Re the Y Trust NO. 1
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, C.J.) |
| Judgment Date | 19 January 2016 |
| Date | 19 January 2016 |
| Court | Grand Court (Cayman Islands) |
(Smellie, C.J.)
F. Hinks, Q.C. and S. Hurry for the plaintiffs;
C.D. McKie, Q.C. and C. La Roda for the first defendant;
Ms. R. Reynolds for the second defendant;
Mrs. S. Warnock-Smith, Q.C. and R. Lindley for the third, fourth and fifth defendants.
(1) AB Jnr. v. MB, 2013 (1) CILR 1, referred to.
(2) B v. Trust Management, Grand Ct., March 10th, 1988, unreported (noted at 1988–1989 CILR N–22), considered.
(3) Beale v. Kyte, [1907] 1 Ch. 564, referred to.
(4) Cecil v. LangdonELR(1884), 28 Ch. D. 1, applied.
(5) Circle Trust, In re, 2006 CILR 323, referred to.
(6) Davis v. Richards & Wallington Indus. Ltd., [1990] 1 W.L.R. 1511; [1991] 2 All E.R. 563; [1990] Pens. L.R. 141, considered.
(7) Epona Trustees Ltd., Re, [2009] W.T.L.R. 87, referred to.
(8) Gibson v. DoegENR(1857), 2 Hurl. & N. 615; 153 E.R. 253, followed.
(9) Golden Trust, In re, 2012 (2) CILR 355, followed.
(10) Harris v. KnightELR(1890), 15 P.D. 170, followed.
(11) IFM Corporate Trustees v. Helliwell, [2015]JRC160, Jersey Royal Ct., July 31st, 2015, unreported, referred to.
(12) Inland Rev. Commrs. v. Bernstein, [1961] Ch. 399; [1961] 2 W.L.R. 143; [1961] 1 All E.R. 320, applied.
(13) Lindsay Petroleum Co. v. HurdELR(1874) L.R. 5 P.C. 221, considered.
(14) Megerisi v. Scotiabank Trust (Cayman) Ltd., 2004–05 CILR 456, referred to.
(15) Nwakobi v. Nzekwu, [1964] 1 W.L.R. 1019, followed.
(16) Weld v. Petre, [1929] 1 Ch. 33, followed.
(17) Wilkinson v. ParryENR(1828), 4 Russ. 272; 38 E.R. 808, referred to.
Trusts Law (2011 Revision), s.8(1): The relevant terms of this sub-section are set out at para. 116.
s.110(2): The relevant terms of this sub-section are set out at para. 121.
Trusts—powers and duties of trustees—right to retire—if deed of settlement states that trustee may retire by giving notice to co-trustees, right to retire as opposed to power of retirement granted—right to retire imposes no fiduciary duty—consent of trust protector unnecessary—power of retirement to be exercised in best interests of beneficiaries
Trusts—powers and duties of trustees—right to retire—trustees granted statutory power to retire by Trusts Law (2011 Revision), s.8(1) with consent of co-trustees and any person entitled to appoint trustees—statutory power may be expressly or impliedly excluded by terms of trust—no implied exclusion if terms of trust give power to trustees to retire without consent
Trusts—rectification—discretion of court—court to consider delay and laches when determining whether to grant order for rectification—mere delay not sufficient to bar claim—necessary to demonstrate that rectification inequitable, e.g. due to conduct amounting to waiver—waiver only established if shown that plaintiff fully aware that right to rectify will be abandoned
Trusts—rectification—incorrect drafting of trust instrument—if rectification of deed of settlement sought in order to validate subsequent deed of retirement, court to be satisfied settlor”s intentions not expressed in deed of settlement as result of mistake, and that rectification will give effect to those intentions—deed of settlement not to be rectified even if contrary to settlor”s intentions if deed of retirement in any event invalid, as rectification not effective remedy
The plaintiff trustees sought orders rectifying a deed of settlement and validating a deed of retirement.
The trust was established by a deed of settlement in December 1982; a deed of exclusion was subsequently executed stipulating that the trust was for the benefit of ‘Matthew’ and his descendants. The deed of settlement stated that the settlor, ‘Y Trust Inc.’ (which was controlled by Matthew”s mother, ‘FDS’), was to be the trust”s protector; a deed of appointment
executed on the same day, however, appointed ‘Fern’ (a company controlled by Matthew) as protector. In 1984, a deed of retirement was executed by which two trustees purported to retire.
