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Offshore Cases

In the Matter of Various Trusts (unreported, 22 February 2017)

May 2017 Trusts

CAYMAN ISLANDS

GRAND COURT

While it is a relatively rare occurrence, circumstances can arise in the life of a trust that lead a trustee to the view that its hands are effectively tied and which potentially put the proper administration of the trust, and the interests of its beneficiaries, in great peril. Such a set of circumstances were considered by the Grand Court of the Cayman Islands (the “Court”) earlier this year, and the resulting judgment offers guidance and comfort to both trustees and beneficiaries facing troubles of this nature.

In the judgment concerning In the Matter of Various Trusts (unreported, 22 February 2017), the Honourable Justice Mangatal considered an application (the “Application”) made jointly by the beneficiaries of various trusts governed by Cayman Islands (“Cayman”) law (collectively, the “Plaintiffs”) for orders substituting a new trustee in the place of the original, and apparently hamstrung, trustee of those trusts.

Background

The Plaintiffs were all members of the same family, and beneficiaries of a number of trusts which were governed by Cayman law and contained clauses providing for the Court to have exclusive jurisdiction over any proceedings concerning the trusts. The original trustee of each of the trusts (the “Existing Trustee”) was a company incorporated outside Cayman. The trusts themselves were part of a complex trust and corporate structure and held, through various limited liability companies and other corporate intermediaries, assets worth hundreds of millions of dollars (the “Assets”). The Assets were located in a number of countries including the United States (“US”).

At the time the Application was made, the Existing Trustee was facing allegations by the US Government that some of the Assets were in fact traceable to a conspiracy, of which the settlor of the Trusts was allegedly a part, to launder money misappropriated from a company wholly owned by the government of another foreign country. Off the back of those allegations, the US Government had commenced proceedings in the US District Court for the Central District of California (“CDCA”), which took the form of forfeiture actions against the Assets pursuant to the laws of California (the “US Proceedings”). All of the allegations in the US Proceedings were strenuously contested by the Plaintiffs, who feared impairment to, or permanent loss of, the Assets if the Existing Trustee did not actively engage in the US Proceedings.

For its part, the Existing Trustee had informed the Plaintiffs that it considered itself to be effectively paralysed from performing its functions as trustee, or from resigning as trustee, due to the risk that if it were to take any such steps it would be accused by the US Government of being involved in money laundering or otherwise exposed to civil or criminal liability for any action it decided to take. Evidence was submitted to the effect that, in the course of the US Proceedings, the US Government had already made such accusations.

 

To continue reading full articles in PDF format:
In the Matter of Various Trusts (unreported, 22 February 2017)

 

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EDITOR & HEAD OF LITIGATION BERMUDA

Christian R. Luthi
Tel: +1 441 298 7814
Email: christian.luthi@conyersdill.com


Head of Litigation British virgin islands

Mark J. Forte
Tel: +1 284 852 1113
Email: mark.forte@conyersdill.com


Head of Litigation Cayman Islands

Paul Smith
Tel: +1 345 814 7777
Email: paul.smith@conyersdill.com


HEAD OF THE ASIA DISPUTES & RESTRUCTURING GROUP

Nigel K. Meeson, QC
Tel: +852 2842 9553
Email: nigel.meeson@conyersdill.com

Offshore Cases

In the Matter of Various Trusts (unreported, 22 February 2017)

30 May 2017

CAYMAN ISLANDS

GRAND COURT

While it is a relatively rare occurrence, circumstances can arise in the life of a trust that lead a trustee to the view that its hands are effectively tied and which potentially put the proper administration of the trust, and the interests of its beneficiaries, in great peril. Such a set of circumstances were considered by the Grand Court of the Cayman Islands (the “Court”) earlier this year, and the resulting judgment offers guidance and comfort to both trustees and beneficiaries facing troubles of this nature.

In the judgment concerning In the Matter of Various Trusts (unreported, 22 February 2017), the Honourable Justice Mangatal considered an application (the “Application”) made jointly by the beneficiaries of various trusts governed by Cayman Islands (“Cayman”) law (collectively, the “Plaintiffs”) for orders substituting a new trustee in the place of the original, and apparently hamstrung, trustee of those trusts.

Background

The Plaintiffs were all members of the same family, and beneficiaries of a number of trusts which were governed by Cayman law and contained clauses providing for the Court to have exclusive jurisdiction over any proceedings concerning the trusts. The original trustee of each of the trusts (the “Existing Trustee”) was a company incorporated outside Cayman. The trusts themselves were part of a complex trust and corporate structure and held, through various limited liability companies and other corporate intermediaries, assets worth hundreds of millions of dollars (the “Assets”). The Assets were located in a number of countries including the United States (“US”).

At the time the Application was made, the Existing Trustee was facing allegations by the US Government that some of the Assets were in fact traceable to a conspiracy, of which the settlor of the Trusts was allegedly a part, to launder money misappropriated from a company wholly owned by the government of another foreign country. Off the back of those allegations, the US Government had commenced proceedings in the US District Court for the Central District of California (“CDCA”), which took the form of forfeiture actions against the Assets pursuant to the laws of California (the “US Proceedings”). All of the allegations in the US Proceedings were strenuously contested by the Plaintiffs, who feared impairment to, or permanent loss of, the Assets if the Existing Trustee did not actively engage in the US Proceedings.

For its part, the Existing Trustee had informed the Plaintiffs that it considered itself to be effectively paralysed from performing its functions as trustee, or from resigning as trustee, due to the risk that if it were to take any such steps it would be accused by the US Government of being involved in money laundering or otherwise exposed to civil or criminal liability for any action it decided to take. Evidence was submitted to the effect that, in the course of the US Proceedings, the US Government had already made such accusations.

 

To continue reading full articles in PDF format:
In the Matter of Various Trusts (unreported, 22 February 2017)

 

 

EDITOR & HEAD OF LITIGATION BERMUDA

Christian R. Luthi
Tel.: +1 441 298 7814
Email.: christian.luthi@conyersdill.com


Head of Litigation British virgin islands

Mark J. Forte
Tel.: +1 284 852 1113
Email.: mark.forte@conyersdill.com


Head of Litigation Cayman Islands

Paul Smith
Tel.: +1 345 814 7777
Email.: paul.smith@conyersdill.com


HEAD OF THE ASIA DISPUTES & RESTRUCTURING GROUP

Nigel K. Meeson, Q.C.
Tel.: +852 2842 9553
Email.: nigel.meeson@conyersdill.com