The A Trust and the B Trust and the C Trust and Section 48 of the Trusts Act (2021 Revision) and Order 85 of the Grand Court Rules (2022 Consolidation)
| Jurisdiction | Cayman Islands |
| Judge | Mr Justice Segal |
| Judgment Date | 20 December 2022 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD 213 OF 2022 (NSJ) |
The Hon. Mr Justice Segal
CAUSE NO: FSD 213 OF 2022 (NSJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Application by a trustee for approval of proposed exercise of its powers – the Court's inherent jurisdiction and jurisdiction under section 48 of the Trusts Act (read with GCR O.85) – a category 2 Public Trustee v Cooper application – basis on which the Court should exercise its common law and statutory jurisdictions – relevance of non-financial benefits for beneficiaries – form of order to be made
Ms Rachael Reynolds KC, Mr Christopher Levers and Mr Chris Vincent of Ogier for the Trustee
Mr Hector Robinson KC and Mr James Anson-Holland of Mourant for Mr Robinson as representative of the minor and unborn beneficiaries
Mr Carlos de Serpa Pimentel and Esmond Brown of Appleby (Cayman) Limited for Mr F, the representative of the adult beneficiaries
The Trustee is the sole trustee of three Cayman Islands law governed discretionary trusts known as the A Trust, the B Trust and the C Trust (the Cayman Trusts). By its ex parte originating summons (the OS) dated 6 October 2022 the Trustee as trustee of each of the three Cayman Trusts seeks the Court's approval or sanction of various decisions (the Proposals).
The Proposals involve the following steps:
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(a). as regards the A Trust:
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(i). a distribution of assets with a very substantial value to be made from the assets of the A Trust to one of the current beneficiaries (Z) of the A Trust (the A Proposed Distribution).
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(ii). a philanthropic entity known as H Limited, a former beneficiary of the A Trust, will be added back into the class of beneficiaries of the A Trust (the A Proposed Addition).
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(iii). the terms of the A Trust will be amended such that the balance of the trust fund remaining on the first quarter end date following the one year anniversary of the death of the survivor of the two main beneficiaries (Z and Y) would be held absolutely for H Limited from that date (the A Proposed Amendment) provided that:
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(A). the A Proposed Distribution has been approved and/or sanctioned by the Court and thereafter made to Z.
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(B). a proposed distribution to Y of assets with a similar value to the amount of the A Proposed Distribution from an affiliated Jersey law trust (the D Trust and the D Proposed Distribution) has been approved or sanctioned by the Royal Court of the Island of Jersey (which approval has now been obtained) and thereafter made to Y.
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(C). the Trustee has satisfied itself that Z and Y have made appropriate provision for their descendants and, in this context, the Trustee has resolved, in principle, that it would consider appropriate provision to have been made if Z and Y have transferred the assets they receive from the A Proposed Distribution and the D Proposed Distribution (or assets deriving from those assets) to the trustees of a newly established Jersey law governed trust and a newly established Cayman law governed trust for the benefit of their descendants (the Reserve Trusts).
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(D). there has been no material change in the needs of the beneficiaries in the time between the A Proposed Distribution being made and the point at which the Trustee comes to implement the A Proposed Amendment.
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(b). as regards the B Trust:
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(i). a distribution of the balance of the trust fund to H Limited, a current beneficiary of the B Trust (the B Proposed Distribution), provided that:
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(ii). the A Proposed Distribution has been approved and/or sanctioned by the Court and thereafter made to Z.
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(iii). the D Proposed Distribution has been approved and/or sanctioned by the Royal Court (such approval has now been obtained) and thereafter made to Y.
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(iv). the Trustee has satisfied itself that Z and Y have made appropriate provision for their descendants and the Trustee has resolved, in principle, that it would consider appropriate provision to have been made if Z and Y have transferred the assets they receive from the A Proposed Distribution and the D Proposed Distribution (or assets deriving from those assets) to the trustees the Reserve Trusts.
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(v) there has been no material change in the needs of the beneficiaries in the time between the A Proposed Distribution being made, and the point at which the Trustee comes to implement the B Proposed Distribution.
