Firewall And Forum

• Published date: 16 February 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Trials & Appeals & Compensation, Trusts
• Law Firm: Ogier
• Author: Ms Rachael Reynolds and Deborah Barker Roye

Summary

The recent judgment in the case of Geneva Trust Company v IDF and MF or Re Stingray Trust¹ (the Judgment) is the latest in a line of decisions of the Cayman Islands courts considering the meaning and scope of the Cayman firewall provisions. The Grand Court has now provided important clarification about the effect of Section 90 of the Trusts Act 2020² - that it does not operate to bestow exclusive jurisdiction on the Cayman Islands courts (as previous cases have suggested) and that common law principles of forum non conveniens still have relevance and application in the context of disputes concerning Cayman Islands trusts.

The Court also provided further guidance on the application of forum for administration clauses in Cayman trusts.

The Legislation

Section 90 of Part VII, the Trusts Foreign Element section, of the Cayman Islands Trusts Act³ (Section 90) provides (as relevant in the present case) that "[a]ll questions arising in regard to a trust which is...governed by the laws of the [Cayman] Islands or in regard to any disposition of property upon the trusts thereof including questions as to... any aspect of the validity of the trust, ...whether the administration be conducted in the Islands or elsewhere... are to be determined according to the laws of the islands, without reference to the laws of any other jurisdiction with which the trust or disposition may be connected."

Decision

The Court gave detailed consideration to each of the previous Cayman Islands cases which had commented on the effect of Section 90. The trustee of the Stingray Trust (the Trustee) argued that these cases established, as a matter of Cayman Islands law, that questions concerning Cayman Islands trusts must be determined by a Cayman court as well as in accordance with Cayman Islands law. Kawaley J held that the previous cases relied upon by the Trustee in this regard had been decided without the benefit of full or any argument on the issue. Following full argument in the Stingray case, and looking at each of those cases and the relevant Hansard report concerning the introduction of Section 90, together with the plain reading of the legislation, Kawaley J confirmed that Section 90 is expressed, and is intended, to be a governing law provision only and does not have the effect of conferring exclusive jurisdiction on the Cayman Court to adjudicate the issues which the section expressly requires to be determined as a matter of Cayman Islands law. Accordingly, Section 90 does not abrogate the court's power to stay proceedings on grounds of the common law doctrine of forum non-conveniens.

The Court also held that the wording of the forum for administration clause in this case (which provided: "The courts of the Cayman Islands shall be the forum for administration of this Trust") (the Forum Clause) was not an exclusive jurisdiction clause enforceable against a party suing in the capacity of a stranger to the trust.

The Facts

The Stingray Trust (the Trust) is a Cayman Islands trust, which is the subject of a validity challenge in ongoing proceedings in Milan. The validity challenge is brought by the court appointed Guardian (the Guardian) of IDF an incapacitated elderly lady, who the Trustee claims to be the economic settlor of the Trust and one of the discretionary beneficiaries. The Guardian seeks to argue that the Trust was settled without IDF's consent or understanding.

The question for the Cayman Courts was whether, notwithstanding the Milan proceedings having been ongoing for over 3 years, and the Trustee having submitted to the...