Cutting through conceptual thickets
Abstract
-
The decision of the Grand Court of the Cayman Islands (the Court) in In the Matter of Settlements made by Declarations of Trust dated 9 May 2013 is the first published decision applying s.64A of the Cayman Islands Trusts Act (2021 Revision).[1] Section 64A, which came into force on 14 June 2019, incorporated into Cayman Islands statute the common-law Hastings-Bass principle. [2] Although not the first time the Court has granted relief under s.64A, the decision is significant because it is the first time the Court has provided written guidance on the application and interpretation of this relatively new statutory regime.
In his reasons for decision, Justice Kawaley summarises the s.64A jurisdiction as one that enables the Court to ‘grant relief on a basis which cuts through the conceptual thickets which many consider were erected around the traditionally flexible Hastings-Bass principle’[3] by the UK Supreme Court in Pitt v Holt.[4] This article explores those ‘conceptual thickets’ and the Court’s guidance to those seeking to avail themselves of this statutory jurisdiction.
The impugned transactions
In the Matter of Settlements made by Declarations of Trust dated 9 May 2013 concerned three Cayman Islands-law-governed trusts established in 2013 by a husband and wife domiciled in an onshore jurisdiction. The purpose of the trusts was to preserve and accumulate largely inherited family wealth. The two initial trustees were lay individuals who were close friends of the settlors. Neither trustee had ever acted as a professional trustee nor had they received any remuneration throughout their trusteeship of the trusts.
The trusts were each settled with USD100 and, in early 2014, the shares of a Cayman Islands company were transferred to each of the three trusts. Neither the settlors nor the initial trustees in the settlors’ domicile sought tax advice about the implications of establishing the trusts in this manner.
Please login to access this content
If you are not a member, find out more about joining STEP or subscribing to STEP articles.