A Settlement known as B Trust Made by Declaration of Trust Dated November 1, 2002 (‘The Trust”)
| Jurisdiction | Cayman Islands |
| Judge | Anthony Smellie |
| Judgment Date | 20 August 2019 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD0206 OF 2017 (ASCJ) |
THE HON. Anthony Smellie, CHIEF JUSTICE
CAUSE NO: FSD0206 OF 2017 (ASCJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Mrs. Shan Warnock-Smith QC, instructed by Ms. Morven McMillan and Mr. Adam Huckle of Maples Group for the Plaintiff
Mr. Simon Taube QC, instructed by Mr. Paul Smith and Mr. Robert Lindley of Conyers Dill & Pearman, Attorneys-at-Law for the First Defendant Trustee (Paicolex)
Mr. Dakis Hagen QC, instructed by Mr. Marc Kish and Ms. Jennifer Fox of Ogier, Attorneys-at-Law for the Second, Third and Fourth Defendants (JPD, RM and YP)
Mr. Eason Rajah QC instructed by Mr. Graham Stoute of Carey Olsen, Attorneys-at-Law for the Fifth Defendant (HB)
Mr. Andrew De La Rosa, instructed by Mr. Carlos de Serpa Pimentel and Ms. Anya Martin of Appleby, Attorneys-at-law for the Sixth, Seventh and Eighth Defendants (CA, BA and AA)
Mr. John Machell QC, instructed by Mr. Charles Moore of Harneys, Attorneys-at-Law for Mr. Henry Mander, the Ninth Defendant (HM) (as court-appointed representative of the unborn children of the Fifth Defendant)
Restructuring and distribution of trust assets — jurisdiction of court to direct Trustee — Trustee's right to apply to court for the “blessing” of its decisions to restructure and distribute — obligation of trustee to make full and frank disclosure of relevant information — whether Court should give final blessing to effect distribution before all steps in the transaction are completed and disclosed to the Court — Trustee to be indemnified if acting with the blessing of the Court — Court's approval to be binding upon all beneficiaries including minors and future unborns — duty of Court to satisfy itself that it is fully informed and that interests of minors and unborns are protected .
These proceedings concern the B Trust, a settlement comprising a corporate structure of holding companies which control a significant shareholding in an immensely valuable European enterprise. The proceedings were instituted by the Plaintiff AB, in her capacity as a beneficiary of the B Trust, by way of Originating Summons under Grand Court Rules (“GCR”) Order 85 rule 2. AB seeks orders from the Court directing the First Defendant Trustee to give due consideration to her request for the appointment out and distribution to her of one-half in value of the assets of the B Trust.
The relief sought is framed in such non-compulsory terms because the Trust vests in AB and her children discretionary entitlement to income and capital in respect of a one-half proportion of the Trust fund, the other one-half proportion being held on discretionary trust for her brother HB and his children; described by the Trust Deed respectively as AB's and HB's “Said Proportions”. At the expiration of the trust period, which is likely to be in 2039, each of AB's and HB's Said Proportions will vest in AB and HB respectively if still alive. Failing them, the Trust would vest secondary entitlement to income and capital in their children and failing them, an ultimate default trust to charity, at the end of the trust period in 2039.
What AB now seeks therefore, is an advancement by the appointment out to her of the capital of one-half of the Trust assets — that defined by the Trust as AB's “Said Proportion” but which would not otherwise occur until the end of the trust period in 2039, provided she is then still alive.
Although this advancement to AB would be absolute with no legal obligation on her part to benefit her three children, they all consent, being joined as parties (the 6th, 7th and 8th Defendants) and independently advised that their interests would be protected. This would be on the basis that AB is considering another arrangement by which the capital of AB's Said Proportion would be preserved for their ultimate benefit, while she would enjoy a usufruct over the income during her lifetime.
Given the very large value of AB's Said Proportion, her usufruct (apart from other income from other very large capital interests) would assure her more than sufficient means by which to provide for herself and her children during her lifetime.
