Re Circle Trust

• Jurisdiction: Cayman Islands
• Judge: (Henderson, J.)
• Judgment Date: 14 November 2007
• Court: Grand Court (Cayman Islands)
• Date: 14 November 2007

Grand Court

(Henderson, J.)

IN THE MATTER OF THE CIRCLE TRUST

HSBC INTERNATIONAL TRUSTEE LIMITED

and

WONG and FIVE OTHERS

Attorneys: Maples & Calder for the plaintiff; Appleby Spurling Hunter for the first, third and fourth defendants; Ritch & Conolly for the second defendant; Giglioli & Co. for the fifth defendant.

Trusts-beneficiaries-right to costs

The sixth defendant was the settlor of a trust for the benefit of his wife (the first defendant) and their four children (the second to fifth defendants). The parties had already spent over US$5m. on legal proceedings concerning the trust, which had assets of US$40–50m. Following an application by the second defendant, the Grand Court (Sanderson, Ag. J.) directed that certain operating companies (the main assets of the trust) be sold. The first, third and fourth defendants commenced an appeal against the order. The second defendant had been removed as director of the operating companies and intended to appeal against that order if the first, third and fourth defendants succeeded in their bid to prevent the companies being sold, and also to appeal against a ruling (reported at 2007 CILR 225) that the sixth defendant, the trust protector, was entitled to remuneration for managing the operating companies. The first to fifth defendants sought an order directing the trustee to pay the costs of the appeals, in advance, from the trust fund. They submitted that the proceedings were not hostile but were for the benefit of the trust and that, furthermore, all the parties had already agreed on a draft order awarding pre-emptive costs to each party.

Held: The application for a pre-emptive costs order would be refused. A party”s litigation costs would only be reimbursed from a trust if the costs were incurred for the benefit of the trust itself (In re Beddoe, Downes v. Cottam, [1893] 1 Ch. 547, applied), and ‘hostile’ litigation would not satisfy the test (In re Buckton, Buckton v. Buckton, [1907] 2 Ch. 406, applied). The court could make an award in exceptional circumstances if satisfied that its guidance was clearly required to determine the matters in question (Barclays Private Bank & Trust (Cayman) Ltd. v. McLaughlin, 1998 CILR...