Re Ojjeh Trust

JurisdictionCayman Islands
CourtGrand Court (Cayman Islands)
Judge(Smellie, Ag. J.)
Judgment Date02 June 1993
Date02 June 1993
Grand Court

(Smellie, Ag. J.)

IN THE MATTER OF THE OJJEH TRUST

R. Walker, Q.C. and N. Timms for the trustees;

C. Sparrow, Q.C. and N. Clifford for the first respondent;

L. Tucker as guardian ad litem for the second respondent;

F. Hinks and R. Nelson for the third respondent;

I. Paget-Brown and C. Quin for the fourth respondent.

Cases cited:

(1) Beddoe, In re, Downes v. Cottam, [1893] 1 Ch. 547; (1893), 37 Sol. Jo. 99, applied.

(2) Butt v. Kelson, [1952] Ch. 197; [1952] 1 All E.R. 167, observations and dicta of Romer, L.J. and Evershed, M.R. applied.

(3) Chiltern-Hunt v. Chiltern-Hunt, Cause No. 217/86, October 27th, 1988, unreported.

(4) Eaton Deed, In re, Shaw v. Midland Bank Executor & Trustee Co. Ltd., [1964] 1 W.L.R. 1269; [1964] 3 All E.R. 229, dicta of Wilberforce J. applied.

(5) Lemos v. Coutts & Co. (Cayman) Ltd., Cause No. 425/91, April 19th, 1993, unreported.

(6) Londonderry”s Settlement, In re, [1965] Ch. 918; [1964] 3 All E.R. 855, dicta of Salmon, L.J. applied.

(7) Malone v. Metropolitan Police Commr., [1979] Ch. 344; [1979] 2 All E.R. 620, observations of Megarry, V.-C. applied.

(8) Moritz, In re, [1960] Ch. 251; [1959] 3 All E.R. 767, applied.

(9) O”Rourke v. Darbishire, [1920] A.C. 581; [1920] All E.R. Rep. 1, dicta of Lord Wrenbury applied.

Legislation construed:

Trusts Law (Law 6 of 1967, revised 1976), 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 or the assets of any testator or intestate . . . 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. . . .’

Trusts-beneficiaries-joinder as defendant to summons for directions-beneficiary to be joined as defendant if summons seeking directions for proceedings against him-not normally to be provided with evidence or allowed to attend hearing-general rule flexible according to circumstances

Trusts-powers and duties of trustees-application for directions-merits of summons seeking directions for proceedings against beneficiary to be decided on situation at time of hearing-court may consider actions by beneficiary directly affecting trust assets but not merits of beneficiary”s foreign proceedings against trustee

Trusts-powers and duties of trustees-declaration approving trustee”s conduct-court may make declaration that trustee properly administering trust-limited to declaration on specific issues and not appropriate to give abstract, general approval

Trusts-beneficiaries-rights-right to inspect trust documents-right to inspect and copy essential trust documents based on qualified proprietary right in trust assets-no automatic right to details of companies owned by trust but beneficiary may make special case for disclosure

Trusts-powers and duties of trustees-duty to give information to beneficiaries-court to consider on merits trustee”s application for order limiting extent of disclosure-possibility of obtaining wider disclosure orders in foreign proceedings no obstacle to court”s granting disclosure order limited to specific items

Trusts-powers and duties of trustees-application for directions-application for directions as to foreign proceedings to be allowed (a) if proceedings likely to cause difficult conflict of laws questions relating to foreign companies owned by trust, (b) to give trustees opportunity to establish Cayman law as proper law governing trust, (c) for trustees to present good arguable case on substantive issues

The trustees applied for directions concerning foreign proceedings involving the trust and a declaration that they had acted properly in relation to it.

The trust was governed by the laws of the Cayman Islands and its assets included several private companies registered in different countries. In their attempts to resolve the various difficulties they inherited with the trust and generally in the discharge of their duties and responsibilities, the trustees voluntarily provided the beneficiaries with information about, inter alia, their intentions for the future management of the trust, for the payment of dividends and for the commission of a global valuation of the trust assets. They also engaged in extensive correspondence with the first respondent (a beneficiary and the settlor”s wife) on these and other matters of concern to her and provided her with annual group accounts of the companies within the trust.

