Michele Alexia Canham v Cutty Sark Land Company

JurisdictionCayman Islands
Judgment Date18 February 2022
Docket NumberCAUSE NO: FSD 121 OF 2016 (IKJ)
CourtGrand Court (Cayman Islands)

In the Matter of the Poulton Family Trust

(1) Michele Alexia Canham
(2) James Alexander Poulton
(3) Nicholas James Poulton
(4) James Michael Poulton
(5) Daisy Elizabeth Houghton-Poulton
(1) Cutty Sark Land Company
(2) Deborah McMullan Poulton
(3) Wilson Malcolm McMullan
(4) Christine Jane McMullan
(5) Cayman National Trust Co. Ltd.
(6) CNT (Nominees) Ltd

CAUSE NO: FSD 121 OF 2016 (IKJ)




Discretionary trust- declaration of exclusion by settlor and protector excluding all beneficiaries save for settlor and his wife-distribution of all trust assets to settlor and wife shortly before his death-validity of declaration of exclusion-whether declaration vitiated by lack of capacity or undue influence or improper exercise of a fiduciary power-unlawful means conspiracy-proprietary estoppel


Mr. Tom Lowe QC of counsel and Mr. Neil McLarnon of Travers Thorp Alberga for the Plaintiffs

Mr. Graeme McPherson QC of counsel and Ms Ilona Groark of Kobre & Kim (Cayman) for the 2 nd to 4 th Defendants (“D2–D4”)

Mr. Sebastian Said and Mr. Zacharie Caudeiron of Appleby (Cayman) Ltd. for the 5 th Defendant (the “Trustee”) and the 6 th Defendant (together, the “Trustees”)


Alan Poulton (“Alan”) was born in London in 1938. He became a successful businessman, principally through the London property market. He had 5 children, born to three mothers, who are the Plaintiffs in this case. On November 23, 2003 he settled the Poulton Family Trust (the “Trust”) for the benefit of himself, his children and their descendants. The Trust Fund consisted of his 50% interest in the family business, in which at least two of his children were always directly employed. Under the initial terms of the Trust, Alan was entitled to 100% of the income for his lifetime with his children's entitlement to income and capital accruing after his death. In the early 1990s, he bought a property in Ponte Vedra Beach, Florida and travelled regularly between Florida and London. He married a lady named Joyce Jackson (“Joyce”) there, but their relationship ended in 2003. In the summer of 2004, he married Deborah McMullan (“Deborah”), a union which lasted until his death in June 2016.


By 2014, Deborah was a beneficiary of the Trust entitled to 40% of the Trust income for her life after Alan's death. In early 2015, Alan was advised that he had a substantial IRS liability because he had not disclosed the existence of the Trust and that he should terminate the Trust and ‘onshore’ the assets and make fresh provision for his wife and children. This strategy was opposed by his children and the termination issue became a contentious one. In October 2015, Alan received a terminal cancer diagnosis, having been in declining health from early that year. Alan's children complained to the Trustee that they were being denied access to their father, and raised concerns about his mental capacity and Deborah's undue influence. He last saw any of his children in early August, 2015. On March 2, 2016, roughly three months before Alan's death, he removed his children and their descendants as beneficiaries of the Trust and requested that the Trustee terminate the Trust and distribute the entire Trust Fund to himself and his wife. The Trustee resolved to give effect to Alan's wishes on May 12, 2016. Corporate formalities transferring control of the holding company previously owned by the Trust to Deborah, her son and daughter-in law were still being completed when Alan died on June 6, 2016.


Against this background, it is perhaps unsurprising that the present litigation has been bitterly fought with, all too often, shockingly unkind accusations being exchanged on both sides. Some of the evidence would provoke any reasonable bystander to exclaim, like Kurtz in ‘ Heart of Darkness’: “ The horror, the horror!” Such a bystander would, on the other hand, have admired the way in which his eldest child Michele and his wife Deborah each acknowledged under cross-examination the most compelling truth: that Alan would have wanted to take care of them all.

Summary of Findings

The Plaintiffs' case had two main limbs. They sought to set aside their purported removal as beneficiaries by a letter dated February 24, 2016 but said by D2–D4 to have been executed by Alan on March 2, 2016 (the “Declaration of Exclusion”) on the grounds of either (1) Deborah's undue influence, or (2) Alan's own lack of mental capacity. Other, makeweight claims against D2–D4 were sensibly only addressed in a cursory way: (a) improper exercise of a fiduciary power/fraud on the power, (b) estoppel, and (c) unlawful means conspiracy. Only the first of the latter three claims were addressed by the Plaintiffs' counsel in oral closing argument.


