Re T Trust

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 28 February 2000
• Court: Grand Court (Cayman Islands)
• Date: 28 February 2000

Grand Court

(Smellie, C.J.)

IN THE MATTER OF THE T TRUST

A.G. Steinfeld, Q.C., J.L. Stephens, A.J.E. Foster and S.R. Andrew for the plaintiffs;

A.J. Jones for the first to fourth defendants;

C.R.F. Tidmarsh, A.J. Bolton and J.P. Walton for the fifth and seventh defendants;

A.G.D. Duckworth for the sixth and eighth to twelfth defendants;

Mrs. S. Warnock-Smith and W.J. Helfrecht for the thirteenth defendant.

Cases cited:

(1) H Ltd. v. B, 1994–95 CILR 343.1994–95 CILR 343.

(2) -Henderson v. HendersonENR(1843), 3 Hare 100; 67 E.R. 313; [1843–60] All E.R. Rep. 378, dicta of Wigram, V.-C. applied.

(3) -House of Spring Gardens Ltd. v. Waite, [1991] 1 Q.B. 241; [1990] 2 All E.R. 990, followed.

(4) -Vernon v. Inland Rev. Commrs.WLR, [1956] 1 W.L.R. 1169; sub nom. Vernon (Trustees of Employees Fund of William Vernon & Sons Ltd.) v. Inland Rev. Commrs., [1956] 3 All E.R. 14, considered.

(5) -Whishaw v. StephensELR, [1970] A.C. 508; sub nom. Re Gulbenkian”s Settlement Trusts, Whishaw v. Stephens, [1968] 3 All E.R. 785.

(6) -Yat Tung Inv. Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581; (1975), 119 Sol. Jo. 273, applied.

Estoppel-res judicata-consent order-parties estopped from raising issue necessarily decided in approving compromise agreement-non-contentious nature of previous proceedings immaterial

Civil Procedure-summons-striking out-may strike out cause of action as frivolous or vexatious if issue already substantially determined in earlier proceedings, even if not strictly estopped as res judicata

The applicants sought to challenge the validity of the appointment of a beneficiary of a trust.

The settlor of a Cayman discretionary trust provided for the appointment by the trustees of additional beneficiaries, including ‘any person, persons or class of persons or charity.’‘Charity’ was defined in the deed of settlement as ‘a body corporate or unincorporated which in the opinion of the trustees is established anywhere in the world for generally recognized and accepted charitable purposes.’ In a memorandum of his wishes for the distribution of funds under the trust, the settlor provided for the setting up of separate charitable trusts as discretionary beneficiaries through which charitable distributions could be made. The thirteenth defendant, the L Foundation, was established as a charitable trust for this purpose.

After the settlor”s death, certain beneficiaries under the main trust challenged its validity in the Grand Court. Ultimately, a compromise of their claims was negotiated, under which their interests as beneficiaries were bought out and, in order to protect the interests of their offspring who remained beneficiaries, the trustees” discretionary powers were limited, inter alia, as to the proportion of the trust fund which could be distributed to charitable beneficiaries. The compromise was agreed with the consent of all beneficiaries, including the L Foundation, and was approved by the court on behalf of the minor and unborn beneficiaries.

An order was later made for the segregation of the trust into several new sub-trusts as a result of further litigation concerning the investment policies adopted by the trustees. A distribution of capital to the L Foundation was proposed upon the segregation. The applicant beneficiaries challenged the appointment of the L Foundation as a charitable beneficiary under the trust.

They submitted that (a) since charity, as defined by the settlement deed, was not confined to those objects regarded as charitable under Cayman law, but extended to purposes generally accepted as charitable

anywhere in the world, the power to appoint charitable beneficiaries was void as uncertain; (b) for the same reason, even if the L Foundation had been validly appointed as a person rather than as a charity, any requirement by the trustees that funds given to it be applied for charitable purposes would be in excess of their powers and invalid; and (c) since the validity of the appointment of the L Foundation had not been in issue before the court when it had made the order approving the compromise, they were not estopped from raising it now.

The respondent trustees and beneficiaries submitted in reply that the applicants were estopped per rem judicatam from challenging the appointment of the L Foundation, since the status of the trust as a beneficiary had clearly been before the court when the amendment limiting distributions to charity was approved, and the issue of its validity should have been raised then.

