Wahr-Hansen v Bridge Trust Company Ltd

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Kerr and Collett, JJ.A.)
• Judgment Date: 28 November 1997
• Court: Court of Appeal (Cayman Islands)
• Date: 28 November 1997

Court of Appeal

(Zacca, P., Kerr and Collett, JJ.A.)

WAHR-HANSEN

and

BRIDGE TRUST COMPANY LIMITED and FOUR OTHERS

P.H. Goldsmith, Q.C., D.J. Close and G.F. Ritchie for the appellant;

T.M.E.B. Etherton, Q.C., C.R.F. Tidmarsh and A.J.E. Foster for the first and second respondents;

M.C.C. Hart, Q.C. and W.J. Helfrecht for the third respondent;

A.G. Boyle, Q.C., N.F. Harrison and N.R.L. Clifford for the fourth respondent;

S. Barrie for the fifth respondent.

Cases cited:

(1) Atkinson”s Will Trusts, In re, Atkinson v. Hall, [1978] 1 W.L.R. 586; [1978] 1 All E.R. 1275, applied.

(2) Att.-Gen. v. Carlisle (Mayor & Corp.)ENR(1828), 2 Sim. 437; 57 E.R. 851.

(3) Att.-Gen. v. Lonsdale (Earl)ENR(1827), 1 Sim. 105; 57 E.R. 518.

(4) Att.-Gen. v. National Provncl. & Union Bank of England, [1924] A.C. 262; [1923] All E.R. Rep. 123, dicta of Lord Cave applied.

(5) Att.-Gen. (Bahamas) v. Royal Trust Co.UNK(1983), 36 W.I.R. 1; on appeal, [1986] 1 W.L.R. 1001; [1986] 3 All E.R. 423, dicta of Luckhoo, P. applied.

(6) Att.-Gen. (New Zealand) v. Brown, [1917] A.C. 393; [1916-17] All E.R. Rep. 245.

(7) Blair v. Duncan, [1902] A.C. 37; (1901), 71 L.J.P.C. 22.

(8) Combe, In re, Combe v. CombeELR, [1925] Ch. 210; [1925] All E.R. Rep. 159; sub nom. In re Coombe, Coombe v. CoombeUNK(1925), 133 L.T. 473, distinguished.

(9) Houston v. Burns, [1918] A.C. 337; (1918), 87 L.J.P.C. 99.

(10) Income Tax Special Purpose Commrs. v. Pemsel, [1891] A.C. 531; [1891-4] All E.R. Rep. 28, dicta of Lord Macnaghten applied.

(11) Incorporated Council of Law Reporting (England & Wales) v. Att.-Gen., [1972] Ch. 73; [1971] 3 All E.R. 1029, dicta of Russell, L.J. applied.

(12) Incorporated Council of Law Reporting (Queensland) v. Commr. of Taxation (Australia)UNK(1971), 125 C.L.R. 659; 45 ALJR 552.

(13) Inland Rev. Commrs. v. McMullen, [1981] A.C. 1; [1980] 1 All E.R. 884.

(14) Macduff, In re, Macduff v. Macduff, [1896] 2 Ch. 451; [1895-9] All E.R. Rep. 154.

(15) Mitford v. ReynoldsENR(1842), 1 Ph. 185; 41 E.R. 602; [1835-42] All E.R. Rep. 331.

(16) Nightingale v. GoulburnENR(1848), 2 Ph. 594; 41 E.R. 1072; [1843-60] All E.R. Rep. 420.

(17) Ogden (H.J.), In re, Brydon v. Samuel, [1933] Ch. 678; [1933] All E.R. Rep. 720, distinguished.

(18) Pardoe, In re, McLaughlin v. Att.-Gen., [1906] 2 Ch. 184; (1906), 75 L.J. Ch. 455, considered.

(19) Smith, In re, Public Trustee v. Smith, [1932] 1 Ch. 153; [1931] All E.R. Rep. 617, distinguished.

(20) Vandervell”s Trusts (No. 2), In re, White v. Vandervell Trustees Ltd., [1974] Ch. 269; [1974] 3 All E.R. 205, applied.

(21) Weekes” Settlement, In re, [1897] 1 Ch. 289; (1897), 76 L.T. 112, distinguished.

(22) West v. Knight(1669), 1 Cas. in Ch. 134; 22 E.R. 729.

Legislation construed:

Trusts (Foreign Element) Law, 1987 (Law 17 of 1987), s.4(4):

‘If the terms of a trust so provide, the governing law of the trust may be changed to or from the laws of the Islands provided that:

(i) in the case of a change to the law of the Islands, such change is recognised by the governing law of the trust previously in effect….’

Charitable Uses Act 1601 (43 Eliz. 1, c.4), Preamble: The relevant terms of this Preamble are set out at page 537, lines 2–6.

