Cayman Islands: Recent Court Decisions Affecting Trusts In The Cayman Islands

Last Updated: 10 February 2008
Article by Carlos de Serpa Pimentel

A number of recent Grand Court decisions have demonstrated that the Cayman Islands Court remains at the forefront of developments in trusts and trust litigation. Three notable cases address subjects as varied as protector's powers, the validity of no contest clauses and the circumstances in which the Court will refuse to entertain a claim on the ground that it amounts indirect tax gathering on behalf of a foreign revenue authority.

The 2006 decision, In the matter of the Circle Trust, HSBC International Trustee Limited v Wong and Five Others 1arose out of an acrimonious dispute between beneficiaries of a trust relating to the control and running of a paper manufacturing business established in China and Hong Kong. The Plaintiff Trustee applied to the Court for the preliminary determination of various questions, including issues relating to the nature of the Protector's duties. In an effort to assert control over the dispute, the majority beneficiaries of the Trust, who comprised the wife of the founder of the business and two of his children, appointed the founder as the Protector pursuant to a clause in the trust deed allowing a majority of the sui juris beneficiaries to appoint an additional Protector in circumstances where an Original Protector had not been appointed. The two remaining beneficiaries argued that the appointment of their father as Protector was invalid having been carried out irrationally and in the absence of good faith. By way of preliminary issue the Court considered whether under the terms of the trust deed the majority beneficiaries had the power to appoint the Protector and if so, whether that appointment had been invalid or irrational. The Court held that the majority of the sui juris beneficiaries had power to appoint a Protector on the face of the deed and that as the power was a fiduciary power, therefore the beneficiaries were obliged to exercise such power in good faith. The rationale for this finding was that as the power to appoint trustees would normally be fiduciary, similarly the power to appoint a Protector who could in turn appoint trustees would not be treated any differently. It was held that the power to appoint a Protector in the circumstances of the case was a fiduciary power. The Court then went on to consider the exercise by the Protector of the power to appoint and remove trustees. In this context it was held that the Protector held a fiduciary position and his power to appoint or remove trustees was subject to the review and scrutiny of the Court. The Protector could exercise his powers only for the good of the beneficiaries as a whole. Interestingly, the Court emphasised in its judgment that it has an inherent jurisdiction to remove the Protector and appoint another in his place if the Protector fails to exercise his powers in the best interests of the beneficiaries.

In A.N v Barclays Private Bank and Trust (Cayman) Limited2 the Grand Court considered the validity of forfeiture clauses, otherwise known as "no contest" clauses. The Plaintiff was the discretionary beneficiary of two trusts and sought a declaration that a forfeiture clause in each of the trusts was invalid, as well as the removal of the trustee and the Protective Committee. Clause 23 of the trusts was a forfeiture clause stating that beneficiaries contesting the validity of the Trust, transfers of property or decisions of the Trustee or Protective Committee would be excluded from any benefit, direct or indirect. The Plaintiff alleged that the Trustees and the Protective Committee had acted unreasonably in seeking to restructure the underlying business owned by the Trust. The Plaintiff had sought and obtained an ex-parte injunction preventing the IPO of the underlying company: a valuable research, trading and manufacturing business. The question whether the action initiated by the Plaintiff breached clause 23 and therefore as a consequence she was no longer a beneficiary came before the Court. The Court also considered whether it was able to grant the Plaintiff relief from forfeiture. The Chief Justice held that the forfeiture clause was valid and not unconscionable in the circumstances of this particular case. Specifically, the Chief Justice decided that the clause should be construed as including the word "unjustifiably" so that it read:

"Whomsoever unjustifiably contests the validity of this deed and the Trust created under it, ... shall cease to be a beneficiary of any of these trusts and shall be excluded from any benefit direct or indirect deriving from the trust fund".

