Xyz Trusts (No. 2)
| Jurisdiction | Bermuda |
| Judge | Duncan, A.J. |
| Judgment Date | 10 January 2018 |
| Neutral Citation | [2018] SC Bda 2 Civ |
| Docket Number | CIVIL JURISDICTION Nos 2017: 415,416, 417 |
| Court | Supreme Court (Bermuda) |
| Date | 10 January 2018 |
[2018] SC (Bda) 2 Civ
In The Supreme Court of Bermuda
Duncan, A.J.
CIVIL JURISDICTION Nos 2017: 415,416, 417
Mrs Fozeia Rana-Fahy, MJM Limited, for the Trustees
Perpetuities and Accumulations Act 2009, section 3– exercise of power changing governing law to Bermuda law under trust instruments created prior to enactment of 2009 Act-whether perpetuity rule applies to exercise of power
(in Chambers)
On December 4, 2017, in respect of each of the three trusts, I granted a declaration on the Trustees' Ex Parte Originating Summons that:
“
1. Neither
(a) the rule against perpetuities; nor
(b) any other similar rule of law that may limit or restrict the time under or during which property may be held in or subject to any trust
applies or shall apply to the Trust or the property held thereunder.”
The application raised a point which appeared to me to be a new point of construction about the meaning and effect of section 3 of the Perpetuities and Accumulations Act 2009 (the “Act”). I was ultimately persuaded, despite some anxiety about deciding a somewhat technical point on an ex parte basis, that it was appropriate to grant the relief sought on the following alternative bases. Either:
-
(1) by virtue of section 3 of the Act, the rule against perpetuities did not apply; or
-
(2) if I was wrong, I would in any event possessed the jurisdiction to dis-apply the rule against perpetuities under section 4 of the Act.
I now give brief reasons for the decision made in relation to these applications.
This Trust was established prior to August, 2009 under Part VIII of the Cayman Islands Trust law and that statute's Special Trusts Alternative Regime (“STAR”). The Trust Period was defined as a term of years in excess of 100 years. The Trust was not a “pure” purposes trust as it had beneficiaries. The Trust's governing law was subsequently changed to Bermuda law. The Trustee was at this point advised that the perpetuities rule did not apply to the X Trust under Cayman Islands' law but might become applicable under Bermuda law. The Trust neither holds nor is intended to hold Bermuda land. The Trustees were concerned whether the common law relation back doctrine had in fact been dis-applied by the relevant provisions of the Act.
The Y Trust was established prior to August 2009 and amended and restated in after August 1, 2009. The Trust Period was defined as a term of years in excess of 100 years. The Trust was not a “pure” purpose trust as it was created for the benefit of both beneficiaries and purposes. In 2016 the Trust's governing law was changed to Bermuda law. The Trustee understood that prior to this change the perpetuities rule did not apply to it as a Cayman Islands STAR trust, but that afterwards it did under Bermuda law. The Trust neither holds nor is intended to hold Bermuda land.
The Z Trust was established prior to August 2009 and amended and restated after August 1, 2009. The Trust Period was defined as a period of years in excess of 100 years. The Trust was not a “pure” purpose trust as it was created for the benefit of both beneficiaries and purposes. After August 1, 2009, the Trust's governing law was changed to Bermuda law. The Trustee understood that prior to this change the perpetuity period did not apply to it as a Cayman Islands STAR trust but that afterwards it did under Bermuda. The Trust neither holds nor is intended to hold Bermuda land.
The Trusts were established to preserve family wealth for many generations. The dynastic intentions of the Settlor were consistent with the fact that the settlements were initially established on terms that they were not subject to the rule against perpetuities.
The terms of the Trusts were changed from time to time, explicitly on the terms that new settlements were not created. After August 1, 2009, the governing law of the X, Y and Z Trusts was changed and the Trusts reappointed on amended terms.
It was pertinent to note that the Trusts are not purpose trusts because if they were it would have been clear that the perpetuity period did not apply to them. Section 12A of the Trusts (Special Provisions) Act 1989 (as amended by the Act with effect from August 1, 2009) provides:
“ (4) The rule of law (known as the rule against excessive duration or the rule against perpetual trusts) which limits the time during which the capital of a trust may remain unexpendable to the perpetuity period under the rule against perpetuities shall not apply to a purpose trust.”
It was conceded that the construction of section 3 of the Act was for present purposes less than clear. Nevertheless, it was contended that, properly construed, its effect was that any post-August 1, 2009 instrument governed by Bermuda law was not subject to the perpetuity period unless it related to “ land in Bermuda”. The section provides as follows:
“ Application of rule against perpetuities limited to land in Bermuda
3(1) In relation to instruments taking effect on or after the commencement day, the rule against perpetuities applies (and applies only) as provided by this section.
(2) If an instrument limits property in trust so as to create successive estates or interests, the rule against perpetuities applies to each of the estates or interests only to the extent that the property is land in Bermuda.
(3) If an instrument limits property in trust so as to create an estate or interest which is subject to a condition precedent and which is not one of successive estates or interests, the rule against perpetuities applies to the estate or interest only to the extent that the property is land in Bermuda.
(4) If an instrument limits property in trust so as to create an estate or interest which is subject to a condition subsequent, the rule against perpetuities applies to any right of re-entry exercisable if the condition is broken only to the extent that the property is land in Bermuda.
(5) If an instrument creates a power of appointment, the rule against perpetuities applies to the power only to the extent that it is exercisable over land in Bermuda.
(6) In this section “instrument” does not include a will executed before the commencement day.
(7) For the avoidance of doubt, the reference to land in Bermuda does not include–
(a) the income from any land in Bermuda, or
(b) the proceeds of sale of any land in Bermuda.” [Emphasis added]
The difficult question arose was in connection with the doctrine that an instrument exercising a power conferred by a settlement takes its character from the original settlement. Was subsection (5) of section 3 designed to override the effect of that doctrine in relation to instruments which took effect before the commencement of the Act and powers of appointment exercised after the Act came into operation?
Mr Richard Wilson QC, in a cautious and careful Opinion, ultimately concluded that this question should be answered in the affirmative but that the question...
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