In The Matter Of The X Trust And The Y Trust ' FSD 57 Of 2022 (IKJ)

Published date17 February 2023
Subject MatterCorporate/Commercial Law, Corporate and Company Law, Contracts and Commercial Law, Trusts
Law FirmConyers
AuthorMr Robert Lindley, Anna Lin and Catherine Wong

Offshore Trust and Estate Litigation Update Series - Part I

Trust and estate disputes in both the Cayman Islands and the BVI, and claims against the actions of a trustee/executor or disputes related to an interested party's entitlement under a deceased's estate, continue to be on the rise.

This series analyses recent cases concerning trust and estate disputes in the Cayman Islands and the BVI which demonstrate the scope of the Courts' supervisory role and powers. These decisions provide clarity as to the approach to be taken by the Courts in similar cases in other offshore and common law jurisdictions, and serve as a useful reminder of the fact that the Courts will not substitute their own views for those of trustees or beneficiaries, and will generally give priority to the specific facts of each case.

The first article in this series discusses a 2022 Cayman Islands case where the Cayman Court considered an application for "blessing" of a "momentous decision" in the context of a trustee's decision, and was for the first time being invited to balance the trustee's entitlement to remuneration against the rights of beneficiaries and potential third-party proprietary claimants.

In the Matter of The X Trust and The Y Trust - FSD 57 of 2022 (IKJ)

In this case, the trustee (the "Trustee") sought an order that, amongst other things, it be permitted to liquidate assets in order to pay its unpaid and future fees and expenses. The Trustee was appointed in respect of two trusts (the X Trust and the Y Trust) governed by Cayman Islands law (the "Trusts"). The defendant, a child of the settlor, was appointed to represent all of the beneficiaries of both Trusts.

There was no dispute about the Trustee's entitlement to take such steps as might reasonably be required to meet its outstanding fees and expenses and those which would soon fall due. The argument centred on whether or not liquidating two of the most liquid assets at a substantial discount was the best available commercial decision.

The central rationale for liquidating assets at a substantial discount to their face value was that no alternative ways to meet trust expenses could be found and that, although the beneficiaries had been afforded a reasonable time to formulate substantive alternative proposals, no concrete proposals had been made. The pivotal question arising was whether or not the Trustee had, as it contended, exhausted all reasonable attempts to consider the defendants' alternative proposal.


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