A textbook application scores full marks for the responsible trustee

26 May 2020

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Saffery Champness Registered Fiduciaries and their advisors secured approval from the Grand Court of the Cayman Islands for a “momentous decision” concerning the liquidation of a complex and high value trust.

Saffery Champness managed and administered a dynastic wealth structure established to manage certain assets and business affairs of the late patriarch of a Middle Eastern family (the Settlor). The Trustee made an application to the Grand Court in accordance with the established Public Trustee vs. Cooper procedure concerning its decision to make distributions under Shari’a Law to the Settlor’s named heirs. 

One of the fundamental issues was that the Settlor’s wish for the trust be distributed to his heirs in accordance with Shari’a inheritance principles conflicted with the underlying laws governing the discretionary trust in question which has a large class of potential beneficiaries. 

In order for the Trustees to properly discharge their fiduciary responsibilities in exercising their discretionary powers of distribution Lead Trustee Director, Lisa Vizia, made extensive and forensic enquiries into the size and nature of the wider beneficial class, as well as into other relevant issues including working with a panel of leading advisers to review and assess the background to the trust’s creation and the application of Shari’a law. 

In handing down its judgment, the court cited a reference from “Lewin on Trusts” to a judgement in a historic trust case   which stated that trustees are not obliged to “survey the world from China to Peru” in terms of the extent of their enquiries. The trustee had, in fact, effectively gone to all possible lengths in its extensive enquiries, mirroring the work undertaken by Ms Vizia in support of the Trustee.

The Grand Court approved the Trustee’s decision and commended the diligence of its approach. The Judge commented, “I am satisfied that the Trustee has arrived not simply at a rational decision, but one which follows very careful deliberation and inquiry…an approach which may be described as a “textbook” approach to the issues.”

Charles Gothard, Partner at Macfarlanes, the law firm advising the trust, said: 

“Although the Trustee was described during the hearing and in the written reasons as taking a “textbook” approach to the issues, this case may in fact be better seen as an example of a trustee looking beyond the textbook in order to ensure the proper exercise of its powers in a situation where novel circumstances meant it was not able to take the conventional approach…”

Lisa Vizia, Director at Saffery Champness Registered Fiduciaries in Guernsey and Lead Trustee Director, said: 

“This case provides a useful development of the guidance regarding the proper application of Public Trustee vs. Cooper, which should only be utilised by prudent trustees in order to validate and provide surety to decisions that have been made rather than to seek the court’s guidance on making a decision.”

“This decision also reinforces that trustees should avoid applying for a court’s blessing too early and with inadequate preparation. Robust and thorough research is vital, particularly as it relates to decisions of significance to very core and future direction of a trust, as is maintaining accurate, comprehensive records.”

“This was an extremely intricate and unusual case involving a high value trust with significant international and diverse assets, a wide pool of potential beneficiaries to be mapped into a dynastic family tree, and the Settlor’s wishes – all of which were weighed against the common law classification of trust beneficiaries.”

“When faced with complex and highly sensitive issues such as this, cultural sensitivity is incredibly important. An acute understanding of the application of Shari’a Law – and in particular its position on inheritance – was fundamental to the Trustee making the appropriate decision in this matter.”

“In our role, we were always mindful of the cultural and religious nuances needing to be combined with a considered and sensitive approach to all parties. This requires real depth of expertise and understanding with a focus upon building and maintaining personal client relationships across successive generations.” 

“I hope this will be seen as a significant judgement with implications for other trusts in the Cayman Islands and more widely in other jurisdictions and I am grateful to Chief Justice Smellie for his comments. It provides helpful guidance regarding the interplay between Shari’a law and common law of trusts, particularly as to the balanced approach needed to appropriately consider a Settlor’s wishes, as well as the expectations incumbent upon a professional trustee regarding the level of investigatory work and cultural consideration needed before making decisions of significance to the future of trusts under their management.” 

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