The trusts of the Deed of Settlement establishing the A Settlement

• Jurisdiction: Bahamas
• Judge: Charles J
• Judgment Date: 18 March 2021
• Date: 18 March 2021
• Docket Number: 2020/CLE/gen/00652
• Court: Supreme Court (Bahamas)

IN THE SUPREME COURT

Common Law and Equity Division

Before:

The Honourable Madam Justice Indra H. Charles

2020/CLE/gen/00652

In the Matter of the trusts of the Deed of Settlement establishing the A Settlement

In the Matter of Section 4 of the Rule Against Perpetuities (Abolition) Act, 2011

In the Matter of an application by the Co-Trustees of the A Settlement made pursuant to Section 4 of the Rule Against Perpetuities (Abolition) Act, 2011

Appearances:

Mr. N. Leroy Smith and Mr. Jonathan Deal of Higgs & Johnson for the Petitioners

Rule Against Perpetuities (Abolition) Act, 2011 — Service and notification of Petition — Principles to be applied in exercising discretion under Section 4 — Confidentiality

The “A Settlement” is an irrevocable discretionary trust which was established in 2009 for the benefit of certain named persons, their children and remoter issue and such charities as might be added to the beneficial class. At its inception, the Settlement was governed by the laws of the principality of Liechtenstein, however, in 2018, the governing law and the forum for the administration of the A Settlement were changed to Bahamian law and the courts of The Bahamas respectively.

Under the terms of the A Settlement, the “ Duration of this Settlement” was defined as meaning “60 years from the 5 ^th March 1966 or the day on which shall expire the period of twenty one years after the death of the last survivor of the individuals referred to in the second Schedule of [the instrument establishing an earlier trust, the “B Settlement”] as were living and ascertained as of 5 ^th March 1966 (whichever shall occur first)”. The end of this period was defined as the “Final Day”, upon which the Trustees were obliged to distribute the trust fund of the A Settlement and were no longer able to exercise any overriding powers.

The Petitioners who are the Co-Trustees of the A Settlement, commenced these proceedings by way of a Petition filed on 22 July 2020, seeking orders pursuant to section 4 of the Rule Against Perpetuities (Abolition) Act, 2011 (the “RAPAA 2011”) including a declaration that the RAPAA 2011 shall apply to the trusts of the A Settlement and every disposition of assets thereto.

Whilst these proceedings were brought on an ex parte basis, the Petitioners did so on notice to the individual identified as the Primary Beneficiary in the Deed of Settlement establishing the A Settlement, each of the charities added to the class of beneficiaries and the trust Protector. Each of the notice recipients confirmed their support for the application.

The Petitioners, in compliance with their duty to the Court, raised with the Court the fact that, by reason of an ambiguous provision within the trust instrument, the possibility existed that the children and remoter issue of certain individuals removed from the class of beneficiaries in circa 2015 may have still fallen within the class of beneficiaries.

HELD: This is an appropriate case to proceed without directing further notification or service of the Petition. The relief sought under section 4 of the RAPAA 2011 is granted. The court file is ordered to be sealed and the Ruling anonymized to protect the confidentiality of the affairs of the trust.

• 1. By virtue of the RAPAA 2011, the rule against perpetuities is, without more, abolished under the laws of The Bahamas in respect of trusts established after 30 December 2011.

• 2. Insofar as it concerns trusts established before 30 December 2011, the rule against perpetuities will still apply unless and until an application is made to the Court pursuant to section 4 of the RAPAA 2011 for an order expressly disapplying the rule against perpetuities in respect of that trust.

• 3. Where an application is brought pursuant to section 4 of the RAPAA 2011, section 4(3) confers a discretion upon the Court to determine upon whom the petition should be served or to whom notice of the petition should be given. The words “if any” used in section 4(3) indicate that, in an appropriate case, an application under section 4 may be made completely ex parte. Re C Trust 19 ITELR 814 referred to.

• 4. The Court had regard to the fact that (i) notice had already been given to the Principal Beneficiary and other ‘key’ beneficiaries of the trust, (b) those persons had confirmed their support for the application and (c) there appeared to be no relevant prejudice that would accrue to the other beneficiaries in the event that the Court should ultimately determine to accede to the Petitioners' application. Based upon these considerations, the Court is satisfied that this is an appropriate case in which to proceed without directing further notification or service of the Petition.

