Re Z Trust

JurisdictionCayman Islands
Judge(Smellie, J.)
Judgment Date02 June 1997
CourtGrand Court (Cayman Islands)
Date02 June 1997
Grand Court

(Smellie, J.)

IN THE MATTER OF THE Z TRUST

A.G.D. Duckworth and G.F. Ritchie for the plaintiff;

Cases cited:

(1) Beatty”s Will Trusts, In re, Hinves v. Brooke, [1990] 1 W.L.R. 1503; [1990] 3 All E.R. 844, considered.

(2) Boardman v. Phipps, [1967] 2 A.C. 46; [1966] 3 All E.R. 721, considered.

(3) Bray v. Ford, [1896] A.C. 44; [1895-9] All E.R. Rep. 1009, considered.

(4) British Coal Corp. v. British Staff Superannuation Scheme Trustees Ltd., [1994] I.C.R. 537, considered.

(5) Dicconson v. Talbot(1870), L.R. 6 Ch. App. 32; 24 L.T. 49.

(6) Drexel Burnham Lambert UK Pension Plan, In re, [1995] 1 W.L.R. 32, observations of Lindsay J. applied.

(7) Edwards” Will Trusts, Re, Dalgliesh v. Leighton, [1947] 2 All E.R. 521, considered.

(8) French Protestant Hospital, In re, [1951] Ch. 567; [1951] 1 All E.R. 938, distinguished.

(9) Hahn v. Bank Intercontinental Ltd., 1986-87 CILR 407, distinguished.

(10) Hart”s Will Trusts, Re, Hart v. Hart, [1943] 2 All E.R. 557, considered.

(11) Hay”s Settlement Trusts, In re, [1982] 1 W.L.R. 202; [1981] 3 All E.R. 786, dicta of Megarry, V.-C. applied.

(12) Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd., [1991] 1 W.L.R. 589; [1991] I.C.R. 524, dicta of Browne-Wilkinson, V.-C. applied.

(13) Inland Rev. Commrs. v. SchroderTAX(1983), 57 T.C. 95; [1983] S.T.C. 480, considered.

(14) Kearns v. HillUNK(1990), 21 N.S.W.L.R. 107, applied.

(15) Laing”s Settlement, In re, Laing v. Radcliffe, [1899] Ch. 593; (1899), 80 L.T. 228. considered.

(16) Lewis v. NicholsonENR(1852), 18 Q.B. 503; 118 E.R. 190, dicta of Lord Campbell, C.J. applied.

(17) McPhail v. Doulton, [1971] A.C. 424; [1970] 2 All E.R. 228, considered.

(18) Manisty”s Settlement, In re, Manisty v. Manisty, [1974] Ch. 17; [1973] 2 All E.R. 1203, distinguished.

(19) Mettoy Pension Trustees Ltd. v. Evans, [1990] 1 W.L.R. 1587; [1991] 2 All E.R. 513, distinguished.

(20) Miller (James) & Partners Ltd. v. Whitworth St. Estates (Manchester) Ltd., [1970] A.C. 583; [1970] 1 All E.R. 796.

(21) Morice v. Durham (Bishop of)(1805), 10 Ves. 522; 32 E.R. 947, dicta of Lord Eldon, L.C. applied.

(22) Muir v. Inland Revenue Commrs., [1966] 1 W.L.R. 1296; [1966] 3 All E.R. 38.

(23) Penrose, In re, Penrose v. Penrose, [1933] Ch. 793; [1933] All E.R. Rep. 796, followed.

(24) Rawcliffe v. Steele, 1993-95 MLR 426, dicta of Acting Deemster Hegarty applied.

(25) Rawson Trust Co. Ltd. v. Perlman, Supreme Court of Jamaica, Cause No. 194/1989, April 25th, 1990, unreported.

(26) Reardon Smith Line Ltd. v. Hansen-Tangen, [1976] 1 W.L.R. 989; [1976] 3 All E.R. 570, dicta of Lord Wilberforce applied.

(27) Regal (Hastings) Ltd. v. Gulliver, [1967] 2 A.C. 134n; [1942] 1 All E.R. 378.

(28) Sargeant v. National Westminster Bank PLC (1990), 61 P. & C.R. 518; The Times, May 10th, 1990, dicta of Nourse, L.J. applied.

(29) Skeats” Settlement, In re, Skeats v. Evans, [1889] 42 Ch. D. 522; (1889), 61 L.T. 500, distinguished.