The jurisdiction invoked by AB's Originating Summons is the long-standing inherent and supervisory jurisdiction of the Court as set out in Grand Court Rules (“GCR”) Order 85 rules 2 in the following terms:
“2. (1) An action may be brought for the determination of any question or for any relief which could be determined or granted, as the case may be, in an administration action and a claim need not be made in the action for the administration or execution under the direction of the Court of the estate or trust in connection with which the question arises or the relief is sought.
(2) Without prejudice to the generality of paragraph (I), an action may be brought for the determination of any of the following questions —
(a) ….
(b) ….
(c) any question as to the rights or interests of a person claiming to be a creditor of the estate of a deceased person or to be entitled under a will or on the intestacy of a deceased person or to be beneficially entitled under a trust.
(3) Without prejudice to the generality of paragraph (I), an action may be brought for any of the following reliefs:-
(a) …
(b) …
(c) …
(d) …
(e) an order directing any act to be done in the administration of the estate of a deceased person or in the execution of a trust which the Court could order to be done if the estate or trust were being administered or executed, as the case may be, under the direction of the Court.”
Accepting that AB has good reasons for making her request (to be discussed below), the Trustee acknowledges this jurisdiction of the Court to entertain AB's application, including for the making of orders for the administrative restructuring and distribution of the Trust assets. The Trustee has therefore agreed to consider AB's request and, subject to ensuring that it complies with its obligations to all beneficiaries and obtains appropriate indemnities, will implement the division of the Trust to give effect to it.
While there are elements of this complex restructuring which require the agreement and cooperation of third parties, it is common ground that the Trustee itself has the power under the Trust Deed to make the final distribution of the assets for these purposes. This, among other powers, is expressed in Clause 4 of the Trust Deed where, in this regard, an appointment out of capital for the benefit of beneficiaries is allowed: “…provided always that any such appointment shall respect and be in accordance with the Said Proportions….”
Accordingly, and of crucial importance to the present matter, it is acknowledged by all that neither the Trustee nor the Court (in the context of the present proceedings) has the power to alter the beneficial entitlements under the Trust beyond the stated limit. And so, although all beneficiaries are joined in the proceedings and consent — with the minors through their guardians ad litem accepting that their interests would be protected, or in the case of the future unborns — with their interests represented in relation to the restructuring and distribution; the contingent interests of minor or unborn beneficiaries may not be deleteriously affected and may not be compromised (there being no dispute which could be the subject of a compromise): see Chapman v Chapman [1954] A.C. 429 and the Notes to Order 85 r 2 of the Rules of the Supreme Court 1999 Edition (the equivalent to GCR Order 85 r 2) 1.
What is proposed will therefore involve only the exercise of dispositive and administrative powers strictly for the equal division of the Trust assets in such manner as to ensure that beneficial proportions under AB's and HB's Said Proportions are respectively maintained albeit that AB's Said Proportion will be appointed to her absolutely and that HB's Said Proportion will be appointed on different trusts.
In this case, it is recognized that HB, although unmarried and without children, could yet have children who would qualify 2 as beneficiaries of HB's Said Proportion. Accordingly, distribution of the assets must be as near as possible precisely equal, to avoid any deleterious impact upon the contingent entitlements especially of any unborn children of HB.
There have been a number of hearings and adjournments in the proceedings to allow for what all parties recognize to be a complicated process for the restructuring of the incorporated entities of the Trust and for the proper equal division and distribution of AB's and HB's Said Proportions of the assets, all of which must be effected in order to honour AB's wishes. Significant work has been done by the Trustee and matters have progressed to the stage where there is a Memorandum of Understanding (“MOU”) between the Trustee, AB, HB, and AB's adult child, CA the 6th Defendant. Although not legally binding, the MOU describes in acceptably clear terms the remaining steps to be taken and the commitment of the Trustee, AB herself and her brother HB (as the primary beneficiaries of the Trust in equal shares), to the fulfilment of AB's wishes to have her distribution from the Trust.
As already mentioned, HM, the 9th Defendant, who has been appointed by the Court to represent the unborn children of HB, advises the Court on the appropriateness of the proposed division of assets as it might relate to them.
There are now, however, urgent concerns about timing from AB's and her children's point of view, relating...
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