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Cayman Court considers grant of retrospective Beddoe relief in foreign proceedings

In a recent decision of the Grand Court of the Cayman Islands (In the Matter of a settlement known as the Stingray Trust dated 5 July 2005), Justice Parker granted the trustee’s application for Beddoe relief in the form of retrospective directions that it was entitled to defend proceedings in Switzerland that had concluded and for similar directions concerning proceedings in Milan which were ongoing, so that the trustee could be indemnified out of the trust fund against costs and expenses arising out of those proceedings.

The brief background to the proceedings is that they both included an allegation by a Milan court appointed guardian on behalf of one of the co-settlors that the Trust was invalid. The Swiss courts dismissed the challenge at first instance and on appeal in confirming the validity of the Trust. The Milan proceedings are ongoing and are being challenged by the trustee on jurisdiction grounds.

In granting the Beddoe relief, the Court provided some helpful guidance on the approach to Beddoe section 48 applications:

  • The court has an inherent and statutory jurisdiction to supervise trustees and to give directions binding on the trustees and all the beneficiaries of the trust.
  • Beddoe applications do not have to be unnecessarily involved or complicated.
  • The trustee is under a duty to protect the trust fund for the benefit of the beneficiaries.
  • Only those costs reasonably and properly incurred that will be indemnified.
  • The affidavit in support must contain full and frank disclosure.
  • It will only be in exceptional circumstances that a trustee will be granted an indemnity by the court if it has not obtained the sanction of the court.
  • Retrospective relief can be granted if shown that if an application had been made prior to the commencement of proceedings it would have been granted.
  • The court also has an exceptional jurisdiction where a trustee has become involved in a trust dispute which amounts to an attack on the trust’s validity and will look carefully at the merits of the case and the relative costs to the overall value of the trust assets.

Notwithstanding, the jurisdiction to grant Beddoe relief retrospectively, a prudent trustee should (if possible) apply to invoke the supervisory jurisdiction of the Court to seek directions before proceedings are engaged in.

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