Amendments To The Cayman Islands Trusts Law

Amendments to the Trusts Law (2018 Revision) (Trusts Law) affirm the reputation of the Cayman Islands as a leading trusts jurisdiction.

The stated object of the Trusts (Amendment) Law, 2019 (Amendment Law) is "to enhance the inherent jurisdiction of the Court in relation to the administration of trusts".[1] The amendments to the Trusts Law achieve this object in a number of ways, as we explain further below.

Power to correct mistakes - application of the Rule in Hastings-Bass

In particular, the Amendment Law introduces a statutory power enabling the Grand Court of the Cayman Islands (Court) to set aside mistaken exercises of a fiduciary power[2] (a power which is exercised for the benefit of someone other than the holder of the power). An application to correct a mistake may be made by:

the trustee or other person who holds the relevant power (power holder) a person beneficially interested under the trust in the case of a purpose trust, the enforcer in the case of a charitable trust, the Attorney General any other person, with leave of the Court The Court may set aside the exercise of a power where:

the power holder has exercised the power on the basis of irrelevant considerations or without taking into account all relevant considerations; and had the power holder taken into account all and only relevant considerations, they would not have exercised the power or would have done so on a different occasion or in a different manner. It is not necessary for an applicant to show that the power holder acted in breach of trust or duty. As such, the Amendment Law confirms that an expansive Hastings-Bass[3] type application is permissible in the Cayman Islands. Such applications have previously been approved by the Court.

If the exercise of a power is set aside by the Court, it is treated as never having occurred.

Importantly, however, the Court cannot intervene where it would prejudice a bona fide purchaser for value of any trust property who did not have notice of the matters that would allow the Court to set aside the exercise of the power.

Power to approve a settlement and variations to a trust

The Amendment Law also enables the Court to approve the settlement of "trust litigation" on behalf of any beneficiary if the Court is satisfied that the settlement is not to the detriment of any such beneficiary, even where the Court cannot be satisfied that the settlement is for their benefit.[4] "Trust litigation" means litigation invoking the inherent...