Re H

JurisdictionCayman Islands
Judge(Smellie, J.)
Judgment Date08 October 1996
CourtGrand Court (Cayman Islands)
Date08 October 1996
Grand Court

(Smellie, J.)

IN THE MATTER OF H.

M. Parkinson for the applicant;

I.F. Archie, Solicitor General, as amicus curiae.

Cases cited:

(1) -ABC Ltd., In re, 1984–85 CILR 130.

(2) -Att. Gen. v. Bank of Nova Scotia, 1984–85 CILR 418.

(3) -BankAmerica Trust & Banking Corp. (Cayman) Ltd., In re, 1992–93 CILR 574.

(4) -British Nylon Spinners Ltd. v. I.C.I. Ltd., [1953] Ch. 19; [1952] 2 All E.R. 780.

(5) -Confidential Relationships (Preservation) Law, s.3A, In re, 1988–89 CILR N–6.

(6) -MacKinnon v. Donaldson, Lufkin & Jenrette Secs. Corp., [1986] Ch. 482; [1986] 1 All E.R. 653.

(7) -R. v. Grossman, 1981–83 MLR 20; (1981), 73 Cr. App. R. 302.

(8) -Rio Tinto Zinc Corp. v. Westinghouse Elec. Corp., [1978] A.C. 547; [1978] 1 All E.R. 434.

(9) -X A.G. v. A BankUNK, [1983] 2 All E.R. 464; sub nom. X, Y & Z v. B, [1983] 2 Lloyd”s Rep. 535.

Legislation construed:

Confidential Relationships (Preservation) Law (1995 Revision) (Law 16 of 1976, revised 1995), s.2: The relevant terms of this section are set out at page 241, lines 6–8; line 22.

s.3(2): ‘This Law has no application to the seeking, divulging or obtaining of confidential information-

(b) -by or to-

(i) -any professional person acting in the normal course of business or with the consent, express or implied, of the relevant principal. . . .’

s.4(1): ‘Whenever a person intends or is required to give evidence in, or in connection with, any proceeding being tried, inquired into or determined by any court, tribunal or other authority (whether within or without the Islands) any confidential information within the meaning of this Law, he shall before so doing apply for directions and any adjournment necessary for that purpose may be granted.’

Trusts Law (1996 Revision) (Law 6 of 1967, revised 1996), s.45:

‘Any trustee . . . shall be at liberty, without the institution of suit, to apply to the Court for an opinion, advice or direction on any question respecting the management or administration of the trust

money . . . and the trustee . . . acting upon the opinion, advice or direction given by the Court shall be deemed, so far as regards his own responsibility, to have discharged his duty as such trustee . . . in the subject matter of the said application.’

s.85: ‘(1) In determining the governing law of a trust, regard is first to be had to the terms of the trust and to any evidence therein as to the intention of the parties; and the other circumstances of the trust are to be taken into account only if the terms of the trust fail to provide such evidence.

(2) A term of the trust expressly selecting the Laws of the Islands to govern the trust is valid, effective and conclusive regardless of any other circumstances.’

Confidential Relationships-application to court for directions-compliance with grand jury subpoena-directions to be sought by trustee of Cayman assets ordered by US grand jury to disclose confidential information in evidence in foreign proceedings

Confidential Relationships-application to court for directions-factors for consideration-against public policy to allow disclosure by trustee of information on trust assets in compliance with foreign subpoena whilst legal challenge to trust”s validity pending

Conflict of Laws-application of foreign law-foreign penal law-subpoena issued by grand jury with or without endorsement from US court may not compel disclosure of information on Cayman assets in US criminal proceedings in breach of Confidential Relationships (Preservation) Law (1995 Revision)

The applicant sought directions under the Confidential Relationships (Preservation) Law (1995 Revision), s.4 on whether he should comply with a subpoena issued by a grand jury in the United States.

The applicant, a US citizen, was subpoenaed by a grand jury in Pennsylvania to give evidence relating to assets in the Cayman Islands which his father had allegedly failed to disclose as his property in bankruptcy proceedings in Pennsylvania. The assets were part of a trust fund of which the applicant”s father was the purported settlor and of which the applicant had been appointed trustee.

The validity of the trust was the subject of litigation pending in the Cayman courts at the time of the application and, although the applicant”s father did not object to the disclosure of the information sought, the trust companies holding the assets did not give their consent.

The Pennsylvania District Court granted a stay on compliance with the subpoena pending the outcome of the present application.

The applicant submitted that (a) although his father did not object to his disclosure of the information relating to the assets of the trust fund he considered it appropriate to apply for the court”s directions before com-plying with the grand jury subpoena, given the confidential nature of the information; and (b) however, he intended to give evidence in any event because of the penalties he would otherwise face in the United States.

The Solicitor General as amicus curiae submitted that (a) since the applicant had received confidential information from a principal (his

father or the trust companies holding the assets) in circumstances which fell within the definitions of s.2 of the Confidential Relationships (Preservation) Law (1995 Revision), he was obliged to make the present application for directions before divulging the information without his principal”s express or implied consent, whether the application was framed under the Confidential Relationships (Preservation) Law (1995 Revision), s.4 or under the Trusts Law (1996 Revision), s.45, in order to safeguard the rights of the beneficiaries of the trust; (b) his father could not validly consent to the disclosure since he was under threat of penalty from the US court; (c) whilst the issue of the validity of the trust was still being contested in the Cayman courts, it was against public policy, and potentially in breach of the applicant”s fiduciary duties to the beneficiaries for him to disclose the requested information to an investigating body in the United States; (d) the subpoena issued by the grand jury, as a measure intended to compel assistance in the domestic administration of justice in breach of the laws of a foreign jurisdiction, was an infringement of Cayman sovereignty and therefore ineffective; and (e) accordingly the applicant should not comply with the subpoena.

Held, giving directions under s.4:

(1) Since the applicant had, upon his appointment as trustee, received confidential information in the course of business of a professional nature within the meaning of s.2 of the Confidential Relationships (Preservation) Law (1995 Revision), he had properly applied under s.4 for the court”s directions. There had been no consent to disclosure from the trust companies holding the assets, nor any valid consent from his father who was under threat of sanction from the US courts. Had the present application not been made, he would still have been required by the Trusts Law (1996 Revision), s.45 to obtain guidance from the court in observance of his fiduciary duty to the beneficiaries of the trust (page 242, lines 2–45).

(2) It was against public policy to allow the disclosure of the...

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