• 5. Section 4(1) of the RAPAA 2011 does not prescribe any threshold test or criteria to be satisfied before the Court may make an order under Section 4(1). It follows that Parliament has invested the Court with a prima facie unfettered discretion to make an order where it thinks it fit to do so.

• 6. The Court had regard to Bermudian jurisprudence concerning section 4 of the Bermuda's Perpetuities and Accumulations Act, 2009 and endorsed the following principles emanating from that jurisprudence:

  • (i) The Court should not act as rubber stamp. The Court must exercise its discretion judicially and not capriciously or whimsically, upon a consideration of all of the facts.

  • (ii) The Court should have regard to the best interests of all interested parties, broadly defined and looked at as a whole. Where abolishing the rule against perpetuities would be in the interests of the beneficiaries as a whole, this would justify the Court making an order.

  • (iii) Having regard to the Court's unfettered discretion, it is not a necessary requirement in every instance that abolishing the rule against perpetuities be in the interests of each and every beneficiary; and

  • (iv) The fact that extending the duration of a trust will dilute the economic interests of existing beneficiaries will ordinarily be an irrelevant consideration: Re C Trust 19 ITELR 814 and Re G Trusts 21 ITELR 46 considered.

• 7. In the present case, the Petitioners supported the abolition of the rule against perpetuities as it applied to the A Settlement on the basis that it would avoid any need for a forced restructuring or disposition of the assets of the A Settlement, it would enhance the flexibility of the A Settlement and it would enable the Trustees to continue to benefit the beneficiaries (several of which are foreign charities/non-profit organisations). These reasons were collectively sufficiently compelling to satisfy the Court that it is appropriate to make an order under section 4(1).

• 8. Finally, whilst the Court must always be mindful of the principle of open justice, the Court will be prepared to make such orders as are necessary to preserve the confidentiality of private trusts governed by Bahamian law in appropriate cases. In this case, the Court made an anonymization and sealing order as the application before it was of a narrow compass and was exclusively concerned with the internal administration of a private Bahamian trust. Re G Trusts 21 ITELR 46 followed.

RULING

Charles J

Introduction

1 By a Petition filed on 22 July 2020, the Petitioners in their respective capacities as Trustees of a Bahamas law governed trust which shall, for present purposes, be called the “A Settlement”, applied for the following substantive relief:

• “(1) A Declaration pursuant to section 4 of the Perpetuities Abolition Act that:

  • (a) The Perpetuities Abolition Act shall apply to the trusts of the [A Settlement], the Trust Fund and every disposition of assets thereto; and

  • (b) The [A Settlement] and the Trust Fund shall no longer be subject to any rule against perpetuities as that term is defined in the Perpetuities Abolition Act.

• (2) An Order that sub-Clause 1(4) of the Deed of Settlement be varied so as to read:

  ‘Duration of this Settlement (4) the period between the date hereof and such date after the date hereof as the Trustees may declare by instrument in writing.’

• (3) An Order that the Current Trustees' Costs of this application shall be borne by the trust fund of the Trust.

• (4) Such other relief as this Honourable Court shall deem just.”

2 The Petitioners relied upon two Affidavits in support of their Petition which variously exhibited the Deed of Settlement, ancillary trust documents and correspondence including the consents by several beneficiaries. The Petitioners also adduced correspondence at the hearing which was later formally placed in an Affidavit.

3 The Petitioners also lodged written submissions and a Bundle of Authorities containing (a) the salient legislation (including the Rule Against Perpetuities Abolition Act, 2011 (the “RAPAA 2011”) and the Rule Against Perpetuities (Abolition) (Amendment) Act, 2020 (No. 38 of 2020) (the “RAPAAA 2020”)) and (b) relevant case law.

4 After hearing both Counsel for the Petitioners on 18 March 2021, I made an Order in the following terms:

• 1. The Perpetuities Abolition Act shall apply to the trusts of the [A Settlement] and every disposition of assets thereto.

• 2. The [A Settlement] shall no longer be subject to any rule against perpetuities as that term is defined in the Perpetuities Abolition Act.

• 3. The Deed of Settlement is hereby amended by the deletion of Clause 1(4) and the insertion of the following text in substitution therefor:

  ‘Duration of this Settlement (4) the period between the date hereof and such date after the date hereof as the Trustees may declare by instrument in writing.’

• 4. The Court File shall be and is hereby sealed and shall be kept in such a secure manner so as to ensure the confidentiality of these proceedings.

• 5. Any written reasons or Judgment(s) produced herein shall be anonymized prior to publication.

• 6. The Petitioners' Costs of this application...