The M Trust (the Trust) and Section 48 of the Trusts Act Between: ST Ltd (in its capacity as trustee of the M Trust) Plaintiff v AV Defendant

• Jurisdiction: Cayman Islands
• Judge: Mr Justice Segal
• Judgment Date: 14 October 2021
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO: FSD 50 OF 2021 (NSJ)

In the Matter of the M Trust (the Trust)

And in the Matter of Section 48 of the Trusts Act

Between:

ST Limited (in its capacity as trustee of the M Trust)

Plaintiff

and

AV

Defendant

Before:

The Hon. Mr Justice Segal

CAUSE NO: FSD 50 OF 2021 (NSJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

Headnote

Application by the trustee in relation to the former protector of a Cayman trust for a declaration that a deed executed after her resignation appointing a successor protector was valid and effective — was the power given by the trust deed to a serving protector to appoint a successor without the need for an application to Court exercisable even after the resignation of that protector — if the deed and the exercise of the power were invalid, did the Court have the power to and should the Court appoint the successor protector.

Heard: On the papers on the basis of written submissions by Charles Moore of Harney, Westwood & Reigels on behalf of the Plaintiff and the Defendant consenting to the application being dealt with on the papers

Introduction

1 This judgment deals with the Originating Summons dated 22 June 2021 (the Application) issued by the Plaintiff in its capacity as trustee of the M Trust (the Trust). The trust was created and is governed by a trust deed dated 4 April 2005 (the Trust Deed). The Plaintiff applies for relief in connection with the resignation and replacement of the first protector of the Trust, Ms G. On 24 July 2020, Ms G wrote to the Plaintiff (as trustee) to tender her resignation with immediate effect but failed to appoint a successor at that time. Subsequently, on 23 October 2020, she executed a deed of confirmation and appointment of successor protector of the M Trust (the 2020 Deed) in which she confirmed her intention at the time of her resignation to exercise the power in clause 22.2 of the Trust Deed to appoint a successor protector and by which she sought to appoint Mr B as the new and successor protector. The 2020 Deed and the Trust Deed are governed by Cayman Islands law.

2 In these circumstances, the following questions have arisen on which the Plaintiff seeks a decision from the Court:

• (a). whether Ms G was entitled to exercise the power in clause 22.2 after her resignation.

• (b). whether, if she was, the 2020 Deed was effective to appoint Mr B as the new protector of the Trust.

• (c). whether, if she was not so entitled or the 2020 Deed was not effective to appoint Mr B, the Court can and should now make an order appointing him as the Protector of the Trust.

3 The Application is supported by an affidavit (the Second Affidavit) of Mr S, who is a director of the Plaintiff and the Plaintiff's attorneys (Mr Moore of Harney, Westwood and Reigels) have filed a skeleton argument setting out the Plaintiff's written submissions. The Plaintiff invited the Court to deal with the Application on the papers without the need for a hearing. It does so with the support of the Defendant who also supports the Application (AV was appointed to represent all persons who are or may be interested in or affected by the Application by my order dated 23 March 2021). In the circumstances, where the Application is unopposed, both parties wish to avoid the cost of a hearing, the issues before the Court concern the administration of a private trust and I feel able properly to adjudicate on the Application without the need for a hearing (at least on the basis of the primary case put forward by the Plaintiff), I am prepared to accede to this request.

The Trust Deed

4 Clause 22 of the Trust Deed is in the following terms (underlining added):

• (1). The initial Protector shall be the first person named in the Fourth Schedule hereto. The appointment of the first Protector shall become effective on the date of the execution of this Trust.

• (2). If the initial Protector is unable or unwilling to act, then the persons named subsequently in the Fourth Schedule, shall, in the order named, serve as Protector, PROVIDED that if no persons are named subsequently or if none of the persons named subsequently in the Fourth Schedule is able or willing to act, the person, if any, serving as Protector at the time may appoint his or her successor Protector, and PROVIDED FURTHER, that if no successor Protector is appointed and the office of Protector remains vacant for three consecutive full calendar months, the Courts of the Cayman Islands (or the courts of such other place which shall then be the Forum for the Administration hereof in accordance with the terms of Clause 19) shall appoint one or more other persons to serve as Protector, and PROVIDED FURTHER that only a person who is not the Settlor and that is independent of the Settlor and not related or subordinate to the Settlor may be appointed as Protector. In no event shall an Excluded Person be appointed Protector. Notwithstanding any other provision in this Deed, this Subclause 22.2 shall not be amended or modified in any way whatsoever.

