Cayman Courts Continue To Provide Essential Guidance To Trust Practitioners Navigating Complex Trust And Estate Challenges

• Published date: 29 April 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation, Trusts
• Law Firm: Ogier
• Author: Ms Rachael Reynolds, Anthony Partridge and Deborah Barker Roye

Ogier's top-tier Cayman Trusts Advisory Group successfully acted in the matters reviewed in this briefing.

It is not uncommon for trust practitioners to face significant challenges when administrating trusts and estates. Changing circumstances and family dynamics can even involve practitioners in foreign and cross-jurisdictional disputes, which can result in trustees being caught up in a clash of laws and processes and potentially facing conflicting orders and obligations.

In a number of recent cases in which Ogier successfully acted, the Cayman courts have provided essential guidance to assist trust practitioners to navigate these difficulties and have demonstrated a willingness to assist trustees and beneficiaries when circumstances require it in order to ensure the proper, and cost-effective administration of trusts and estates.

Here we discuss the very specific regime for the reformation of STAR trusts which are a creature of Cayman statute and are increasingly being used as effective dynastic family trusts for multiple generations, for holding operating companies, and as special purpose vehicles in a commercial context. We also consider recent Cayman cases on the removal of personal representatives and the application of the principles of the Cayman firewall, forum and enforcement which are issues often deployed in cross-jurisdictional disputes to insulate a Cayman trust from attack by foreign courts.

Reformation of Cayman STAR Trusts

CIBC Bank and Trust Company (Cayman) Limitedv T & S¹ (CIBC v T & S) is the first decision of the Grand Court of the Cayman Islands dealing with the reformation of trusts established under the Special Trusts (Alternative) Regime (STAR).

A significant way in which STAR trusts differ from ordinary trusts is the disapplication of the usual statutory regime for variation of a Cayman trust. Instead, in the context of STAR trusts, the relevant power to effect changes is contained in section 104 of the Trusts Act (Section 104).

Where the execution of a STAR Trust in accordance with its terms becomes over time 'impossible or impractical, unlawful or contrary to public policy or obsolete, in that by reason of changed circumstances, it fails to achieve the general intent of the special trust,' the trustee must, unless the trust is reformed pursuant to its own terms, apply to the Cayman court to reform the trust cy-près (the term cy-près is from Norman French, and is conventionally understood, in the context of the reform of gifts...