Grand Court confirms successor protector following resignation
In a decision by the Grand Court of the Cayman Islands (ST Limited v AV, 24 October 2021), a trustee sought a declaration that a deed executed after the former protector’s resignation appointing a successor protector was valid and effective, or in the alternative, for the appointment of the successor protector by the Court pursuant to its inherent jurisdiction.
The brief background was that in July 2020, the protector wrote to the trustee to tender her resignation with immediate effect but failed to appoint her successor. Subsequently in October 2020, she purported to execute a deed of confirmation and appointment of a successor protector in which she confirmed her intention at the time of her resignation to exercise the clause 22.2 power in the trust instrument to appoint a successor protector. In those circumstances, the Court was asked to consider the potentially ambiguous wording of clause 22.2 of the trust instrument (“the person, if any, serving as Protector at the time may appoint his or her successor Protector”) and the uncertainty as to whether the former protector was able to appoint a successor protector following her resignation.
In granting the trustee’s primary relief for a declaration that the October 2020 deed was valid and effective and accordingly the successor protector was validly appointed, Justice Segal analysed in detail the relevant provisions of the trust instrument and accepted that the rules of construction applying to inter vivos trusts were the same as those applying to contracts and held that the former protector, whilst serving as protector, had the power to make the appointment and that the power was exercisable by her after her resignation, as the appointment was part of the process of her resignation. However, the power would not extend to the appointment by a protector who resigned and only subsequently decided to appoint a successor.
An important reason for the trustee making this application was to be sure of the validity of the protector’s appointment, given the importance of the protector’s role in the administration of the trust and the potential problems that could be caused by an invalid appointment of a protector to the validity of future steps (see for example, Re Y Trust (No.1) [2016] 1 CILR 9).
This unreported case is an important reminder that if a trust instrument contains ambiguous wording and/or there is some uncertainty as to the validity of the appointment of an officeholder in a trust, then a prudent trustee is well advised to seek legal advice and potentially make an application to the Court to resolve the uncertainty.
Harneys acted for the trustee in this matter.
