Re Hall

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 26 July 1995
• Date: 26 July 1995
• Court: Grand Court (Cayman Islands)

Grand Court

(Smellie, J.)

IN THE MATTER OF HALL

J.R. McDonough for the plaintiff;

T.B. Shea for the second and third defendants;

Ms. C.J. Bridges for the fifth defendant.

Cases cited:

(1) Alsop Wilkinson v. Neary, [1995] 1 All E.R. 431, distinguished.

(2) American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396; [1975] 1 All E.R. 504, considered.

(3) Evans, In reWLR, [1986] 1 W.L.R. 101; sub nom. Evans v. Evans, [1985] 3 All E.R. 289.

(4) Iran Nabuvat, The, [1990] 1 W.L.R. 1115; [1990] 3 All E.R. 9, applied.

(5) National Anti-Vivisection Socy. Ltd. v. Duddington, The Times, November 23rd, 1989, unreported, considered.

(6) Ninemia Maritime Corp. v. Trave Schiffahrts G.m.b.H. & Co. K.G., The Niedersachsen, UNK[1984] 1 All E.R. 398; [1983] 2 Lloyd”s Rep. 600; on appeal, [1983] 1 W.L.R. 1412; [1984] 1 All E.R. 398, considered.

(7) Universal & Surety Co., In re, 1992–93 CILR 157.

Injunctions-Mareva injunction-trust assets-ex parte order is Mareva injunction if intended to prevent dissipation of trust assets prior to decision of claim, rather than to act as precursor to permanent injunction-parties subject to injunction ordinarily entitled to access to trust assets to meet legal fees

Trusts-costs-indemnity from trust fund-trustee entitled to indemnity from trust funds to defend against claim that trust invalid unless claimant can show strong prima facie case that e.g. trust improperly settled or that claim is tracing action

Trusts-costs-indemnity from trust fund-party attacking validity of trust to show strong prima facie case in order to finance action from trust fund in dispute

The plaintiff sought leave to appeal against an order of the Grand Court varying the injunction he had obtained.

The plaintiff was the trustee in bankruptcy of the first defendant and had obtained an ex parte injunction restraining him or the second and third defendants, companies which held property of which he was the beneficial owner, from dealing with their assets in the Cayman Islands. It subsequently came to light that the first defendant”s assets were in fact held on trust by his own son. As a result, the plaintiff applied for a variation of the injunction to enable him to fund his action from the trust fund in dispute, which he contended had been revoked by the first defendant”s subsequent use of discretionary powers reserved to him through his appointment as trust protector, the consequence being that the first defendant was still the owner of the trust fund and it was therefore the property of the estate in bankruptcy. In return, the defendants sought, inter alia, the joinder of the trustee as fifth defendant, which was unopposed, and also both an indemnity from the trust fund for the costs of defending the suit and security for their costs from the plaintiff.

The Grand Court (Smellie, J.) joined the trustee as fifth defendant and varied the injunction, holding, inter alia, that (i) the injunction was a Mareva injunction and consequently the defendants were entitled to access to the trust fund in order to meet reasonable legal fees incurred in defending the plaintiff”s suit; (ii) the fifth defendant, as trustee, was

obliged to defend the trust; (iii) the plaintiff was not entitled to an indemnity from the trust fund; and (iv) the defendants were also entitled to security for their costs from the plaintiff. These proceedings are noted at 1994–95 CILR N–4.

The plaintiff sought leave to appeal against that decision, submitting that he had a good arguable case on appeal because (a) the injunction was not a Mareva injunction; (b) the trustee was obliged to remain neutral as between competing claims to the trust assets and so was not entitled to use the trust assets to meet legal fees; and (c) he was entitled to fund his action from those assets.

Held, refusing leave to appeal:

(1) Since the original ex parte order was not intended to act on an interim basis as a precursor to a permanent injunction in favour of the plaintiff but was intended to prevent the dissipation of trust assets pending the decision of a claim that the plaintiff was entitled to them, it was a Mareva injunction and consequently the defendants would ordinarily be entitled to access to the trust fund for the purpose of meeting their legal fees (page 458, lines 28–36;page 458, line 41 – page 459, line 5).

(2) The trustee was not obliged to remain neutral, although the question of whether to allow him and the other defendants access to the trust fund was a matter for the court”s discretion and depended on the facts of the case. The plaintiff had to show a strong prima facie case that, e.g., the trust fund had been settled with dishonestly obtained assets, or was made when the settlor was insolvent or that the plaintiff”s claim was a tracing action. None of these elements was present in this case and therefore the plaintiff had not made out a sufficiently strong case to justify impairing the defendants” ability to defend the trust (page 459, lines 28–35; lines 41–44; page 461, lines 41–45;page 462, lines 28–32).

(3) Although the plaintiff had shown a good arguable case and had thus satisfied the test for obtaining Mareva relief, for the court to exercise its exceptional jurisdiction to allow his action to be financed from the trust fund in dispute, he had to show a strong prima facie case and had failed to do so. It followed that the plaintiff had failed to show a good arguable case to be made on appeal, and his application for leave to appeal would therefore be refused (page 462, lines 33–44;page 463, lines 7–14).

SMELLIE, J.: The plaintiff seeks leave to appeal against my order of
July 6th, 1995 by which I varied the then existing Mareva injunction to
15	allow the second, third and fifth defendants access to funds for the
payment of legal fees.
The plaintiff also seeks to show I was wrong to reach two other
conclusions. First, that the order granted ex parte by the learned Chief
Justice on May 22nd, 1995 and varied by me on July 6th is of the Mareva
20	type of injunction. Secondly, that the fifth defendant, the trustee, is duty
bound, in the context of this case, to take reasonable steps to defend the
trust and to preserve its assets for the benefit of the beneficiaries. It is upon
these conclusions that my decision to allow access to funds for the
payment of legal fees was based. It is appropriate now that I refer to them
25	only briefly again in the proper context in which those conclusions were
reached, as this is not a rehearing of the arguments put before me on the
earlier application.

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