Knowledge

Introduction

The Grand Court of the Cayman Islands (the "Court") has supported a professional trustee's application to resign an appointment that it has been trying to vacate for almost five years, despite the sole beneficiary's lack of engagement and failure to appoint a replacement.

The Court has approved the application by X Limited but will set a final hearing to allow the beneficiary to raise any issues or objections before the resignation is finalised.

In the matter of the O Trust was heard on 16 December 2024 by The Hon. Justice Ian RC Kawaley in the Court's Financial Services Division. The Plaintiff, X Limited, acted in its capacity as the trustee of the O Trust, while the Defendant, MC, is the sole beneficiary of the trust.

Facts

The O Trust was established in 1993 as a discretionary trust, with X Limited appointed as trustee in 2008.

X Limited requested that a replacement trustee be appointed in 2019 so that it could resign its appointment, and sought the assistance of the Court in 2023 when no progress was being made.

In November 2024, a fresh summons was issued by X Limited seeking directions, given that MC was no longer represented by Caymanian attorneys and appeared not to be actively engaging in the proceedings.

X Limited informed the Court that MC had declined an invitation to travel to the Cayman Islands for the hearing and did not use a link that would have enabled her to attend remotely. X Limited also informed the Court that MC had made allegations of misconduct against the trustee, but that the allegations had not been pursued legally.

Issues

The key issues before the Court were:

• whether X Limited could resign and be replaced as trustee of the O Trust;
• the implications of MC's lack of representation and engagement in the proceedings on the resignation process; and
• ensuring that MC had the opportunity to pursue any claims of breach of duty or wilful neglect by X Limited.

Decision

The Court decided to facilitate the Plaintiff's resignation, recognising that effective communication and trust between the Plaintiff and Defendant had broken down and noting that "it seemed reasonable to conclude the proposed resignation should be facilitated rather than impeded by the Court". 

In doing so, the Court set out a timeline for X Limited to file and serve further evidence in addition to final accounts, and for MC to respond, before a final hearing in April.

X Limited's appointment as trustee will continue up to that point. The Court noted a decision from the Ontario Superior Court of Justice (in the absence of a relevant Caymanian decision) which held that a trustee entitled to resign could not be held to an appointment in the absence of a new trustee.

Legal framework and cases cited

The relevant legal framework considered includes the Trusts Act (2021 Revision) and Grand Court Rules Order 85, under which the Court provided directions for the trusteeship process.

Cases cited included:

• Evans v Gonder (Ontario SCJ, 12 June 2009): which provided a basis for allowing a trustee to resign without needing a replacement ready, which was significant in deciding the directions for the Plaintiff's resignation process;
• Evans v Gonder 2010 ONCA 127: which affirmed the initial judgment in support of the same principles regarding trustee discharge; and
• Re Smith [2022] EWHC 3053 (Comm): cited to affirm the legal principle regarding the resignation of trustees.

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