Bermuda Trust Law Update

In the Matter of the C Trust [2016] SC [Bda] 53 Civ was the first Bermuda case to extend the perpetuity period under the new Section 4 of the Bermuda Perpetuities and Accumulations Act 2009 ("the 2009 Act"). The amendment to Section 4 took effect in December 2015. Although prior to the amendment, the 2009 Act had already abolished the rule against perpetuities with respect to instruments taking effect on or after 1 August 2009, the rule continued to apply to trusts established under Bermuda law prior to 1 August 2009 as well as to trusts originally established in other jurisdictions (with an applicable perpetuity period or similar limitation) but now governed by Bermuda law.

Prior to the amendment, trustees or interested parties could apply to Court using Section 47 of the Trustee Act 1975 to amend a trust to vary the perpetuity period as well as other aspects of the trust. 'Section 47' applications require showing that the proposed variation is "expedient" to the trust as a whole. The Section 4 amendment avoids the more rigorous and costly method of dealing with perpetuities variation via a Section 47 application – the test being a weaker test than "expediency".

This latter point was confirmed in the C Trust case which was ruled upon within 8 days of the originating summons being filed. It concerned a US$2 billion trust in which the settlor was the only current beneficiary. The settlor wished the trust to be dynastic in duration and to ensure that succeeding generations of beneficiaries would "never be spoiled" by suddenly coming into great personal wealth. It was held that the Courts are not to be used as a "rubber stamp" in such applications and that regard must be had to the best interests of all interested parties "broadly" defined and looked as a whole.

In this case, the express consent of the settlor was affirmed through evidence. The settlor's children who were contingent beneficiaries did not provide evidence. Justice Kawaley did, however, comment that had the interests of other actual beneficiaries been involved, direct evidence of their consent or other form of agreement or support to the application would likely be required to justify proceeding without their formal joinder. Chief Justice Kawaley was persuaded that as the extension of the trust period did not adversely impact the default beneficiary (a charity), the default beneficiary did not need to receive notice of the application.

Justice Kawaley also accepted that the fact...