Held, dismissing the application:

(1) The applicants were estopped from raising the issue of the L Foundation”s status as a beneficiary, since that issue had necessarily been determined as a prerequisite to the consent order approving the limitation on charitable distributions. Since the L Foundation had been established to carry out the settlor”s charitable designs and its consent as a beneficiary had been recognized as required, the issue had plainly been before the court. Indeed, the court would have hesitated to fetter the trustees” discretion in such a way had the consent of all the beneficiaries not been given. The doctrine of res judicata applied not only to issues specifically decided by the court but also to matters which ought to have been raised in earlier litigation. The relevant parties now before the court were the same; they had been required to present their whole case, and to permit them to reopen the same subject-matter would be an abuse of process. The non-contentious nature of the proceedings for approval of the compromise did not preclude the application of this rule (page 17, lines 5–35; page 19, lines 25–40; page 20, line 16 – page 21, line 37; page 22, line 30 – page 23, line 2).

(2) Even if the applicants had not been estopped under the res judicata principle, their cause of action could have been struck out as frivolous or vexatious, since their aim was to relitigate a question which had, in substance, already been determined (page 22, lines 6–14).

SMELLIE, C.J.: The T Trust was established as a Cayman Islands
15	trust by a deed of settlement dated January 5th, 1984.
The thirteenth defendant (‘the L Foundation’) is a Liechtenstein
foundation established by the trustees of the T Trust to carry out what the
trustees describe as ‘the settlor”s charitable wishes.’ His charitable
wishes were expressed as intended preferably to benefit charities in his
20	country of origin. For present purposes, those wishes were as expressed
in the settlor”s last memorandum of wishes dated January 4th, 1988.
Notwithstanding that the settlor expressly acknowledged in cl. 1 that his
memorandum of wishes had ‘no legal and binding effect and . . . should
not be taken as attempting to fetter in any way the trustees in the exercise
25	of their discretionary powers,’ there existed the clear understanding that
the trustees would give effect to his wishes as a matter of the exercise of
their discretion if they thought it appropriate to do so.
The establishment of the L Foundation by the trustees and its purported
appointment as a beneficiary of the T Trust by them by deed of
30	appointment on April 12th, 1990 is to be viewed against that background.
The settlor”s wishes had led the trustees to formalize a vehicle through
which, in their view, those wishes could best be fulfilled. The settlor”s
wishes, as well as the idea for such a vehicle to be set up for ‘ease of
administration’ and which became the L Foundation, are clearly stated in
35	cl. 8(d) and (e) of the memorandum of wishes dated January 4th, 1988 in
the following terms:
‘(d) -14% of the general revenue of the [T Trust] shall be distributed
annually to charity, preferably . . . charities [of the settlor”s
country of origin] as my trustees shall think fit.
40	(e) -4% of the general revenue of the [T Trust] shall be distributed
annually for prizes, scholarships, bursaries and endowments for
students and scholars and for general educational purposes as the
trustees may decide, preferably for [nationals or institutions of the
settlor”s country of origin]. For this clause and cl. 8(d) above, the
45	trustees may, for ease of administration, set up separate charitable

trusts and appoint these trusts to the discretionary class in the
[T Trust].’
And in the closing paragraph of cl. 8 he stated:
‘It is my wish that the trust should continue for as long as
5	possible, or until there are no more of my heirs, issue and
descendants living, or until such time as in the opinion of my
trustees the [T Trust] is serving no useful purpose. Any capital
remaining can then be distributed in equal shares to my descendants
then alive, and if I have no descendants living at that time the
10	trustees may distribute the capital to charity, preferably in [the
settlor”s country of origin].’
These clear wishes notwithstanding, charity was itself not directly made
an object of the trusts of the T Trust by the settlor. Instead, by cl. 2(ii) of
the deed of settlement, charity is listed among the discretionary classes of
15	beneficiaries who may be appointed by the trustees as additional benefi
ciaries of the T Trust:
‘The trustees may at any time or times before the perpetuity date,
by deed or deeds, revocable or irrevocable, appoint by way of
addition to the beneficiaries any person, persons or class of persons
20	or charity in being at the date of such appointment.’
By cl. 1(viii), ‘charity’ is defined to mean-
‘a body corporate or unincorporated which, in the opinion of the
trustees, is established anywhere in the world for generally
recognized and accepted charitable purposes and the decision of the
25	trustees in this respect shall be

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