Background
The application sought approval for the Enforcer’s decision to instruct the Trustee to exercise particular rights attached to shares held by the Trustee in an underlying company for the benefit of the Trust. Exercising these share rights was pivotal to the purpose of the Trust.
The Trust was a purpose trust established in the Cayman Islands under the Special Trusts Alternative Regime (“STAR”) in Part VIII of the Trusts Act (2021 Revision) (the “Act”)[2].
The Act
Under the Act, S.48 provides for any trustee or personal representative to make an application to the Court for advice and directions. The applicant may apply to the Court for an opinion or advice relating to the overall management of the trust, trust monies or the assets as a whole. S.48 does not explicitly contemplate or include an enforcer making such an application[3].
Under the Act, S.102(b) provides for the rights and remedies of enforcers specifically. An enforcer has the rights of a trustee (subject to any specific terms of the appointment as documented within the trust instrument) pertaining to protection, indemnity and to make applications to the Court for an opinion, advice or direction. Applications under S.102(b) may also cover a relief from personal liability[4].
Decision
Justice Kawaley approved the Enforcer’s decision to make a ‘momentous’ decision in the exercise of his fiduciary powers under the Trust. As already stated, S.48 of the Act provides any trustee with the ability to apply to the Court for direction on any question respecting the management or administration of the trust. The judge held that when reading S.48 in conjunction with S.102(b), an enforcer is armed with the same ability and rights as a trustee to make applications to the Court for advice or direction. The legal basis is one and the same.
Furthermore, the Grand Court Rules, under GCR Order 85 provide for additional clarity whereby an Enforcer enjoys equivalent standing as a trustee as displayed in S.48 and S.102(b):
“7. (1) Unless made by written submission under rule 8, an application by an executor, administrator, trustee or enforcer under S.48 of the Trusts Act (as revised and amended) for the opinion, advice or direction of the Court upon any question respecting the management or administration of the estate or trust fund shall be made in accordance with this rule.”[5]
Appleby Commentary
1. The decision is the first of its kind where an Enforcer has successfully applied to the Court for directions under S.102 of the Act. Importantly, a precedent has now been set for an Enforcer to be able to apply confidently to the Court for advice or directions under the same legal basis as a trustee.
2. Justice Kawaley’s application of the legal principles established in Public Trustee-v-Cooper [2001] WTLR 901[6], and the “Category 2” test, also further established in Cayman under AA v BB & Colin Shaw 2020[7], provides for a useful reminder of the four categories that the Court must consider when blessing a trustee (or enforcer) decision:
(a) Whether the step is momentous;
(b) Whether the step is within the trustee’s (or enforcer’s) powers;
(c) Whether the step is one which a prudent trustee (or enforcer) would take; and
(d) Full and frank disclosure and any conflict of interests must be presented to the Court.[8]
Category 2: where there is no real doubt as to the trustees’ powers and how a trustee would like to exercise them, but, because the decision is particularly ‘momentous’ the trustee wishes to obtain a blessing by the Court.[9]
Parties making an application to the Court under S.102 will be reminded that the above considerations as well as the restated test under “Category 2” continue to be good law in the Cayman Islands as well as elsewhere.
3. The STAR regime continues to be a dynamic and flexible piece of legislation that provides certainty to the fiduciaries of the structure. Justice Kawaley stated that he “had little difficulty in concluding that the Enforcer had standing to apply under section 48 read in conjunction with section 102(b)”[10]. The Court’s ease of interpretation of the clear drafting of these sections enhances the practical uses of the Act and the Public Trustee v Cooper jurisdiction.
4. This decision further goes to clarify the rights of an Enforcer under the Act and provides new case law applicable to the wider role of Enforcers, as often deliberated in the offshore trust world.
[1] In the matter of AA v JTC (Cayman) Limited – FSD 12 of 2024 (IKJ) – Reasons for Decision
[2] Trusts Act (2021 Revision), PART VIII – Special Trusts – Alternative Regime
[3] Ibid 2
[4] Ibid 3
[5] Grand Court Rules, Order 85
[6] Public Trustee-v-Cooper [2001] WTLR 901
[7] AA v BB v Colin Shaw 2020 (as Amicus Curiae)
[8] Ibid 5
[9] Ibid 4, Ibid 6
[10] Ibid 1