A justifiable contest was held to be a bona fide contest, one with "probabilis causa litigandi", and one which was not frivolous or vexatious. Interpreted literally, clause 23 would be too uncertain to be valid, however with the addition of the word "unjustifiably", it was held that the beneficiary would know with much greater certainty the exact action which would bring about the forfeiture of her interest. The Court held that the forfeiture clause was equivalent to a condition subsequent and therefore the Court could intervene in equity to grant relief from forfeiture if the Plaintiff had not complied with the terms of the clause through no fault of her own. Perhaps the major significance of this decision is that it is to our knowledge the only reported decision anywhere concerning the validity of no contest clauses in trusts.

The as yet unreported 2007 decision in Even Wahr-Hansen and Others v Compass Trust Co. Limited and Others3 is the latest Court decision in the continuing litigation relating to the Estate of the late Norwegian shipping magnet Anders Jahre who died in 1982. In this fresh action commenced by the Plaintiff administrator of the Jahre Estate, which was taken under public administration in Norway, the Court was asked to rule by way of a preliminary issue on the validity of Defendants' assertion that the Estate's claims against them were an indirect attempt to enforce the revenue claims of a foreign authority and therefore unenforceable. The dispute between the parties on this issue centered on the nature and scope of the prohibition on indirect enforcement of a tax gathering claim. In a detailed judgment, Mr Justice Henderson reviewed the existing Commonwealth authorities relating to the question of tax gathering. To summarise, the Judge agreed that there had to be an unsatisfied tax claim on behalf of the State of Norway and also agreed in order for the defence to succeed it should be shown that most of the proceeds of litigation would go to the State of Norway. A further issue between the parties was whether the claim was "in substance" an attempt to collect foreign tax. It was not necessary to prove a "connection" between the present claim and foreign tax law and it was not necessary that the defence of indirect tax gathering only be available to the tax payer himself as opposed to another party. On the facts of this case it was held that in substance the Estate had no other creditor other than the Norwegian Revenue. There was one tiny debt owed to the Ministry of Justice which comprised a fraction of one percent of the revenue debt. The burden to show the claim was in substance an attempt to collect foreign tax rested on the Defendants and the issue turned on the nature of the public administration of an Estate in Norway where the Administrator is supported by the Judge of the Probate Court and reports to him. It was accepted by the Court that the Administrator had worked closely with the Ministry of Finance and paid a great deal of attention to its wishes and views. It was also accepted that Mr Wahr-Hansen had worked "hand in glove" with and on behalf of the Norwegian authorities and the Probate Court had exercised a significant degree of control and supervision, so much so that the Judge held that "the [Norwegian] Court was exceeding the level of supervision ordinarily exercised over a Court appointed liquidator, particularly where the liquidation estate has only one major creditor". Nevertheless, the Estate was currently self-funding, having settled actions against various other parties. Ultimately the Judge decided that there were sufficient actual distinctions between the facts of the case and the main reported authorities. In particular the Probate Court had a relatively high involvement in the administration of the Estate and acted against the wishes of the Norwegian Revenue on a few occasions. Judge Henderson decided that this distinction was of a controlling importance and concluded the claim was not in substance an attempt to collect tax. Although the tax gathering defence was not upheld on this occasion, the decision is significant as it amounts to a recent upholding of the principles behind tax gathering jurisprudence set out in cases such as Peter Buchanan v McVey [1954] IR 89 and Government of India v Taylor [1955] A.C. 491, as well as comprising a useful and detailed review of all other authorities on this subject.


1 In the matter of the Circle Trust, HSBC International Trustee Limited v Wong and Five Others Grand Court, Henderson J, July 28 2006 [2006 CILR 323]

2 A.N. v Barclays Private Bank and Trust (Cayman) Limited and Six Others, Grand Court, Smellie C.J., July 17 2006 [2006 CILR 367]

3 Even Wahr-Hansen v Compass Trust Co. Limited, Grand Court of the Cayman Islands, Henderson J., January 8 2007

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.