T. Shea for the plaintiff;

R. Henriques, Q.C. and M. Parkinson for the defendant.

Case cited:

(1) Space Invs. Ltd. v. Canadian Imp. Bank of Comm. Trust Co. (Bahamas) Ltd., [1986] 1 W.L.R. 1072; [1986] 3 All E.R. 75, followed.

Trusts-powers and duties of trustees-power to invest-trustee bank”s express power to transact trust business on same terms as for ordinary customers without accounting for profit, enables it to place trust moneys on deposit with itself-on bank”s insolvency, beneficiary not entitled to preference over other ordinary customers since no breach of trust

The plaintiff sought the approval of the court for the transfer of a trust fund of which he was the beneficiary from the original trustee (the defendant bank) to a new trustee.

The deed of settlement authorised the defendant to transact on behalf of the trust any business which it was authorised to undertake for ordinary customers on the same terms, to use current or deposit accounts and it did not require it to account for any profit made. The bank placed the trust fund in one of its own interest-bearing deposit accounts. It then became insolvent and its licence was suspended.

The plaintiff secured the appointment of a new trustee and sought in the present proceedings to have the trust fund paid over to the new trustee. The plaintiff submitted that the terms of the settlement did not confer an explicit power on the defendant to place the trust moneys on deposit with itself as banker and since it had therefore acted in breach of trust the plaintiff as beneficiary had a charge over the assets of the bank on its insolvency which ranked ahead of the claims of other unsecured creditors.

Held, refusing to grant preference to the plaintiffs claim:

Whether the bank had acted in breach of the trust by depositing the trust moneys in one of its own accounts had to be determined by the true construction of the deed of settlement. That instrument allowed the trustee to deal with the trust moneys as it would with the business of its other customers and since the trustee was a bank this would include depositing the trust money with itself as banker. The bank had therefore not acted in breach of the trust so as to give the beneficiary a charge over its assets ranking ahead of other unsecured creditors and the trust fund could in consequence not be handed over to the new trustee in preference to the claims of those creditors (page 408, lines 11–17; page 411, lines 17–36).

HULL, J.: By a deed of settlement dated June 22nd, 1981, the
5	defendant bank was appointed the trustee of a fund for the bene-
fit of the plaintiff and members of his family.
The bank placed the fund in an interest-bearing deposit
account with itself. Although it is not in liquidation, the bank”s
licence has been suspended and it is insolvent. A new trustee has
10	since been appointed.
The parties agreed that the only issue outstanding on the plain-
tiffs originating summons was whether the fund could be paid
over to the new trustee. They agreed that this fell to be deter-
mined by the true construction of the deed of settlement. If it
15	empowered the bank to deposit the trust fund with itself, the new
trustee could not recover it in preference to other unsecured
creditors. If it did not, the new trustee could.
In Space Invs. Ltd. v. Canadian Imp. Bank of Comm. Trust
Co. (Bahamas) Ltd. (1), the following power was conferred on a
20	bank in respect of its appointment as a trustee ([1986] 1 W.L.R.
at 1075):
‘“To open and maintain one or more

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