(30) Space Invs. Ltd. v. Canadian Imperial Bank of Commerce Trust Co. (Bahamas) Ltd., [1986] 1 W.L.R. 1072; [1986] 3 All E.R. 75, considered.

(31) Tito v. Waddell (No. 2), [1977] Ch. 106; [1977] 3 All E.R. 129.

(32) Vestey”s (Lord) Executors v. Inland Rev. Commrs., [1949] 1 All E.R. 1108, distinguished.

(33) Whishaw v. StevensELR, [1970] A.C. 508; sub nom. Re Gulbenkian”s Settlement Trusts, Whishaw v. Stevens, [1968] 3 All E.R. 785, considered.

(34) Wills” Trust Deeds, In re, Wills v. Godfrey, [1964] Ch. 219; [1963] 1 All E.R. 390, considered.

(35) Wormley & Wormley(1823), 8 Wheat 421; 21. U.S. 651.

Trusts-amendment-power to amend-management committee may amend family trust to increase beneficial entitlement of committee member-self-dealing permitted if settlor”s intention to confer personal power clear and family purpose of trust otherwise frustrated

Trusts-powers-nature of powers-powers of management committee appointed to direct trustee may be either personal or fiduciary depending on intention of settlor-power to direct alteration of beneficial entitlements may be personal even though other powers to manage funds are fiduciary

The parties applied for declarations relating to the construction and administration of a trust.

The settlor, now deceased, established a trust for the benefit of her daughter (Mrs. D), the second defendant, under which her grandchildren and great grandchildren (Mrs. E, F, Mr. G, Mrs. H and Mrs. I), the third to seventh defendants, and son-in-law (Mr. D), the first defendant, were contingent beneficiaries.

The trust instrument provided, by art. 7, for a management committee, including Mrs. D, Mrs. H and a non-family member, Mr. K (later replaced by Mr. D), to direct the investment of and distribution of income from the trust fund by the trustee, B Co. Under art. 4B of the trust, the management committee, together with the settlor herself, was given the power to amend the terms of the trust at any time before the death of the settlor or Mrs. D. This power was exercised to give Mrs. D a right to receive up to 50% of the trust capital, although she had previously been entitled to income only.

When distributions of trust capital were subsequently made to Mrs. D, Mrs. E, her daughter, alleged that the amendments to the trust were invalid and that the management committee had acted fraudulently in making the distributions. The trustee commenced proceedings, seeking directions from the court under the Trusts Law (Revised), s.45. When Mrs. E withdrew from the proceedings, F and Mr. G, contingent capital beneficiaries under the trust, raised matters relating to the construction of the trust and the validity of the amendments for the court”s determination as preliminary matters, on the ground that Mrs. D was prohibited from benefiting from the exercise of a fiduciary power.

They submitted that (a) in vesting the power of amendment under art. 4B in the management committee and herself jointly, the settlor had

intended that the exercise of the power should carry a duty to consider all the beneficiaries under the trust since (i) the management committee was a fiduciary body, entrusted under art. 7 with powers to manage and invest the trust assets and to direct the trustee, and therefore all its powers, including that under art. 4B, were fiduciary ones; (ii) it would be wrong in principle for the committee to be unaccountable to those beneficiaries who were not on the committee, and whose entitlements would otherwise become illusory; (iii) there was no indication, either express or implied, in art. 4B that Mrs. D as a committee member and an income beneficiary already well provided for under the trust, was intended as a possible object of the power so as to entitle her to receive a capital distribution by self-dealing; (iv) it would be undesirable for the committee, to which other members could be appointed, and which therefore might in future include persons who did not have the beneficiaries” best interests at heart, to have an unfettered discretion to amend the trust; and (v) it was inconsistent with the family nature of the trust for committee members to be in a position allowing them to bargain with the settlor for advantages in exchange for consenting to amendments which she might wish to make under art. 4B.

They further submitted that (b) the power under art. 4B was workable as a fiduciary power precluding Mrs. D from benefiting under it if viewed as a dispositive power exercisable in favour of anyone save the members of the management committee and the settlor as its donees; (c) once it had been established that the power of amendment was a fiduciary one, the rule against self-dealing could not be excluded ‘by necessary implication’ to enable the management committee to benefit themselves within the class of intended beneficiaries; and (d) in any event, the settlor had not intended that the power should be used to make substantive amendments regarding beneficial entitlements under the trust. For all of the above reasons, the amendments and the dispositions to Mrs. D made in reliance on them should be set aside.

