Al-Ibraheem v Bank of Butterfield Intl
| Jurisdiction | Cayman Islands |
| Judge | (Murphy, J.) |
| Judgment Date | 12 October 1999 |
| Date | 12 October 1999 |
| Court | Grand Court (Cayman Islands) |
(Murphy, J.)
L.F.R. Cohen, Q.C. and W.J. Helfrecht for the plaintiff;
Ms. C.T. Carrington for the first defendant;
Ms. S.J. Collins for the second defendant;
J.B.W. McDonnell, Q.C. and S.J. Barrie for the third defendant.
(1) Drew v. NunnELR(1879), 4 Q.B.D. 661; 48 L.J.Q.B. 591, observations of Brett and Bramwell, L.JJ. applied.
(2) Hawkins v. KempENR(1803), 3 East 410; 102 E.R. 655, dicta of Lord Ellenborough, C.J. applied.
(3) Mansfield v. PeachENR(1814), 2 M. & S. 576; 105 E.R. 496.
(4) Reardon Smith Line Ltd. v. Hansen-Tangen, [1976] 1 W.L.R. 989; [1976] 3 All E.R. 570.
(5) Rutland v. WytheENR(1843), 10 Cl. & Fin. 419; 8 E.R. 801, observations of Wightman J. applied.
(6) S Trust, In re, 1992–93 CILR 268, applied.
(7) Whishaw v. StevensELR, [1970] A.C. 508; sub nom. Re Gulbenkian”s Settlement Trusts, Whishaw v. Stevens, [1968] 3 All E.R. 785.
(8) Yonge v. Toynbee, [1910] 1 K.B. 215; (1909), 79 L.J.K.B. 208, observations of Buckley, L.J. and Swinfen Eady J. applied.
Notaries Public Law (Laws of the Cayman Islands, 1963, cap. 110), s.2: The relevant terms of this section are set out at page 452, lines 36–37.
Notaries Public Law, 1982 (Law 13 of 1982), s.13(1):
‘Every notary public shall keep and maintain a book called a “Notarial Acts Book” which shall be in the form in the Sixth Schedule in which he shall record the details of every notarial act listed as items 1 to 13 inclusive and 16 in the Fifth Schedule done by him ….’
Fifth Schedule: The relevant terms of this Schedule are set out at page 453, lines 1–2.
Sixth Schedule: The relevant terms of this Schedule are set out at page 452, lines 41–43.
Probate of Deeds Law (Revised) (Laws of the Cayman Islands, 1963, cap. 135, revised 1978), s.6, as amended by the Probate of Deeds (Amendment) Law, 1983 (Law 31 of 1983), s.2: The relevant terms of this section are set out at page 451, lines 36–45.
Law of Property Act 1925 (15 & 16 Geo. V, c.20), s.159(1): The relevant terms of this sub-section are set at page 448, lines 5–12.
Trusts-amendment-execution-amendment invalid unless formalities of execution, reasonable or not, complied with as specified in trust instrument
Conflict of Laws-execution of documents-notarization-Cayman law governs nature of notarization required to make amendment to Cayman trust-procedural elements of notarial act governed by lex loci actus
Documents-notarization-nature-notarization of document may be by proof of execution on oath of witness or acknowledgement by party to document before notary public
Trusts-amendment-effect-amendment may operate only prospectively from date of execution
The plaintiff applied for a declaration that an amendment to a trust was invalid.
The settlor, the second defendant, established a trust, to be administered in the Cayman Islands and construed according to Cayman law, providing for the distribution of the trust assets upon his death between his children, including the plaintiff. The trust instrument provided that the trust could be amended by the settlor ‘by written instrument delivered to the trustee with the consent of the protector….’ A ‘written instrument’ was defined as ‘any instrument in writing which has been duly signed, witnessed and notarized.’
An amendment was made giving each of the settlor”s daughters a single opportunity to elect for a distribution to her of a specified sum, and substituting for his children the settlor”s new wife (if she remained so), as sole beneficiary under the trust upon his death. The amendment was signed in Texas by the settlor, the trust protector and a witness on the same date, and countersigned by the trustee. All the daughters except the plaintiff exercised their right to the distribution under the amendment.
The plaintiff applied for the general administration of the trust to be placed under the supervision of the court. She alleged that her father had become mentally incapacitated before his marriage and before the relevant amendment was made, and that certain distributions of capital made thereafter were invalid. The settlor”s incapacity was later recognized by the appointment of a guardian of his estate and person by a court of probate in Texas. The same attorney, appointed by the Grand Court as guardian ad litem in the Cayman proceedings, filed affidavit evidence that the settlor had been mentally incapacitated for some years.
