The a Trust and the Trusts Law (2011 Revision) and GCR Order 85, Rule 2(2)(a)

JurisdictionCayman Islands
CourtGrand Court (Cayman Islands)
JudgeThe Hon. Justice Ingrid Mangatal
Date01 December 2016
Docket NumberCAUSE NO FSD 163 OF 2016 (IMJ)
In the Matter of the a Trust
And in the Matter of the Trusts Law (2011 Revision)
And in the Matter of GCR Order 85, Rule 2(2)(a)
[2016] CIGC J1201-1
Before:

The Hon. Justice Ingrid Mangatal

CAUSE NO FSD 163 OF 2016 (IMJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
HEADNOTE

Trusts Law (2011 Revision) — s.48, s.90–93 — Firewall Provisions — Trusts — Pt VIII — STAR Trust — Directions sought whether Trustee of STAR Trust should submit to jurisdiction of English Court in Matrimonial Proceedings — whether Trustee should disclose further confidential information.

Appearances:

Mr. Alan Turner of Turners for the Applicant trustee of the A Trust

IN CHAMBERS AND IN PRIVATE
1

This is an application by C Ltd., the trustee (“The Trustee”) of the A Family STAR Trust (“the A Trust”). The Trustee became trustee of the A Trust on the 16 June 2016, pursuant to a Deed of Retirement and Appointment of Trustees. The previous trustee was Z Ltd. The application is for directions pursuant to section 48 of the Trusts Law (2011 Revision). I agree with Mr. Turner, Counsel for the applicant, that this application falls within the second category of applications recognised by Mr. Justice Hart in the oft-cited case of Public Trustee v Cooper [2001] WTLR 90.

2

Mr. Justice Hart (at page 17 of the judgment) followed the categories outlined in the unreported ruling of Walker J (as he then was), where he analysed trustee applications as follows:

“At the risk of covering a lot of familiar ground and stating the obvious, it seems to me that, when the court has to adjudicate on a course of action proposed or actually undertaken by trustees, there at least four distinct situations (and there are no doubt numerous variations of those as well).

(1) The first category is where the issue is whether some proposed action is within the trustees' powers. That is ultimately a question of construction of the trust instrument or a statute or both. The practice of the Chancery Division is that a question of that sort must be decided in open court and only after hearing argument from both sides. It is not always easy to distinguish that situation from the second situation that I am coming to….

(2) The second category is where the issue is whether the proposed course of action is a proper exercise of the trustees' powers where there is no real doubt as to the nature of the trustees' powers and the trustees have decided how they want to exercise them but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action on which they have resolved and which is within their powers. Obvious examples of that, which are very familiar in the Chancery Division, are a decision by trustees to sell a family estate or to sell a controlling holding in a family company. In such circumstances there is no doubt at all as to the extent of the trustees' powers nor is there any doubt as to what the trustees want to do but they think it prudent, and the court will give them their costs of doing so, to obtain the court's blessing on a momentous decision. In a case like that there is no surrender of discretion and indeed it is most unlikely that the court will be persuaded in the absence of special circumstances to accept the surrender of discretion on a question of that sort, where the trustees are prima facie in a much better position than the court to know what is in the best interests of the beneficiaries.

(3) The third category is that of surrender of discretion properly so called. There the court will only accept a surrender of discretion for a good reason, the most obvious good reason being that the trustees are deadlocked (but honestly deadlocked, so that the question cannot be resolved by removing one trustee rather than another) or because the trustees are disabled as a result of a conflict of interest. Cases within category (2) and (3) are similar in that they are both domestic proceedings traditionally heard in Chambers in which adversarial argument is not essential though it sometimes occurs. It may be that ultimately all will agree on some course of action or, at any rate, will not violently oppose some particular course of action. The difference between category (2) and category (3) is simply as to whether the court is (under category (2)) approving the exercise of discretion by trustees or (under category (3)) exercising its own discretion.

(4) The fourth category is where trustees have actually taken action, and that action is attacked as being either outside their powers or an improper exercise of their powers. Cases of that sort are hostile litigation to be heard and decided in open court….”