The first respondent challenged the administration of the trust with respect to herself and her young son, also a beneficiary (and the second respondent in this application). She obtained judicial orders in France, where she resided, for the judicial sealing of a valuable art collection housed in her residence there even though it was trust property; she claimed that it was part of the settlor”s free estate and, moreover, that it was the subject of diplomatic immunity. Although she subsequently resiled from this position, she continued to deny the trustees access to the art collection notwithstanding its importance as an asset of the trust.

She also obtained orders in French guardianship proceedings directing a court representative to compile ‘an inventory or description of the minor”s estate, wherever they might be,’ and appointing an ad hoc guardian with the right to access to copies of documents obtained by the court representative and the right to use them as he saw fit. In addition, she successfully applied to the Swiss court for orders for the recognition and enforcement of the French orders.

The trustees” intervention in the French proceedings was rejected and their pending appeal sought to challenge the extensive powers granted to the court representative and the setting aside of the disclosure orders. These orders were stayed pending the outcome of the present proceedings.

In these proceedings the trustees applied for (a) directions in respect of matters of litigation exterior to the trust and seeking the advice of the court for the benefit of the trust as a whole; and (b) a declaration approving their past conduct in relation to the management of the trust, in particular, their refusal to accede to the request to disclose all trust documents. This application was approved by the other beneficiaries of the trust. They raised as a preliminary issue whether a beneficiary who

was likely to be opposing them in litigation should be allowed to be present upon their application for directions in respect of litigation. A guardian ad litem was appointed by the court to participate in the proceedings in the interests of the minor beneficiary.

The trustees submitted inter alia that (a) the European judicial orders prevented their proper administration of the trust and made it necessary for them to apply for directions. In this respect, the propriety of the European proceedings, the material non-disclosure of the first respondent in respect of known assets of the trust and her generally hostile conduct were important matters to consider in deciding what those directions should be; (b) in the light of the serious criticisms levelled at them by the first respondent, their application for a declaration approving their conduct with respect to the management of the trust so far was appropriate; (c) although they had always provided the beneficiaries with information and documentation about the affairs of the trust, they believed it to be against the interests of the trust to accede to the first respondent”s request for every type of information concerning the trust companies, since some was confidential and commercially sensitive; and (d) it was in the interests of the trust and an aspect of their general responsibilities to the trust that they should be allowed to contest or participate in the European proceedings to the extent of challenging the appropriateness or justice of the European orders given that the trust was intended to be governed by Cayman law.

The first respondent submitted in reply, inter alia, that (a) since there had been no proper examination by the court of the basis for her request for disclosure or as to the trustees” justification for refusal, the court had no jurisdiction to grant a declaration approving the trustees” conduct, as it would amount to granting a declaration on abstract questions or hypothetical facts; (b) the declaration should not be granted for the further reason that although the disclosure sought was not currently being pursued, those demands could be renewed in the future in furtherance of the orders already obtained in Europe; accordingly, a declaration granted now by the court in favour of the trustees could become ‘pro tanto falsified’; and (c) the directions sought by the trustees invited a ‘jurisprudential mismatch’ which should be avoided, as they would seek to deploy common law trust principles with the consequent classification of the European companies as separate entities when European law treated them differently.

Held, granting the orders sought:

(1) Trustees seeking directions on whether proceedings should be taken against a beneficiary should join that beneficiary as a defendant to the summons together with the other beneficiaries but it was not the normal practice that such defendant should be present in court when the matter was debated and he should not be furnished with the evidence upon which the court was asked to act. This was a general rule that the court could adapt to particular circumstances but in this case there was no need to deviate from the normal course given the limited purposes of the trustees” summons (page 359, line 14 – page 360, line 11).

(2) The merits of the trustees” case fell to be decided on the state of...

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