Lucy Diggle
Partner
Cayman Islands
In his second judgment dated 1 February 2024 and following the parties having filed further written submissions, Kawaley J re-considered his preliminary views in relation to the following three key issues:
- the need for adversarial argument to be advanced in rectification proceedings;
- the appropriate party to advance contrary arguments in relation to a STAR trust; and
- the appropriate forum for the determination of case management issues relating to the Rectification Summons.
With respect to the second issue, Section 100 of the Trusts Act pivotally provides that a beneficiary of a STAR trust does not have standing to enforce the trust and that the only persons who have standing to do so are its enforcers. In relation to the G Trust, the enforcer was responsible for enforcing that STAR trust under the special statutory regime. In the circumstances, Kawaley J held that there was no proper basis for his assumption that the B Beneficiaries, by virtue of their status as beneficiaries, would be the appropriate parties to advance counter arguments in the context of the Rectification Summons.
Given the displacement of the above assumptions, Kawaley J held in respect of the third issue that there was "no discernible basis on which the Beddoe Court [i.e. the judge hearing the Beddoe application] could properly usurp the jurisdiction of the Rectification Court [i.e. the judge hearing the Rectification Summons] to determine all case management issues arising in relation to the Rectification Summons". In other words, the jurisdiction to determine case management issues in the Rectification Summons (including, whether counter arguments are required at all, who should advance them and what costs order should be made) falls within the purview of the judge presiding over those substantive proceedings.
Comment
In his judgment, Kawaley J reinforced the special role of enforcers as part of the statutory STAR trust regime whilst also being cautious to preserve the separation of judicial roles between the judge determining the Beddoe application on the one hand and the judge determining the substantive proceedings on the other. This is consistent with the requirement that a trustee should make an application for Beddoe relief in separate proceedings to the main action, together with the usual practice that the costs in the main action should not be dealt with by the Beddoe judge.
Given that the case management decisions relating the Rectification Summons will remain with the judge presiding over those substantive proceedings, it will be interesting to see whether the Court provides any further guidance in the future with respect the role of beneficiaries (if any) in the context of the STAR trust regime.
