Important Updates for Trustees - STEP Cayman Islands Branch Presentation
Walkers Bermuda, in association with Kevin Taylor, presented on legislative changes, interesting Cayman cases, CIMA guidance, and more for trustees at the STEP Cayman Islands Branch in May 2019. Topics included trust law amendments, private trust company regulations, and significant legal cases impacting trustees. The presentation covered variations in trusts, trust litigation, the Cayman Firewall, and more with a focus on enhancing trustee knowledge and compliance in the Cayman Islands jurisdiction.
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Presentation Transcript
Important updates for trustees Presentation to STEP Cayman Islands Branch, 16 May 2019 Walkers works in exclusive association with Kevin Taylor, trading as 'Walkers Bermuda', a full service commercial law firm providing advice on all aspects of Bermuda law. The title of partner is used to refer to a consultant or employee of Walkers Bermuda with equivalent standing and qualifications to a partner of Walkers.
Important updates for trustees Legislative changes Interesting Cayman cases Interesting cases from other jurisdictions CIMA guidance for trustees 2
Trusts (Amendment) Law, 2019 "Statutory Hastings-Bass" for the Cayman Islands Variation of trusts "no detriment" requirement Compromising trust litigation Beefing up the Cayman Firewall Trust corporations 4
Private Trust Companies (Amendment) Regulations, 2019 "Connected trust business" single settlor CIMA scrutiny Natural person as director Reduction in registration fees 5
s. 48 Trusts Law (2018 Revision) Opinion advice or direction: "It is a jurisdiction to which resort has been taken in a number of different circumstances and while its boundaries have never been defined by the court, it has, from the decided cases, clearly come to be regarded as a remedial jurisdiction, for orders to be made as the justice of the case deserves." A & Others v Rothschild Trust Cayman Limited [2004-2005 CILR 485], per Smellie C.J. 7
Beddoe applications In the Matter of a Trust Known as Stingray Trust (unreported) Cayman Islands irrevocable discretionary trust Two elderly sisters Beneficiaries comprise the sisters and a charity Proceedings in Switzerland and Italy Swiss proceedings concluded before Beddoe application issues Italian proceedings ongoing when Beddoe application issued 8
Retrospective Beddoe relief? "The urgency of the case and in view of the interim relief obtained by the Guardian the failure to apply for Beddoe relief at that stage is explicable. The engagement of resources to protect the Trust assets in my view had to take priority Had the Trustee not defended the case there is a risk the Trust would have had its assets transferred to the Guardian This meant that it fell to the Trustee to defend the Trust assets and it is clear from the outcome that the Trustee had a strong case against the claims of the Guardian." In the Matter of a Trust Known as Stingray Trust (unreported), per Parker J. 9
Blessing applications (1) "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 " The Public Trustee & anor v Cooper & ors [2001] WTLR 901, per Mr. Justice Hart quoting Walker J (as he then was) 10
Blessing applications (2) Critical legal question? Whether: "the opinion of the trustees was one which a reasonable body of trustees properly instructed as to the meaning of the relevant clause could properly have arrived at " Cotton v Earl of Cardigan [2014] EWCA Civ 1312, Per Vos L.J. 11
Blessing applications (3) "It is to be hoped that following a hearing which has focused on the rationality of the Trustee's conduct, the Beneficiaries will realise that letting go of their past grievances and healing the familial wounds if the only rational thing for them to do." In the Matter of A Trust (unreported), Per, Kawaley J. See also: In the Matter of XYZ Trusts [2017] SC (Bda) 111 Civ 12
Applications for directions (1) Cayman Islands trust and trustee US settlor and beneficiaries of fiduciary duty and negligent misstatement Beneficiaries sue the trustee's sister company in Florida for breach Trustee not a party to Florida claim Trustee makes application to Cayman Court for directions 13
Application for directions (2) Service: Massachusetts and Missouri alleging invalid service insufficient minimum contact with the Cayman Islands Beneficiaries issue proceedings against the trustee in Florida, directions application Beneficiaries ask Cayman Court to set aside service of trustee's trustee in Florida, Massachusetts and Missouri Trustee applied to restrain the service proceedings against the Trustee unsuccessful at first instance but appeal allowed by consent 14
Applications for directions (3) proceedings pending the outcome of the claim in Florida? Strike out s.48 application as an abuse of process or stay the "The parties have agreed that this jurisdiction is the proper forum for the adjudication of the defined matters raised in the section 48 application. This leads to the conclusion that TCo is entitled to seek directions pursuant to the S.48 application and it is entitled to have the matters outlined [in the originating summons], which involve its acts or omissions concerned with the purchase and management of the life policies, examined by this court pursuant to Cayman law." In the Matter of the T Trust (unreported) Per, Parker J. 15
Takeaways? S.48 jurisdiction is extremely wide and its boundaries not defined retrospective Beddoe relief even after the litigation has concluded It may be possible, in exceptional circumstances, to obtain on a blessing application The court may tweak / recommend tweaks to the trustee's proposal jurisdiction S.48 applications can be served on beneficiaries outside of the a trustee of a Cayman trust, the trustee is entitled to bring a s.48 application provided that the relief claimed is specific Where foreign proceedings include factual allegations that implicate 16
Bermuda Meritus Trust Company Limited v Butterfield Trust (Bermuda) Limited Supreme Court of Bermuda Outgoing trustee has no right: to retain trust assets in respect of actual or contingent liabilities to require a contractual indemnity from the new trustee unless it is expressly provided in the trust deed that this requirement exists regarding right to contractual indemnity Trustees should seek to include express provision in trust deed 18
Jersey Z Trust cases Royal Court of Jersey re. "insolvent" trusts Duties of trustees in insolvent situations What sort of insolvency regime, if any, should apply? Exercise of fiduciary powers in insolvent situations Nature of former trustee's equitable lien over trust assets Ranking of different liabilities 19
CIMA guidance for trustees Services Providers (March 2019) Statement of Guidance Market Conduct: Trust and Corporate Regulatory Policy Fitness and Propriety (March 2019) Trust and Corporate Service Providers (March 2019) Statement of Guidance Recruitment and Selection Standards for Statement of Guidance Succession Planning (March 2019) 21
Questions? 22
Key Contacts David Pytches Partner T: +1 345 814 6831 E: david.pytches@walkersglobal.com Monique Bhullar Senior Counsel T: +1 345 814 6838 E: monique.bhullar@walkersglobal.com Lucy Diggle Senior Counsel T: +1 345 914 4250 E: lucy.diggle@walkersglobal.com 23
