Re Z Trust

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 21 October 2009
• Court: Grand Court (Cayman Islands)
• Date: 21 October 2009

Grand Court

(Smellie, C.J.)

IN THE MATTER OF THE Z TRUST

MEP and MPQ

and

ROTHSCHILD TRUST CAYMAN LIMITED and SIX OTHERS

Mrs. S. Warnock-Smith, Q.C. and Ms. S.J. Collins for the plaintiffs;

S. Taube, Q.C. and Ms. C.J. Bridges for the first defendant;

C. McCall, Q.C. and H.G. Robinson for the second defendant;

Ms. E. Campbell and Ms. R. Lawrence for the fourth defendant;

F. Barlow, Q.C. and C. de S. Pimentel for the fifth, sixth and seventh defendants.

The third defendant did not participate in the proceedings, having relinquished his beneficial interests.

Cases cited:

(1) Anker-Petersen v. Anker-Petersen, [2000] WTLR 581, referred to.

(2) Downshire Settled Estates, In re, [1953] Ch. 218; [1953] 2 W.L.R. 94; [1953] 1 All E.R. 103, applied.

(3) Freeston”s Charity, Re, [1978] 1 W.L.R. 741; [1979] 1 All E.R. 51, referred to.

(4) HSBC Intl. Trustee Ltd. v. Registrar of Trusts, 2008 CILR N[5], considered.

(5) Harvey, Re, Westminster Bank Ltd. v. Askwith, [1941] 3 All E.R. 284, referred to.

(6) Havelock v. Havelock, In re AllanELR(1881), 17 Ch. D. 807; 50 L.J. Ch. 778; 44 L.T. 168, referred to.

(7) Riddle v. RiddleUNK(1952), 85 C.L.R. 202; 52 S.R. (N.S.W.) 57; 69 W.N. (N.S.W.) 111; [1952] ALR 167; 26 A.L.J. 86, referred to.

(8) Russell v. Inland Rev. Commrs., [1988] 1 W.L.R. 834; [1988] 2 All E.R. 405; [1988] S.T.C. 195, considered.

(9) Saunders v. VautierENR(1841), 41 E.R. 482; 1 Cr. & Ph. 240; [1835–42] All E.R. Rep. 58, referred to.

(10) Thomas, In re, [1930] 1 Ch. 194; (1929), 99 L.J. Ch. 140; [1929] All E.R. Rep. 129; 142 L.T. 310, referred to.

(11) Trenchard, In re, [1902] 1 Ch. 378; (1902), 71 L.J. Ch. 178; [1900–3] All E.R. Rep. 289; 86 L.T. 196, referred to.

Legislation construed:

Trusts Law (2009 Revision), s.63: The relevant terms of this section are set out at para. 6.

s.72: ‘(1) Where property, whether real or personal, is held on trusts whensoever arising, under any will, settlement or other disposition, the Court may if it thinks fit, by order, approve on behalf of-

(a) any person having, directly or indirectly an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting;

(b) any person (whether ascertained or not) who may have become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description or a member of that class, as the case may be, if the said date had fallen or the said event had happened at the date of the application to the Court;

(c) any unborn person; or

(d) any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined,

any arrangement (by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts:

Provided that, except by virtue of paragraph (d), the Court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person . . .’

Trusts-jurisdiction of court-conferring additional powers on trustees-management and administration of trust-may confer administrative powers on trustees under Trusts Law (2009 Revision), s.63 if no existing power and in interest of better management of trust (e.g. power to partition trust into three sub-funds on same terms)-not to confer dispositive powers-unintended or unforeseen incidental changes to beneficial interests irrelevant

The plaintiffs sought orders to empower the first defendant trustee to partition a trust fund under s.63 of the Trusts Law (2009 Revision).

The plaintiffs, two of three daughters who were to succeed the present sole beneficiary of the fund, applied to divide the fund into three equal shares and to appropriate the shares into three sub-funds to enable the better management and administration of the trust fund. The sub-funds were to be held on the trusts of the current fund and would not change the existing beneficial entitlements. The partition was part of a ‘peace agreement’ between the parties, which had been fully supported by the trust”s only beneficiary, who was now incapacitated, when she was still of full capacity and her guardians confirmed, in their opinion, that she would have wished to secure its implementation through the proposed partition. In the absence of any power vested in the trustee to do so, the plaintiffs applied to the court to order the partition under s.63 of the Trusts Law (2009 Revision).

The court, satisfied by counsel that the application was supported by all adult beneficiaries and would preserve the existing beneficial interests, considered whether it had the jurisdiction under s.63 to order the partition.

Held, confirming its jurisdiction and authorizing the trustee to partition the fund:

(1) The court would empower the trustee to partition the trust under s.63 of the Trusts Law (2009 Revision) because the statutory jurisdiction permitted it to confer powers on the trustees-for instance to enable them to carry out transactions-which were in essence administrative, if there was no suitable existing power and it was in the interest of the better

administration or management of the trust as a whole to do so. It could not confer powers that were in effect dispositive. Since the court was satisfied that the trustee had no existing power to partition the fund and the proposed scheme was predominantly administrative in nature-to meet the particular needs of the different branches of the family-with the sub-funds being held on the same terms of the current trust and so with no intended changes to the beneficial entitlements, the trustee was authorized to carry out the partition. Moreover, the authorization of the exercise of administrative powers in the genuine interest of the management of the trust was unaffected by any incidental change to the beneficial interests-for example if the partition rendered the one-third interests less valuable than the full interest or vice versa-and thus any such interference to the interests caused by the partition which were unintended or unforeseen would be regarded as a necessary incident of the proper management of the trust (paras. 13–17; paras. 22–27).

(2) This jurisdiction under s.63 of the Trusts Law could be distinguished from (a) the...