The plaintiff then notified the other parties that the power of amendment had not been validly exercised because the amendment had not been notarized. The US attorney who had drafted the amendment confirmed that it had not been notarized but, without being requested to do so by the settlor”s guardian or the Texas court, arranged for this to be done. The witness to the original amendment swore an oath as to its proper execution and delivery before a Texas notary, who added her signature and seal. The notarized deed was then delivered to the trustee.
Upon a summons by the plaintiff, the court directed that the matter of notarization should be tried as a preliminary issue.
The plaintiff submitted that (a) since no amendment to the trust could be made save by ‘written instrument,’ which, as defined by the trust instrument, required notarization, the amendment had been improperly executed; (b) this defect had not been remedied by the act of the Texas notary, since (i) under Cayman law, notarization required the acknowledgement of execution by a party to the document before a notary, (ii) this was consistent with English practice and involved a process of authentication whereby the notary verified an act of which he had personal knowledge, ensuring that the formalities had been complied with, and (iii) on the plain words of the trust instrument, notarization, as part of the process of amendment, was to be procured by the settlor; (c) since the settlor by that time lacked capacity to do so either personally or by authorization, the amendment could never be perfected; and (d) even if the purported notarization had cured the defect, the amendment could operate only prospectively from that date.
The third defendant submitted in reply that (a) the failure of the settlor to execute the amendment properly was conceded; (b) however, the notarization by the Texas attorney had remedied this defect, since (i) under s.6 of the Probate of Deeds Law (Revised), in force when the power of amendment was created, the execution of a deed overseas could be proved on the oath of a subscribing witness before a notary of the
foreign jurisdiction, (ii) under the law of Texas, notarization encompassed both acknowledgement and proof of execution of an instrument, and (iii) the trust instrument did not require that the settlor be in control of the notarization process, and therefore notarization and delivery to the trustee could validly occur at a later date and notwithstanding the intervening incapacity of the settlor; and (c) it was conceded that the amendment could not operate retrospectively.
Held, making the following rulings:
(1) The amendment to the trust had not been perfected in its original form (even assuming that the settlor had capacity to make the amendment at the time), since it did not comply with the requirement in the trust agreement that it be made by an instrument in writing which had been duly signed, witnessed and notarized. The court had no power to waive these formalities, whether reasonable or not (page 447, lines 23–35; page 448, lines 15–22).
(2) The meaning of ‘notarization’ was vital to the validity of the amendment, since if notarization required an acknowledgement of its execution by a party to the original deed (as was the English practice), this could not have been effected after the advent of the settlor”s incapacity. Whilst Texas law, as the lex loci actus, would govern the technical requirements of ‘proof’ or ‘acknowledgement’ of execution, Cayman law governed the kind of act required in relation to a Cayman trust. On the evidence of the Probate of Deeds Law (Revised), s.6 (in force at the time of the creation of the power), both of these methods of notarization were acceptable to perfect the execution of a foreign deed and, accordingly, the proof of execution (in Texas) upon the oath of the subscribing witness before the Texas notary was prima facie a valid notarization (page 448, line 44 – page 449, line 22; page 450, lines 31–35; page 451, lines 26–31; page 452, lines 8–30; page 453, lines 8–15).
(3) However, that notarization had not complied with the trust instrument, which plainly stated, by the use of the words ‘the grantor may,’ that an amendment required an act of the settlor. It had been intended that the necessary formalities should be observed in a single transaction under the settlor”s control and not by execution followed much later by notarization on the authority of a third party. Since the power of amendment could not be validly exercised until the written instrument had been delivered to the trustee with the settlor”s authority and approval, the amendment was unperfected and would remain so. The US attorney who had procured the notarization had had no authority to do so, even if previously instructed by the settlor, since any such authority would have ceased upon the settlor”s becoming mentally incapable (page 454, lines 5–30; page 455, lines 22–42; page 456, lines 11–28; page 456, line 36 – page 457, line 29).
(4) Had the notarization process remedied the defect in the original amendment, it could have done so only prospectively from that date (page 458, lines 40–45).
| MURPHY, J.: By consent orders dated April 19th and July 26th, |
| 1999 the learned Chief Justice directed that there be a trial of certain |
| preliminary legal issues (prior to the trial of other factual issues as |
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Al-Ibraheem v Bank of Butterfield Intl (Cayman) Ltd
...The power of amendment had been invalidly exercised and could not be remedied, given the settlor”s proven incapacity in the interim (see 1999 CILR 436). The costs of the determination of the notarization issue alone were substantial, and the overall cost to the plaintiff of challenging the ......
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Al-Ibraheem v Bank of Butterfield Intl (Cayman) Ltd
...to cure the defect in the deed, and the plaintiff obtained a declara-tion that the power of amendment had been invalidly exercised (see 1999 CILR 436). Evidence later came to the court”s attention that the trustee and the respondents had had notice of the settlor”s incapacity at an early st......
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Al-Ibraheem v Bank of Butterfield Intl (Cayman) Ltd
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