The Trustees played a neutral role in the proceedings with the Plaintiffs not pursuing the claims which were initially asserted against them. Despite their limited involvement, Mr Said vigilantly ensured that his clients, gingerly seeking to stay out of the main protagonists' line of fire, did not suffer any collateral damage.


For the reasons that are set out in hopefully sufficient detail below, I find that the Declaration of Exclusion is liable to be set aside on the grounds of undue influence. However somewhat narrowly, I find that Alan possessed sufficient mental capacity to make the critical decision. He was not suffering from any permanent cognitive impairment and the substance of the decision that he made (to remove his children as beneficiaries and request that the Trustee terminate the Trust and distribute all its assets to himself and his wife), was in contemplation for a sufficient period of time for any periods of transitory cognitive impairment to be immaterial.


In considering the two main claims, I have addressed the issue of capacity first because it is (in light of the assistance of expert evidence and its basis in largely uncontroversial medical records) a more straightforward claim to evaluate. Second, because the Plaintiffs' undue influence claim was significantly based on Alan's vulnerability due to his physical and mental medical position (both of which were addressed to some extent by the Experts), it seemed logical to determine his mental capacity first before assessing the validity of the undue influence claim.


I find that Alan was particularly vulnerable to undue influence after his terminal cancer diagnosis in mid-October 2015 and until his death. He was largely bedridden, frail and heavily dependent on Deborah to manage his financial affairs. He was legally blind and suffered from anxiety, a psychological condition which was clearly exacerbated by conflictual situations. His vulnerability was not negligible in the summer of 2015 when his health was sharply declining, but by October 2015 his vulnerability was particularly acute. By this time his attempts to terminate the Trust, which were initially inspired by Alan's tax position, had turned into a battle royale between Alan's Florida and London families. Deborah was a passionate defender of Alan's wellbeing and had a strong motivation to prevent her husband becoming anxious and stressed by both (a) taking control of communications with lawyers and (b) isolating Alan from potentially stressful and inevitably tiring discussions with his children. As the conflict sharpened in August 2015, Deborah found invaluable litigation-managing help in the form of the exuberantly combative accountant friend of hers and Alan's, Mr Joseph Knecht. He, probably more than Deborah, was willing to demonize Alan's children and forestall any trans-Atlantic family reconciliation, appreciative of the fact that, after Alan's terminal diagnosis, if the Trust assets were distributed to Alan and Deborah jointly, the prize (after IRS liabilities were met) would fall entirely into Deborah's lap.


The Plaintiffs perceived that Deborah was primarily motivated by pure greed and a desire to deliberately influence their father, but a careful review of the contemporaneous record shows that she had a deep-seated fear that the Plaintiffs' control of the Trust after Alan's death would work to her financial disadvantage. This fear was not an irrational one; for just as she viewed herself as entitled to inherit all of her husband's wealth, it seems likely that Alan's children instinctively viewed her as an interloper in the Trust that their father had originally settled exclusively for them, whose income entitlement would eat into what they originally hoped to receive upon their father's death. Moreover, Deborah was genuinely concerned for her husband's welfare, upset his initial Trust termination requests were opposed by his children and shocked by her perception (after he became seriously ill) that they were putting their own financial interests ahead of all else.


The Plaintiffs' initial opposition to the Trust termination plans was perhaps understandable in hindsight but would not have been apparent to Alan and Deborah at the time. The Plaintiffs clearly appeared to Deborah to be greedy and uncaring of their father's welfare, seemingly uninterested in protecting him from the civil and potentially criminal penalties from the IRS which threateningly loomed. While Alan had been advised to terminate the Trust, his children received advice which cast doubt on this strategy.


Each side was arguably right. But after Alan's terminal diagnosis in October 2015, the significance of criminal penalties must have waned and the July 2015-vintage plan of Alan taking control of the Trust assets, resolving the IRS claim and (at some future point uncertain) creating two US-based grantor trusts for his wife and children respectively, was well past its sell-by date. Deborah may have avoided seeking guidance on the notoriously tricky question of...

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