3

A.J., who is a director of the Trustee, has sworn an affidavit in support of this application. He outlines the directions sought, as follows:

  • 1) Whether the Trustee should submit to the jurisdiction of the English courts and participate in the matrimonial proceedings involving A and his estranged wife N.

  • 2) Whether the Trustee should disclose further confidential information to the parties to the English matrimonial proceedings.

4

The Trustee has determined not to either submit to the jurisdiction of the English courts or provide further confidential information. However, because it is an important step for a professional trustee to refuse to submit to the jurisdiction of a foreign court, the Trustee seeks the guidance of this Court.

5

I am informed that there has already been a similar application before the Gibraltarian courts in the matter of the A C Trust, (or “the L Trust”) and the Supreme Court of Gibraltar has directed the Trustee of the L Trust to do neither. A copy of the ruling was provided to me at this hearing. The Settlor of the L Trust is the same Settlor as the Settlor of this Trust, A, referred to in more detail in paragraph 10 below.

FACTUAL BACKGROUND
6

There are divorce proceedings ensuing between A and N in the High Court of Justice in England and Wales (“the English High Court”). There are four children of the marriage between A and N. The four children are named parties to the English matrimonial proceedings. The children are I, (born 17 April 1997), O, (born 12 January 1998), H, (born 15 February 2000), and R, (born 18 August 2001). I and O are adults, while H and R are minors.

7

I and O are represented in the proceedings. Although H and R are unrepresented in the proceedings, the Court has expressed the view that their interests are very similar to O's.

8

In addition to the four children, the former trustee Z Ltd. and L Trust and recently all of the companies directly or indirectly held by the Settlement are parties to the divorce proceedings. The former trustee and L Trust had retained a firm of lawyers to advise them in connection with the divorce proceedings. The Trustee has advised all of the parties to the English proceedings that it has now taken over as trustee and has been made a party to those proceedings.

9

In the matrimonial proceedings, N seeks, amongst other orders, a variation of the Settlement pursuant to section 24(1)(c) of the English Matrimonial Causes Act (“the MCA”), and the setting aside of N's exclusion as a beneficiary of the Settlement under section 37 of the MCA.

10

The Settlor of the Trust is A (“the Settlor”) who is the Chief Executive Officer (“CEO”) of a major property company in the UK (“CC”).

11

The Trust is a Cayman Islands STAR Trust. The proper Law of the Trust, according to Clause 14 of the Trust Deed, is Cayman Islands Law and the Cayman Islands courts are the forum for its administration.

12

The object of the Trust is outlined on paragraph 5 of the Trust Deed, and failing that the objects are set out in paragraph 6.

13

The asset of the Trust is shares in HHL, which is a Cayman Islands Company with its own board of directors. HHL owns shares in other companies in the structure, some of which hold legal title to assets in the UK.

14

Through various Deeds of Exclusion, the Settlor, his wife and their children are excluded from benefit under the Trust. The effect of these Deeds of Exclusion is that only children who were minors when the Deeds were executed but who attain majority thereafter can be beneficiaries along with the remoter issue of the Settlor and their spouses, widows, widowers and charity. O is currently a beneficiary. I is excluded as a beneficiary.

15

The Settlor has executed Letters of Wishes in the past, his most recent being dated 9 July 2012. The Settlor does appear to have quite detailed views about how the assets of the Trust should be applied in the future to benefit the classes of beneficiaries and in particular, he wishes to ensure that beneficiaries do not live lavish lifestyles funded by the Trust, but yet ensuring that they receive appropriate benefit from the Trust in the future.

16

The Settlor's main desire is to see the Trust grow from generation to generation and to be a charitable trust providing support for the main charitable object specified.

17

The position taken by the former Trustee in relation to the ongoing Divorce proceedings, on legal advice, was that its provision of information and/or documents to explain its position in relation to the Divorce proceedings would not amount to a submission to the Jurisdiction of the English High Court. The former Trustee and L Trust exchanged position statements with the parties on 22 February 2016.

18

A.J. in his affidavit advises that very little information was provided in relation to the Settlement due to the restrictions which exist on providing confidential information about the Settlement in these circumstances.

19

The former Trustee explained that it had no knowledge of the grounds upon which N sought to contend that the Settlement might be varied and the grounds on which her exclusion from the Settlement could be set aside.

20

The former Trustee...

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