The plaintiff trustee, Mr. and Mrs. D, Mrs. H and Mrs. I submitted in reply that (a) the power to amend the trust under art. 4B was a personal one giving the donees an absolute discretion whether and how to do so, subject only to the implied requirement that the power should not be exercised for improper purposes, since (i) the settlor had not intended to fetter the management committee further in being able to benefit family members merely because she had given it fiduciary responsibilities to the trust as a whole in its management of the fund; (ii) there was no moral justification for the other contingent beneficiaries, who had given no consideration for their entitlements, to have recourse to the court to force the committee to consider them in its exercise of the power; (iii) if the power were fiduciary, only Mrs. E and Mrs. I could benefit from any enhancement of their entitlement under the trust, as all committee members (and not only Mrs. D) would be excluded, a result which was contrary to the purpose of the trust; (iv) the element of future uncertainty as to the exercise of the power was limited from the outset, as the art. 4B

power had ceased upon the settlor”s death, and therefore the power of amendment would never be in the hands of persons not envisaged by her; and (v) the settlor had trusted the committee not to abuse the power either before or after her death.

They further submitted that (b) the art. 4B power would be unworkable as a fiduciary power since the settlor would then be unable to benefit herself under the trust or to retain control over the disposal of its assets without recourse to the courts; (c) since the class of beneficiaries was clearly limited to family members, the power could not be viewed as a fiduciary one exercisable in favour of an unlimited class excepting members of...

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13 cases
  • Re Circle Trust
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 28 July 2006
    ...Ves. 481; 32 E.R. 194, considered. (14) Wills” Trust Deeds, Re, [1964] Ch. 219; [1963] 1 All E.R. 390, referred to. (15) Z Trust, In re, 1997 CILR 248, applied. Trusts-trust protector-appointment-power of beneficiaries to appoint protector usually fiduciary unless settlor”s intention that p......
  • Wong, Wen-Young (also known as Winston Wong) and Wong, Ray-Tseng (also known as Riley Wong) (an infant by his Next Friend, Grace Tsu Han Wong) v Grand View Private Trust Company Ltd
    • Bermuda
    • Supreme Court (Bermuda)
    • 5 June 2019
    ...accept that he identified one judicial statement which at first blush expressly refutes the Plaintiffs' central thesis. In Re Z Trust [ 1997 C.I.L.R. 248], Smellie, C.J. opined as follows: “As was emphasized in the Australian case Kearns v. Hill, which was cited in the arguments, a power of......
  • Wong, Wen-Young v Grand View Private Trust Company Ltd
    • Bermuda
    • Supreme Court (Bermuda)
    • 5 June 2019
    ...accept that he identified one judicial statement which at first blush expressly refutes the Plaintiffs' central thesis. In Re Z Trust [1997 CILR 248], Smellie CJ opined as follows: “As was emphasized in the Australian case Kearns v Hill, which was cited in the arguments, a power of variatio......
  • Grand View Private Trust Company Ltd v Wong, Wen-Young
    • Bermuda
    • Court of Appeal (Bermuda)
    • 20 April 2020
    ...accepted that Mr Adkin had identified one judicial statement which at first blush refuted the Respondents' central thesis. In Re Z Trust [1997] CILR 248 Smellie J (as he then was) observed: “As was emphasized in the Australian case Kearns v Hill, which was cited in the arguments, a power of......
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2 books & journal articles
  • English fiduciary standards and trust law.
    • United States
    • Vanderbilt Journal of Transnational Law Vol. 32 No. 3, May 1999
    • 1 May 1999
    ...Trust Deeds, [1964] Ch. at 228. (132.) See Rawson Trust v. Perlman, 1 BOCM 135 (Bahamas Sup. Ct. Eq. No. 194) (1984); In re Z Trust, [1997] CILR 248 (unreported Cayman case discussed in 2 CHASE J. 57 (133.) It seems the English court has power to override an elderly beneficiary's refusal to......
  • The trust offshore.
    • United States
    • Vanderbilt Journal of Transnational Law Vol. 32 No. 4, October 1999
    • 1 October 1999
    ...note 5, at D4-13. (92.) Trust Act 1998 (Bahamas), [sections] 81 reprinted in 2 INTERNATIONAL TRUST LAWS, supra note 5, at D3-60. (93.) [1997] C.I.L.R. 248, 248-50 (Cayman Is., Grant Ct. (94.) See id. at 259-60. (95.) See id. at 254. (96.) See id. at 254-55. (97.) Id. at 258-59. (98.) See id......

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