Morven McMillan, Maxine Bodden
Maples and Calder
The proposed amendments to the Trusts Law (2011 Revision) and the Property (Miscellaneous Provisions) Law (2011 Revision) are part of a tidying up exercise to correct long-standing deficiencies in both statutes. Other proposed amendments are to correct technical errors made in the original legislation which have been identified or have emerged over time. Although the proposed amendments do not reflect any significant change of policy or new products for the Cayman Islands trusts industry, the amendments are timely. They reflect changing technology and the changing marketplace in the international trusts industry and are designed to make the Cayman Islands more attractive as a possible location for commercial or private wealth trust structures.
Ten amendments are proposed to the Trusts Law and are contained in the Trusts (Amendment) Bill, 2016. The more significant of the proposed amendments are:
Sections 6(c) and 8: Appointment, retirement and discharge of trustees
The first amendment corrects a transitional provision made under the Trusts (Amendment) (Immediate Effect and Reserved Powers) Law, 1998. While the actual changes made in 1998 were largely correct, they applied only to trusts created on or after May 11, 1998, or if the relevant section was expressly extended to apply to the trust by deed executed by the trustee. Unfortunately, when the amending legislation was consolidated with the then-existing Trusts Law, the distinction between trusts made before or after May 11, 1998, was not preserved.
Accordingly, s6(c) as it appears in the current Trusts Law is incorrect and the proposed amendments are aimed at correcting this error. Section 6(c) as amended will contain express reference to trusts created on or after May 11, 1998.
The second part of this amendment concerns the retirement of a trustee where there is no simultaneous appointment of a new trustee. When the changes were made in 1998, they applied only to changes of trustee where a new trustee was appointed under s6(c); an equivalent change to s8 – when there is a retirement but no new appointment – was overlooked. The two conflicting procedures have thus existed since 1998, and so the proposed amendment of s8 is designed to resolve this conflict in a way that achieves the original intent.
An amendment to s14 will allow a settlor of a trust to reserve to himself or to a third party, such as a protector, the power to appoint both trust income and capital. Under new s113(3)(a), the amendment will apply to all trusts whenever created.
Validation of appointments where objects are excluded or take illusory shares
This section will reflect s158 of Law of the Property Act 1925 of England. It will overturn an old rule of equity that required the trustee of a discretionary trust (but not of a discretionary power) to appoint at least something to every object of the power. Experienced Cayman Islands trust practitioners know how to draft around this. However, by introducing this new section, we are not only bringing Cayman Islands law into line with English law, but providing for certainty in the law. Under new s113(3)(b), s23A will apply to all trusts, whenever created.
Trusteeship of STAR trusts
The proposed amendment to s105 will correct a technical defect (inserted in 2008) in relation to the trusteeship of STAR trusts. This correction will allow a controlled subsidiary to be the trustee of a STAR trust as well as a registered private trust company. Under the new s113(5), the amendment to s105 will be deemed to have had effect on and from Aug. 7, 2008.
Property (Miscellaneous Provisions) Law
Seven amendments are proposed to the Property (Miscellaneous Provisions) Law and are contained in the Property (Miscellaneous Provisions) (Amendment) Bill, 2016. The more significant of the proposed amendments are:
Section 9 of the Statute of Frauds 1677 still applies in the Cayman Islands, and prohibits the assignment of an equitable interest except in writing and signed by the transferor. Most other jurisdictions, including England, repealed s9 many years ago and replaced it with a more modern alternative that allows an agent of the transferor to execute the assignment. The newly inserted s8C will repeal s9 of the Statute of Frauds 1677 as it applies in the Cayman Islands and will bring us into line with the regime prevalent in most other common law countries.
Construction of expressions used in deeds and other instruments
Because the Cayman Islands adopted the English statutes on trusts and succession but did not adopt the English conveyancing statutes, this useful set of definitions is missing from our legislation, but the defined phrases are used in our statutes. The newly inserted s6A will provide for the construction of commonly understood terms in deeds, contracts, wills, orders and other instruments.
Execution of powers not testamentary
This useful relaxation of some of the more extreme formalities sometimes imposed on the execution of certain trust powers has been in place in English statute since 1925 but has not found its way into the laws of the Cayman Islands. Not having this provision has on occasion caught out lawyers unfamiliar with the detail of Cayman Islands law who may have complied with the execution formalities for a Cayman Islands deed but not necessarily with any additional formalities imposed in the power itself. Section 8B will facilitate the exercise of powers by deed or another type of non-testamentary instrument.