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Grand Court explains why you cannot appoint a receiver over potential distributions from a discretionary trust

In Y v R, the plaintiff failed to convince the Grand Court of the Cayman Islands to appoint receivers over distributions that might be made to the defendant from an irrevocable discretionary Cayman Islands trust. The result in this case is unsurprising, since the nature of a discretionary beneficiary’s interest in a trust is firmly established.    

In July 2016, Y obtained a foreign arbitral award against R in an amount of approximately US$2 million. In October 2016, relying on Cayman’s Foreign Arbitral Awards Enforcement Law, Y obtained judgment from the Grand Court in the same terms as the award so that Y could enforce the foreign award in the Cayman Islands.

The Court decided Y’s subsequent receivership application on the basis that the majority of evidence in support of the application was inadmissible: Y had failed to obtain the Court’s permission to deploy confidential information in support of the application, in breach of Cayman’s Confidential Information Disclosure Law. Nevertheless, the Court also addressed the parties’ substantive arguments regarding the appointment of receivers.

R argued that his status as a discretionary beneficiary of a trust does not amount to a legal or equitable interest in the assets of the trust; his only right is to require the trustees to consider from time to time whether or not to apply the whole or some part of the assets of the trust for his benefit.

The Court agreed, observing that “[t]o grant the relief sought by [Y] in this case would amount to a radical, impermissible extension of the law.” Y had been unable to point to any authority to support a conclusion that a beneficiary of an ordinary discretionary trust (such as R) has a proprietary interest in the trust assets over which receivers could be appointed. 

In this case, there was no evidence that the trust was a sham or that R had any right to call for any part of the assets of the trust to be transferred to him (such that his interest could be regarded as tantamount to ownership).  

The Court also concluded that there were other adequate remedies available to Y and that as such, there would be no need for recourse to Cayman Islands receivers in any event.

Grand Court explains why you cannot appoint a receiver over potential distributions from a discretionary trust

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