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(c). as regards the C Trust:
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(i). a distribution or distributions from the trust fund of the C Trust to be made to a further philanthropic entity known as I Limited, a current beneficiary of the C Trust (the C Proposed Distribution), provided that:
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(ii). the A Proposed Distribution has been approved and/or sanctioned by the Court and thereafter made to Z.
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(iii). the D Proposed Distribution has been approved and/or sanctioned by the Royal Court (such approval has now been obtained) and thereafter made to Y.
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(iv). the Trustee has satisfied itself that Z and Y have made appropriate provision for their descendants and the Trustee has resolved, in principle, that it would consider appropriate provision to have been made if Z and Y have transferred the assets they receive from the A Proposed Distribution and the D Proposed Distribution (or assets deriving from those assets) to the trustees the Reserve Trusts.
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(v). there has been no material change in the needs of the beneficiaries in the time between the A Proposed Distribution being made, and the point at which the Trustee comes to implement the C Proposed Distribution.
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As can be seen, in summary, the Proposals involve (assuming that the Court grants the Trustee's application):
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(a). an immediate distribution of substantial assets from the A Trust to Z. The evidence shows that the balance of the trust fund after this distribution will be approximately US$650 million. This distribution is to be matched by a distribution of the same value to Y from the D Trust.
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(b). an immediate amendment to the class of beneficiaries of the A Trust to add H Limited.
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(c). provided that Z and Y have made (to the satisfaction of the Trustee) “ appropriate provision” for their descendants (which the Trustee has determined will be the case if Z and Y settle the assets they receive from the A Proposed Distribution and the D Proposed Distribution on the Reserve Trusts) and the Trustee is satisfied that there has been no material change in the needs of the beneficiaries, the Trustee will amend the terms of the A Trust, such that on the first quarter end date following the one year anniversary of the death of the survivor of Z and Y, the balance of the trust fund in the A Trust will be held for and in effect transferred to H Limited (and thereafter will be applied for the benefit of the philanthropic causes that H Limited promotes).
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(d). in the meantime, and before the later of (i) the satisfaction of the conditions set out in (c) above and (ii) the first quarter end date following the one year anniversary of the death of the survivor of Z and Y, the Trustee's powers will be unfettered and it will be at liberty to make appointments and distributions to beneficiaries and take steps to protect their interests and meet their needs.
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(e). provided the two conditions set out in (c) above (as to “appropriate provision” for descendants and no material change in the needs of the beneficiaries) are satisfied with respect to the beneficiaries of the B Trust and the C Trust, the full balance of the trust funds in those trusts will be held for (and in effect transferred to) H Limited (in the case of the B Trust) and I Limited in the case of the C Trust (and thereafter will be applied for the benefit of the philanthropic causes that H Limited and I Limited promote).
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(f). in the meantime, and before the satisfaction of the conditions set out in (e) above, the Trustee's powers at trustee of the B Trust and the C Trust will be unfettered and it will be at liberty to make appointments and distributions to beneficiaries and take steps to protect their interests and meet their needs.
Accordingly, if the Proposals are ultimately put into effect, each of the Cayman Trusts would ultimately have no remaining assets and would accordingly terminate. For this reason, together with the fact that the Proposals involve the distribution of significant sums out of the Cayman Trusts to only three beneficiaries to the exclusion of other members of the class of beneficiaries, the Trustee considers that its decisions to effect the Proposals to be particularly momentous and that an application to the Court was necessary and justified for the purpose of obtaining a direction from or opinion of the Court that in giving effect to and implementing the Proposals, the Trustee would be exercising its powers properly and lawfully.
The Proposals are part of and intended to implement the estate planning of Z and Y and arrangements to reorganise the trusts established for the benefit of their family. The Cayman Trusts are part of a wider group of related trusts established in various jurisdictions with the same protector. These trusts were originally established in the mid-1960s and have always included provision for the support of philanthropic causes. This is an important part of Z and Y's legacy. Z and Y have recently established testamentary trusts which on their deaths will receive the bulk of their personal estates and they expect that these trusts will fund their family up to and including their great grandchildren. The intention is that the distributions to Z and Y will also be available for their family and will (A and B have expressed a “ firm intention” to do so) be settled on the Reserve Trusts (which will be for the...
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