J.P. Morgan Trust Company (Bahamas) Ltd Re

• Jurisdiction: Bahamas
• Judge: Barnett, C.J.
• Judgment Date: 05 January 2011
• Docket Number: CLE/GEM … 2010
• Court: Supreme Court (Bahamas)
• Date: 05 January 2011

Supreme Court

Barnett, C.J.

CLE/GEM … 2010

J.P. Morgan Trust Company (Bahamas) Limited Re:

Appearances:

Mr. N. Leroy Smith and Miss Kelli Ingraham for the Trustee

Administration of Estates - Trusts — Deed of Exclusion — Application to seek guidance of the court — Whether trustee authorised to declare with retroactive effect that certain persons are excluded persons — Whether persons described in Deed will be excluded persons and cease to be beneficiaries of the Trust.

Barnett, C.J.

1 This is an application by JP Morgan Trust Company (Bahamas) Limited (“the Trustee”) pursuant to section 77 of the Trustee Act, 1998 for the Court's advice and directions on certain issues that arise in the administration of a trust settlement dated 27th January, 1984 (“the Trust Deed”) and made between a Husband and Wife as Settlors and Chase Manhattan Trust Company (Hong Kong) Limited (“Chase Hong Kong”) as trustee.

2 Before setting out the specific advice that is being sought, it will be helpful if I set out the relevant facts.

3 By the Trust Deed, Chase Hong Kong was made the trustee of a trust.

The Trust Deed was a fairly standard fully discretionary trust. It contained the following clauses that are relevant to the determination of the issues raised by this application.

“Beneficiaries” means:–

• (i) all and any of the persons specified in the Third Schedule hereto;

• (ii) such other persons as are added to the class of Beneficiaries in exercise of the power conferred upon the Trustees by Clause 10 hereof:–

Clause 2, the governing law clause was in the following terms:–

This Settlement is established under the laws of Hong Kong and subject and without prejudice to any transfer of the administration of the trusts hereof to any change in the Proper Law of this Settlement and to any change in the law of interpretation of this Settlement duly made according to the powers and provisions hereinafter declared the Proper Law of this Settlement shall be the law of Hong Kong which shall be the forum for the administration hereof.”

Clause 9 contained a power of exclusion, which provision is central to the issues raised in this application. It was in the following terms:–

9

(a) The Trustees may by declaration in writing made at any time or times during the Trust Period declare that the person or persons or members of a class named or specified (whether or not ascertained) in such declaration who are would or might but — for this Clause be or become a Beneficiary or Beneficiaries or be otherwise able to benefit hereunder as the case may be:– (i) shall be wholly or partially excluded from future benefit hereunder; or (ii) shall cease to be a Beneficiary or Beneficiaries; or (iii) shall be an Excluded Person or Persons and any such declaration may be irrevocable or revocable during the Trust Period and shall have effect from the date specified in the said declaration provided that this power shall not be capable of being exercised so as to derogate from any interest to which any Beneficiary has previously become indefeasibly entitled whether in possession or in reversion or otherwise; (b) any person of full age to whom or for whose benefit any capital or income of the Trust Fund may be liable whether directly or indirectly to be appointed transferred or applied in any manner whatsoever by or in consequence of an exercise of any trust power or discretion vested in the Trustees or in any other person may by declaration in writing received by the Trustees during the Trust Period either revocable (but revocable during the Trust Period Only) or irrevocably:– (i) disclaim his interest as an object of such trust power or discretion either wholly or with respect to any specified part or share or such capital or income; or (ii) cease to be a Beneficiary; or (iii) declare that he shall be an Excluded Person and such declaration shall have effect from the date that the same is received by the Trustees.”

6 Clause 10 contains a provision for additional beneficiaries in the following terms:–

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(a) THE Trustees shall have power at any time or times during trust Period to add to the class of Beneficiaries such one or more persons (not being an Excluded Person or Excluded Persons) as the Trustees shall in their absolute discretion determine; (b) any such addition shall be made by declaration in writing signed by the Trustees and (i) naming or describing the person or persons to be thereby added to the class of Beneficiaries and :– (ii) specifying the date (not being earlier than the date of the declaration but during the Trust Period) from which such person or persons shall be so added.”

7 Clause 12 provided for the change in the governing law. The clause was as follows:–

• (a) The Trustees may at anytime or times and from time to time during the Trust Period by deed or deeds or by declaration in writing declare that this Settlement shall from the date of such declaration take effect in accordance with the law of some other state or territory in any part of the world (not being any place under the law which (1) any of the trusts powers and provisions herein declared and contained would not be enforceable or capable of being exercised and so taking effect or (2) this Settlement would not be irrevocable) and that the forum for the administration thereof shall thenceforth be the Courts of that state or territory AND as from the date of such declaration the law of the state or territory named therein shall be the law applicable to this Settlement and the Courts thereof shall be the forum for the administration thereof but subject to the power conferred by this Clause and until any further declaration be made hereunder PROVIDED ALWAYS that so often as any such declaration as aforesaid shall be made the Trustees shall be at liberty to make such consequential alterations or additions in or to the trusts powers and provisions of this Settlement as the Trustees may consider necessary or desirable to ensure that the trusts powers and provisions of this Settlement shall (mutatis mutandis) be as valid and effective as they are under the proper law governing the Settlement at the time the power contained herein is exercised AND PROVIDED FURTHER that no such declaration shall be made which would infringe the rule against perpetuities applicable under the law of the place subject to which this Settlement is created;

• (b) Notwithstanding anything in this clause hereinbefore contained sub-clause (a) hereof shall not authorize any such declaration which would or might directly or indirectly result in an Excluded Person obtaining a benefit.

8 Clause 25 provides as follows:–

SUBJECT only to Clause 24 hereof no Excluded Person shall be capable of taking any benefit of any kind by virtue or in consequence of this Settlement and in particular but without prejudice to the generality of the foregoing provisions of this Clause:–

• (a) the Trust Fund and the income thereof shall henceforth be possessed and enjoyed to the entire exclusion of any such Excluded Person and of any benefit to him by contract or otherwise;

• (b) no part of the capital or income of the Trust Fund shall be paid or lent or applied for the benefit either directly or indirectly of any such Excluded Person in any manner or in any circumstances whatsoever; and

• (c) no power or discretion hereby or by any appointment made hereunder or by law conferred upon the Trustees or any of them shall be capable of being exercised in such manner that any such Excluded Person will or may become entitled either directly or indirectly to any benefit in any manner or in any circumstances whatsoever.”

9 The Third Schedule of the Trust Deed designates the Settlors and their children (inter alia) as beneficiaries under the Trust.

10 The Husband died in 1985 and in or about 1992 the Wife and certain of the Trust's beneficiaries (together, the “Canadian Resident Beneficiaries”) emigrated to Canada.

11 The Canadian Resident Beneficiaries have lived in Canada ever since and as such became (and remain) subject to that country's income tax regime. However, no distributions under the Trust were made to any of the Canadian Resident Beneficiaries after they took up residence in Canada as aforesaid. And, in fact the last such distribution occurred on or about 24th January, 1990.

12 By a Deed of Appointment dated 28th February, 1994 made as between Chase Hong Kong of the one part and The Chase Manhattan Trust Corporation Limited (the “Successor Trustee”) of the other part, Chase Hong Kong retired and the Successor Trustee was appointed in its stead. By that deed the governing law of the Trust was changed from the laws of Hong Kong to the...