Re a Trust

• Jurisdiction: Cayman Islands
• Judge: (Mangatal, J.)
• Judgment Date: 01 December 2016
• Court: Grand Court (Cayman Islands)
• Date: 01 December 2016

Grand Court, Financial Services Division

(Mangatal, J.)

IN THE MATTER OF THE A TRUST

A. Turner for the trustee.

Attorneys: Turners for the trustee.

Cases cited:

(1) Alsop Wilkinson v. Neary, [1996] 1 W.L.R. 1220; [1995] 1 All E.R. 431, applied.

(2) Avalon Trust, In re, 2006 JLR N [19]; [2006]JRC105A, referred to.

(3) B Trust, In re, 2010 (2) CILR 348, applied.applied.

(4) Ben Hashem v. Ali Shayif, [2009] 1 FLR 115; [2008] EWHC 2380 (Fam), applied.

(5) Brooks v. Brooks, [1996] A.C. 375; [1995] 3 All E.R. 257; [1995] 2 FLR 13; [1995] 3 F.C.R. 214, referred to.

(6) H Trust, In re, 2006 JLR 280, applied.

(7) IMK Family Trust, In re, 2008 JLR 250, referred to.

(8) Prest v. Petrodel, [2013] UKSC 34; [2013] 2 A.C. 415; [2013] 3 W.L.R. 1; [2013] 4 All E.R. 673; [2013] BCC 571; [2014] 1 BCLC 30; [2013] 2 FLR 732, applied.

(9) Public Trustee v. Cooper, [2001] WTLR 901, applied.

(10) Rabaiotti 1989 Settlement, In re, 2000 JLR 173; [2000] WTLR 953; (2000), 2 ITELR 763; [2001] Fam. Law 808, referred to.

(11) Schmidt v. Rosewood Trust Ltd., [2003] UKPC 26; 2001-03 MLR 511; [2003] 2 A.C. 709; [2003] 2 W.L.R. 1442; [2003] 3 All E.R. 76; [2003] WTLR 565, applied.

(12) U Ltd. v. B, 2011 JLR 452, referred to.

Legislation construed:

Trusts Law (2011 Revision), s.48:

“Any trustee or personal representative shall be at liberty, without the institution of suit, to apply to the Court for an opinion, advice ordirection on any question respecting the management or administration of the trust money or the assets of any testator or intestate ...”

s.90: “All questions arising in regard to a trust which is for the time being governed by the laws of the Islands or in regard to any disposition of property upon the trusts thereof including questions as to-

...

(c) the administration of the trusts ... including questions as to the powers, obligations, liabilities and rights of trustees ...

are to be determined according to the laws of the Islands, without reference to the laws of other jurisdictions with which the trust or disposition may be connected ...”

s.91: “... [I]t is expressly declared that no trust governed by the laws of the Islands and no disposition of property to be held upon the trusts thereof is void, voidable, liable to be set aside or defective in any fashion, nor is the trustee, any beneficiary or any other person to be subjected to any liability or deprived of any right by reason that-

...

(b) the trust or disposition avoids or defeats rights, claims or interests conferred by foreign law upon any person by reason of a personal relationship to the settlor or by way of heirship rights, or contravenes any rule of foreign law or any foreign judicial or administrative order or action intended to recognise, protect, enforce or give effect to any such rights, claims or interests.”

s.93: “A foreign judgment shall not be recognised, enforced or give rise to any estoppel insofar as it is inconsistent with section 91 ...”

Matrimonial Causes Act 1973 (c.18), s.24(1)(c): The relevant terms of this paragraph are set out at para. 24.

Trusts — powers and duties of trustees — application for directions — disclosure of trust information in English matrimonial proceedings between settlor and wife (both excluded beneficiaries) not in best interests of beneficiaries — parties to English proceedings already aware of terms of trust and finances

Trusts — powers and duties of trustees — submission to foreign court's jurisdiction — not generally in beneficiaries' interests for Cayman trustee to submit to foreign court in matrimonial proceedings — to be compelling reason that submission in best interests of beneficiaries — any order of foreign court varying Cayman trust unenforceable (“firewall provisions” in Trusts Law (2011 Revision), ss. 90-93) whether or not trustee submits

A trustee sought directions from the court.

The trust was a Cayman Islands STAR trust which held the shares in a Cayman Islands company, which in turn owned shares in other companies, some of which owned legal title to assets in the United Kingdom. The settlor of the trust was A, and he, his wife N, and their oldest child had been excluded as beneficiaries.

In matrimonial proceedings between A and N in the English High Court, N sought, inter alia, a variation of the trust settlement in her favour (pursuant to s.24(1)(c) of the Matrimonial Causes Act 1973) and the setting aside of her exclusion as a beneficiary. The former trustee had provided certain trust information and documentation in the proceedings.

The current trustee sought the directions of the court as to (a) whether it should submit to the jurisdiction of the English courts or participate in the matrimonial proceedings involving A and N; and (b) whether it should disclose further confidential information to the parties to the English proceedings. It had determined not to do so.

Sections 90-93 of the Trusts Law (2011 Revision) (referred to as the “firewall provisions”) provided:

“90. All questions arising in regard to a trust which is for the time being governed by the laws of the Islands or in regard to any disposition of property upon the trusts thereof including questions as to-

...

(c) the administration of the trusts ... including questions as to the powers, obligations, liabilities and rights of trustees ...

are to be determined according to the laws of the Islands, without reference to the laws of other jurisdictions with which the trust or disposition may be connected ...”

“91. ... [I]t is expressly declared that no trust governed by the laws of the Islands and no disposition of property to be held upon the trusts thereof is void, voidable, liable to be set aside or defective in any fashion, nor is the trustee, any beneficiary or any other person to be subjected to any liability or deprived of any right by reason that-

...

(b) the trust or disposition avoids or defeats rights, claims or interests conferred by foreign law upon any person by reason of a personal relationship to the settlor or by way of heirship rights, or contravenes any rule of foreign law or any foreign judicial or administrative order or action intended to recognise, protect, enforce or give effect to any such rights, claims or interests.”

“93. A foreign judgment shall not be recognised, enforced or give rise to any estoppel insofar as it is inconsistent with section 91 ...”

Held, directing the trustee as follows:

(1) The trustee would be directed not to submit to the jurisdiction of the English High Court nor to participate in the matrimonial proceedings between A and N. The trust was outside the jurisdiction of the English court and the effect of the “firewall provisions” (ss. 90-93 of the Trusts Law (2011 Revision)) was that a Cayman Islands trust could only be varied in accordance with the law of the Cayman Islands and by a Cayman court. Any order made by the English High Court would not be enforceable in the Cayman Islands whether or not the trustee submitted to the jurisdiction of the High Court. If the trustee were to submit, there could potentially be a conflict between its duty to observe the terms of the trust and its obligation to comply with the terms of the High Court's order. It would generally be unwise and inappropriate for a trustee to allow itself to be placed in such a situation. The “firewall provisions” did not affect the trustee's discretionary powers but in the present case it might well be that those powers were curtailed by the exclusion of A and N as beneficiaries. Even where a trustee had power to give effect to an order, it was unlikely to be in the best interests of the beneficiaries for the trustee to do so. There would...