Trusts-creation-obligation to distribute income-may infer intention to create trust despite absence of express obligation to distribute income if possible to give favourable construction to uphold charitable objects

Charities-charitable purposes-intention of settlor-no construction of general words ejusdem generis with class of other implicitly charitable objects unless trust instrument shows intention to benefit exclusively charitable objects-clause permitting amendments to benefit non-charitable objects may suggest contrary intention

The parties applied to the Grand Court for a declaration to determine the validity of a trust.

The appellant represented the estate of the alleged owner of assets settled in The Bahamas on the trusts of the Continental Foundation (‘CF’), of which the second respondent was the first trustee. By cl. 3 of the trust, the trustees, when not required by law to do so, were given ‘an absolute discretion to distribute income…to any one or more religious, charitable or educational institution or institutions or any organizations or institutions operating for the public good…the intention being to enable the trustees to endeavour to act for the good or for the benefit of mankind in general or any section of mankind in particular anywhere in the world or throughout the world.’

The law governing the trust was changed from that of The Bahamas to that of the Cayman Islands under cl. 39 of the trust instrument.

The ostensible settlor of the CF trust was also the settlor of a second trust, the Aall Foundation, of which the first and second respondents were trustees, and to which the majority of the CF trust assets were transferred after the death of their alleged owner. The appellant brought proceedings in England alleging misappropriation of the trust assets by the first and second respondents, who in turn sought directions from the Grand Court on how best to proceed in the interests of the two trusts.

The Grand Court (Harre, C.J.) ruled, on the preliminary issues relating to the validity of the CF trust, that the governing law had changed from Bahamian to Cayman law, and that under the law relating to charitable trusts in the Cayman Islands (which was the same as that in England) the trust instrument created a trust the objects of which were exclusively charitable and which was not invalidated by its lack of geographical

limits. The last of the four categories of object listed, namely ‘any organizations or institutions operating for the public good’ was to be read ejusdem generis with the preceding three heads of charity to achieve this construction. Accordingly, the trust was valid. The proceedings in the Grand Court are reported at 1996 CILR 52.

On appeal, the appellant submitted that (a) regardless of the settlor”s intentions, the trust instrument did not create a valid trust of any kind, since it imposed no obligation on the trustees to distribute income to the objects specified in cl. 3, but instead created a collection of powers without any duty to exercise them; (b) the objects of the trust, in any event, were not exclusively charitable since (i) the recitals expressed the settlor”s wish to benefit ‘worthy individuals, organizations and corporations,’ an intention which could only be achieved by an amendment to cl. 3, which at present permitted only ‘organizations or institutions’ to benefit, and (in contast to the Aall Foundation) amendments which might alter the charitable nature of the trust were not prohibited, (ii) although the first three categories of object specified in cl. 3 were charitable, the fourth could not be so construed as the words ‘or any organizations or institutions operating for the public good’ suggested a disjunctive interpretation, allowing non-charitable bodies to benefit unless the context indicated otherwise, and (iii) the principle of ejusdem generis did not apply to extend the charitable nature of the first three categories to the fourth, since the terms of the trust as a whole did not imply an exclusively charitable intention; and (c) accordingly, there was no valid charitable trust and the assets of the CF trust were held on a resulting trust for the settlor.

The respondents submitted in reply that (a) since it was clear from the recitals and cl. 3 that the settlor had intended to create a trust and to make provision for the management and distribution of the trust fund, the court should construe the operative provisions favourably so as to uphold the charitable objects of the trust; (b) the trust instrument therefore created an implied trust to apply income for the benefit of the objects listed in cl. 3, together with a power to accumulate the income, which could be exercised indefinitely, so that a distribution might never be made; and (c) the objects of the trust were exclusively charitable since (i) the fourth category of objects in cl. 3, namely organizations and institutions operating for the public good, was to be construed as confined to objects within the spirit of the Preamble to the Charitable Uses Act 1601, as were the first three categories, by the application of the ejusdem generis principle, (ii) the court should uphold as charitable a gift in general words for the public benefit, provided there was nothing expressed to prevent such a construction, and (iii) given the draftsman”s undoubted knowledge of the four heads of charity at common law, any other construction of the settlor”s intention would be perverse.

Held, allowing the appeal:

(1) The court was satisfied that the change of the law governing the trust from that of The Bahamas to that of the Cayman Islands was valid

for the purposes of s.4 of the Trusts (Foreign Element) Law, 1987, and would adopt the reasoning of the Grand Court in this respect (page 532, lines 15–31).

(2) It was accepted by the parties, and the court agreed, that the law relating to charitable trusts was the same in the Cayman Islands as in England. Accordingly, no more liberal construction of charitable purposes was to be applied here than elsewhere for socio-economic reasons or otherwise (page 532, lines 32–45).

(3) The CF trust instrument had created a valid trust even though it imposed no express obligation on the trustees to distribute the income, since the recitals stated that the purpose of the instrument was to create a trust and it could be inferred from cl. 3 that that was the settlor”s intention. Furthermore, since its objects were ostensibly charitable, the court would construe its provisions favourably so as to uphold those objects if possible (page 535, line 27 – page 536, line 12; page 536, lines 20–24).

(4) However, upon closer analysis, the trust was not charitable, since no intention was...