LEGAL SERVICES Offshore Trust Law Round-Up BY DAVID CADIN, 1 NOVEMBER 2018 BVI CAYMAN ISLANDS GUERNSEY JERSEY LONDON SINGAPORE
In brief 2
It's been a busy year for Offshore 3 Crociani (Jersey): $200m+ trust dispute Carlyle Capital (Guernsey): $2b breach of director's duties claim AHAB (Cayman): $9b fraud claim 334 pages (3 judgments) 470 pages 1384 pages
And for those on the outside 4 E&W Law Commission 13 th Programme of Law Reform Modernising Trust Law for a Global Britain "The general law of trusts has not been comprehensively reviewed since 1925. In contrast, many other 'onshore' and 'offshore' jurisdictions including Scotland, Jersey, New Zealand and Singapore have updated their trust law and been creative in maintaining a healthy trust market."
And for copycats 5
And for politicians 6 Public registers of beneficial ownership End of 2016: July 2017: May 2018: 53 territories including BVI, Cayman Islands, Guernsey, Isle of Man, Jersey and Mauritius sign a "Statement on the initiative for the systematic sharing of beneficial ownership Information" 4 th AMLD introduced a non-public register of beneficial ownership for trusts - only available to law enforcement bodies and the UK Financial Intelligence Unit Sanctions and Anti-Money Laundering Bill
S.51 Public registers of beneficial ownership of companies registered in British Overseas Territories 7 (1) For the purposes of the detection, investigation or prevention of money laundering, the Secretary of State must provide all reasonable assistance to the governments of the British Overseas Territories to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in each government s jurisdiction. (2) The Secretary of State must, no later than 31 December 2020, prepare a draft Order in Council requiring the government of any British Overseas Territory that has not introduced a publicly accessible register of the beneficial ownership of companies within its jurisdiction to do so.
Fifth EU Anti-Money Laundering Directive 8 Effective from 9 July 2018 Member States have until 10 January 2020 to implement the directive into national law Despite Brexit, the UK will adopt Offshore yet to decide but look at the risk of non-compliance
9 Big beasts 02
The Big Beasts 10 Crociani Investec Hastings-Bass
Crociani 11
Crociani 12 3 month trial Reconstitution of the trust What does reconstitution mean?
13 Investec 04
Investec Trust (Guernsey) v Glenalla Properties 14 The question Does Article 32 T(J)L operate to exclude the former trustees personal liability and limit the BVI companies claims to the trust property?
Article 32 of the Trusts (Jersey) Law 1984 15 Trustee s liability to third parties (1) Where a trustee is a party to any transaction or matter affecting the trust (a) if the other party knows that the trustee is acting as trustee, any claim by the other party shall be against the trustee as trustee and shall extend only to the trust property; (b) if the other party does not know that the trustee is acting as trustee, any claim by the other party may be made against the trustee personally (though, without prejudice to his or her personal liability, the trustee shall have a right of recourse to the trust property by way of indemnity). (2) Paragraph (1) shall not affect any liability the trustee may have for breach of trust.
Investec Trust (Guernsey) v Glenalla Properties 16 The PC on Article 32 T(J)L "The Jersey legislature plainly intended by article 32 to improve the position of trustees by insulating their personal assets from liabilities to third parties expressly incurred as trustees, and must have appreciated that this would have to be at the expense either of creditors or beneficiaries, or both. On the reasonably safe assumption that the legislature intended thereby to promote rather than damage the trusts industry in Jersey, and that its future prosperity would depend upon foreign settlors continuing to choose Jersey as the place for the establishment of their trusts, it seems very unlikely that a deliberate choice would have been made to improve the position of trustees at their beneficiaries expense"
17 Hastings Bass 05
The Hastings-Bass Rule The basics (1) 18 The original rule: "Where trustees act under a discretion given to them by the terms of the trust, but the effect of the exercise is different from that which they intended, the court will interfere with their action if it is clear that they would not have acted as they did had they not failed to take into account considerations which they ought to have taken into account, or taken into account considerations which they ought not to have taken into account." - Lloyd LJ in Sieff v Fox
The Hastings-Bass Rule The basics (2) 19 The rule in Pitt v Holt; Futter v Futter: "I would therefore hold that, for the equitable jurisdiction to set aside a voluntary disposition for mistake to be invoked, there must be a mistake on the part of the donor either as to the legal effect of the disposition or as to an existing fact which is basic to the transaction.... Moreover the mistake must be of sufficient gravity as to satisfy the Ogilvie v Littleboy test, which provides protection to the recipient against too ready an ability of the donor to seek to recall his gift. The fact that the transaction gives rise to unforeseen fiscal liabilities is a consequence, not an effect, for this purpose, and is not sufficient to bring the jurisdiction into play." - Lloyd LJ
The Hastings-Bass Rule three different approaches? 20 BVI The question of whether, if properly informed, the trustees would or might have acted differently will be relevant, but not decisive, to the court s exercise of its discretion whether to set aside the challenged disposition Jersey Jersey Courts, applying 47(H) and 47(G) T(J)L, will act to protect beneficiaries where trustees have relied on incorrect advice when making decisions Guernsey Hastings-Bass relief is not as easily available as it once was (or as it is in Jersey), with a beneficiary instead being expected to sue his professional advisers for negligence however if M v St Anne's Trustees is successfully appealed, it will mark a trend away from Pitt v Holt whereas an unsuccessful appeal will lead to pressure from the trust and legal profession for the position to be enshrined in statute
Weather Forecast 21
A level playing field? 22 Minister Alan Duncan: "While we continue to push for public registers to become the global standard, we should recognise that the arrangements that the territories and dependencies have concluded with the UK exceed the international standards set by the Financial Action Task Force, which do not require private registers, let alone public registers. Nevertheless, should public registers become the global standard, we would expect the overseas territories and Crown dependencies to meet that standard."
A General tightening of the regime? 23 Jersey Financial Crime Strategy Group proposals: Regulations of a foundation to be publicly available Trustees to hold more information Trustees to not be prevented by law or enforceable means from providing competent authorities with any information relating to trusts A new registry regime
Increased scrutiny, ever-changing narrative 24
Three Predictions and one request 25 The landscape will change There will be more Big Beasts Litigation is going to get more fraught (and expensive) through GDPR Play your part in the continued success of Offshore.
Thank you 26 David Cadin Managing Partner T +44 (0)1534 814701 E david.cadin@bedellcristin.com BVI CAYMAN ISLANDS GUERNSEY JERSEY LONDON SINGAPORE