In 2012, Matthew”s children, ‘Fiona’ and ‘Frederick,’ the beneficiaries of the trust after his death, indicated that they wished to appoint two private trust companies as trustees in place of the plaintiffs. It was subsequently discovered by Fiona”s attorneys that the appointment of Fern as protector was invalid according to the terms of the deed of settlement. It was therefore uncertain whether the 1984 deed of retirement was itself valid as no consent had been given to it by a protector, and it was also therefore doubtful whether the trust had been properly administered over the preceding 30 years as subsequent trustees would not have been validly appointed and the two retiring trustees had not participated in the trust”s affairs. Because of the uncertainty regarding the administration of the trust, the plaintiffs were reluctant to retire and be replaced by the private trust companies as it was unclear that any indemnities granted to them would be valid.
The plaintiffs therefore made a non-contentious application seeking an order rectifying the deed of settlement so that Fern was stated to be the protector, or, alternatively, an order that the trustees” 1984 deed of retirement was valid. They submitted that (a) the deed of settlement should be rectified as the settlor and Matthew had intended Fern to be the protector of the trust, and the inclusion of the settlor as protector had been the result of the mistaken drafting of the deed; (b) Fern should be presumed to have validly consented to the deed of retirement, in the absence of any other evidence, according to the presumption of due execution; (c) in the alternative, the protector”s consent to the deed of retirement was not necessary for the trustees to retire validly; (d) in any event, the settlor had consented to the deed of retirement qua protector; (e) the deed of retirement was also valid on the basis that the trustees had exercised their statutory power to retire pursuant to s.8 of the Trusts Law (1976 Revision) (the equivalent of s.8(1) of the Trusts Law (2011 Revision)); (f) any delay in bringing proceedings did not bar a claim for rectification as mere delay alone was not sufficient to prevent a claim, and there were no additional factors which indicated that rectification would be inequitable; and (g) the two private trust companies should be appointed as trustees, despite such an appointment being unusual, as Fiona and Frederick”s needs were diverse, and the trust”s high-risk assets required careful management.
Held, granting the order validating the deed of retirement:
(1) The deed of settlement would not be rectified to state that Fern was the trust protector. For a document to be rectified, the court was to be satisfied that there had been a mistake as a result of which the document did not give effect to its maker”s intentions, and it was necessary to establish that rectification would give effect to those intentions. Though the deed of settlement was contrary to the intentions of the settlor and the
original beneficiaries on the basis that they had intended Fern to be appointed as protector (as indicated by the simultaneous execution in December 1982 of the deed of settlement and the deed appointing Fern as protector), the deed of settlement would not be rectified as rectification would not be an effective remedy. Fern”s consent had not been given to the 1984 deed of retirement; without its consent, rectification of the deed of settlement would be futile as it would not render the deed of retirement valid. The court would not apply the presumption of due execution and assume that the deed of retirement satisfied the relevant formalities as the failure to obtain Fern”s consent to the retirement of trustees in 1990 and 1991 indicated that no such consent was sought in 1984, particularly as its consent was sought in order to appoint trustees. In addition, the outcome sought by the plaintiffs had in any event been achieved as the deed of retirement had been declared valid on the basis that the protector”s consent was not necessary (paras. 53–55; paras. 57–59; paras. 74–75; paras. 79–80; paras. 86–87; paras. 99–103).
(2) The claim for rectification was not, however, precluded by laches or delay. As rectification was a discretionary remedy, the court had to consider delay when determining whether to grant the remedy. Mere delay was not sufficient to bar a claim as it was necessary to demonstrate that rectification would be inequitable, for example due to conduct on the part of the plaintiffs amounting to waiver; waiver would, however, only be established if it were demonstrated that the plaintiffs had been fully aware that they were abandoning their rights, and, as rectification was sought in the interests of all present and future beneficiaries of the trust, it could not be said that they had intended to discard the rights of all beneficiaries of the trust to seek rectification (paras. 61–68; para. 71).
(3) The 1984 deed of retirement was valid as the deed of settlement conferred a unilateral right (as opposed to a fiduciary power) on the trustees to retire on notice being given to their co-trustees, and it had not therefore been necessary for Fern to consent to their retirement. A right to retire imposed no fiduciary duty on trustees, and therefore the consent of a trust protector was not required in order to exercise it; a power of retirement, on the other hand, was to be exercised in the best interests of the beneficiaries of the trust (paras. 106–109; paras. 111–112; paras. 114–115).
(4) The 1984 deed of retirement also satisfied s.8 of the Trusts Law (1976 Revision) (the equivalent of s.8(1) of the present 2011 Revision), which enabled trustees to retire with the consent of co-trustees and any other person empowered to appoint trustees; the deed of retirement was therefore valid without the need for Fern”s consent, as the terms...
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