On 1 February 2024, Kawaley J handed down a judgment in the case of In re G Trust (Cause No. FSD 270 of 2023) in which he commented on some of the key features of Cayman Islands STAR trusts contained in Part VIII of the Trusts Act (2021 Revision) ("Trusts Act") and, in particular, the role of enforcers under that statutory regime.

In summary, in his first judgment dated 11 December 2023, Kawaley J granted Beddoe relief to the trustee of a STAR trust (referred to as the "G Trust") to commence proceedings in the Cayman Islands to seek declaratory relief in relation to the meaning of a Deed of Addition and, if necessary, its rectification (the "Rectification Summons"). At the end of that judgment, Kawaley J expressed his provisional view (without having had the benefit of full adversarial argument) that certain beneficiaries of the G Trust (referred to as the "B Beneficiaries") be nominated to oppose the Rectification Summons, if required, with the protection of a pre-emptive costs order at the expense of the G Trust.

In his second judgment dated 1 February 2024 and following the parties having filed further written submissions, Kawaley J re-considered his preliminary views in relation to the following three key issues:

• the need for adversarial argument to be advanced in rectification proceedings;

• the appropriate party to advance contrary arguments in relation to a STAR trust; and

• the appropriate forum for the determination of case management issues relating to the Rectification Summons.

With respect to the first issue, Kawaley J accepted that his provisional assumption that counter arguments would be required as a necessary part of the Rectification Summons was not justified. Contrary to the position in England and Wales (where other fiscal policy issues arise), there is no automatic need for adversarial argument in relation to rectification applications under Cayman Islands law (see In re Golden Trust [2012 (2) CILR 355] at [37]-[40]).

With respect to the second issue, Section 100 of the Trusts Act pivotally provides that a beneficiary of a STAR trust does not have standing to enforce the trust and that the only persons who have standing to do so are its enforcers. In relation to the G Trust, the enforcer was responsible for enforcing that STAR trust under the special statutory regime. In the circumstances, Kawaley J held that there was no proper basis for his assumption that the B Beneficiaries, by virtue of their status as beneficiaries, would be the appropriate parties to advance counter arguments in the context of the Rectification Summons.

Given the displacement of the above assumptions, Kawaley J held in respect of the third issue that there was "no discernible basis on which the Beddoe Court [i.e. the judge hearing the Beddoe application] could properly usurp the jurisdiction of the Rectification Court [i.e. the judge hearing the Rectification Summons] to determine all case management issues arising in relation to the Rectification Summons". In other words, the jurisdiction to determine case management issues in the Rectification Summons (including, whether counter arguments are required at all, who should advance them and what costs order should be made) falls within the purview of the judge presiding over those substantive proceedings.

Comment

In his judgment, Kawaley J reinforced the special role of enforcers as part of the statutory STAR trust regime whilst also being cautious to preserve the separation of judicial roles between the judge determining the Beddoe application on the one hand and the judge determining the substantive proceedings on the other. This is consistent with the requirement that a trustee should make an application for Beddoe relief in separate proceedings to the main action, together with the usual practice that the costs in the main action should not be dealt with by the Beddoe judge.

Given that the case management decisions relating the Rectification Summons will remain with the judge presiding over those substantive proceedings, it will be interesting to see whether the Court provides any further guidance in the future with respect the role of beneficiaries (if any) in the context of the STAR trust regime.

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