• (3). The Protector shall not be liable for any loss to the Trust Fund arising in consequence of the failure, depreciation or loss of any investment or investments or any mistake or omission or any other matter or thing except wilful fraud or wrongdoing on the part of the Protector and this Clause shall apply whether or not whether the Protector had or should have notice of the matter causing loss.”

5 Clause 4.1(e) of the Trust Deed gives the following definition of Protector (underlining added):

“THE PROTECTOR” means the persons in order of priority named in the Fourth Schedule and all references herein to the actions of the Protector shall be such actions as the Protector may take only after he assumes office pursuant to the provisions of clause 22.”

6 Clause 11.1 of the Trust Deed deals with the power to appoint new or additional trustees. It states that (underlining added):

“The Protector shall have the power to remove and appoint Trustees of this Trust. If Protector is unable or unwilling to act, then the [Court] shall appoint one or more other persons to be a Trustee hereof…”

7 The Trustee is given an express power to resign in clause 11.2 of the Trust Deed which states that:

“A Trustee who at any time desires to withdraw and be discharged from the Trusts hereof may do so by notice in writing to the Protector and upon the posting or personal delivery of such notice the Trustee so doing shall cease to be a Trustee hereof to all intents and purposes except as to acts and deeds necessary for the proper vesting of the Trust Fund in the continuing or new Trustee or otherwise as the case may require.”

The background

8 The relevant background can be described briefly. The Trust is a Cayman Islands law discretionary trust created by the Trust Deed. The Trustee is a BVI incorporated and licensed private trust company. The current beneficiaries of the Trust include the Defendant together with certain charities. The Trust Deed provided for the appointment of a Protector. Clause 22.1 of the Trust Deed provided that the initial Protector would be the person named in the Fourth Schedule. The only person named was Ms G. The Trust Deed as amended provided for the Protector to have various powers. The Trustee's primary dispositive power was made exercisable only with the written consent of the Protector; the Trustee's power to amend the terms of the Trust was made exercisable only with the written consent of the Protector and the Protector was empowered to designate any company, partnership, or other entity whose shares or ownership interests were comprised directly or indirectly within the Trust fund as a “ Special Company” so that the Trustee would have no obligation and no right to interfere in, enquire as to or concern itself in the management of any such designated Special Company. The Trust Deed also provided for the exoneration of the Protector for liability save in cases of wilful fraud or wrongdoing. The Protector was also given the power to remove and appoint the trustee, and various rights of veto.

9 On 24 July 2020, Ms G wrote to the Trustee giving notice of her immediate resignation. She said:

“I hereby tender my resignation as Protector of [the Trust], to take effect from the date of this letter.”

10 Subsequently, some three months later, the 2020 Deed was entered into by Ms G, Mr B, and the Trustee. The 2020 Deed recited (in recital E) that Ms G:

“.. [at the time of sending the 24 July letter] had no intention of leaving the office of Protector vacant … without appointing a successor Protector, rather [her intention] was for a successor Protector to be appointed by her pursuant to the provisions in the [Trust Deed]. Accordingly, for the avoidance of doubt and to secure the appointment of a successor Protector [she] wished to confirm her intention at the time of the [24 July letter] to exercise the [power in clause 22.2] and by this Deed now to exercise that power.”

11 In the operative part of the 2020 Deed, Ms G confirmed that at the date of the 24 July letter she intended to exercise the clause 22.2 power to appoint a Protector (although she does not say that at that time she intended to appoint anyone in particular) and purported to appoint Mr B in her place, in exercise of that power and all other relevant powers enabling her to appoint a new Protector (the 2020 Deed also purported to discharge Ms G from the office of Protector). Mr B also confirmed acceptance of his appointment. The 2020 Deed is governed by Cayman law and contains a submission to the exclusive jurisdiction of the Cayman courts.

The relief sought by the Plaintiff and the Plaintiff's submissions

12 The primary relief sought by the Plaintiff is a declaration that, on a true construction of the Trust Deed, the 2020 Deed was valid and effective, and accordingly that Mr B was validly appointed. This relief was sought (a) pursuant to the...