Exploring Offshore Litigation

Into Perpetuity: The Grand Court Charts New Territory Under the Cayman Islands' Reformed Trust Regime

The Perpetuities Act (2025 Revision) marks an important moment for Cayman Islands trust law. For settlors of new trusts, the legislation offers the power to opt out of any perpetuity limitation at inception. For those who administer existing structures, it creates a streamlined, court-supervised route to convert a fixed-term trust into one of unlimited duration. In March 2026, in what is understood to be the first successful application of its kind under the new statutory jurisdiction conferred by section 20 of the Perpetuities Act (2025 Revision), Harneys successfully obtained an order from the Grand Court, disapplying the rule against perpetuities for a discretionary family trust. The order empowered the trustee to execute a deed of variation replacing the trust's fixed-term period with an indefinite duration. The Reforms to the Perpetuities Act in Brief Prior to the amendment effected by Act 7 of 2024 (which came into force on 22 August 2024), Cayman Islands discretionary trusts were subject to a statutory perpetuity period of 150 years from the effective date of the relevant instrument. Part 3 of the 2025 Revision, which consolidates the 2024 amendment, changes the landscape in three material ways. First, for new trusts created on or after 22 August 2024, the instrument itself may simply provide that the rule against perpetuities does not apply (provided the trust does not hold Cayman land or any interest in Cayman land). The land carve-out is narrow in that it does not extend to income from Cayman land or to the proceeds of sale of Cayman land, and a trust that has opted out of the rule may still hold an interest in an entity that owns Cayman land for the purposes of its business. Second, for existing trusts (whenever created), section 20 permits a trustee, settlor, enforcer, power-holder, or beneficiary to apply to the Grand Court for an order declaring that the rule does not apply. The Court may grant the order where it is satisfied that doing so would not be to the detriment of the beneficiaries. Third, trusts of unlimited duration governed by a foreign law that has no perpetuity rule may change their governing law to Cayman without re-introducing any duration limit. The Application to disapply Harneys acted for a professional trustee of a discretionary family trust seeking to give effect to the dynastic objectives of the settlor through the grant of a court order. In the absence of Cayman authority on the exercise of the section 20 jurisdiction, the Court was invited to approach its discretion by reference to persuasive Bermudian case law under section 4 of Bermuda's Perpetuities and Accumulations Act 2009, a materially analogous provision to section 20 of the Perpetuities Act (2025 Revision). Principles The application before the Grand Court drew on judicial guidance from the Supreme Court of Bermuda that establish clear principles guiding the exercise of the statutory power to disapply the rule against perpetuities. The Bermudian authorities establish that: The Court must not function as a "rubber stamp": disapplication will only be granted where it facilitates the continued efficient administration of a family trust, where no beneficiary is materially prejudiced, and where the relief accords with the best interests of the trust as a whole. A forced distribution at the end of a perpetuity period could give rise to significant tax liabilities and premature dissipation of assets to the detriment of future generations—this is a strong justification for disapplication. The potential dilution of existing beneficiaries' economic interests as a result of extending the duration of a trust will ordinarily be an irrelevant consideration. Distilling and drawing from these Bermudian principles, the Cayman Islands Grand Court will therefore likely exercise its discretion in favour of granting relief where disapplication would: (a) accord with the settlor's wishes and the objectives of the trusts; (b) serve the best interests ...

Common sense and common law: Navigating the gap between breach and loss

The Court of Appeal of England and Wales has dismissed an appeal in Logix Aero Ireland Limited v Siam Aero Repair Company Limited, holding that the voluntary acts of fraudsters broke the chain of causation between an assumed breach of a confidentiality clause and the claimant's loss. The decision restates the principles of legal causation in contract and clarifies the limited reach of London Joint Stock Bank v Macmillan. Although the decision is one of English law, the causation principles applied are common law principles regularly cited in the Cayman Islands and other International Financial Centres (IFCs). Background Logix agreed to purchase two aircraft engines from Siam Aero under a Letter of Understanding (LOI). The LOI was predominantly non-binding. However, certain clauses – including a confidentiality provision – were expressly stated to be legally binding. Unknown fraudsters intercepted email correspondence between the parties. They registered domain names differing from the genuine addresses by a single character and began altering emails before forwarding them on. Among the changes, they substituted their own Vietnamese bank account details for Siam Aero's Thai account in draft Purchase Agreements and invoices. Logix paid the balance of the purchase price to the fraudsters' account believing it was paying Siam Aero. Logix took no independent step to verify the bank details. The fraud came to light days later when Siam Aero informed Logix by telephone and WhatsApp that it had not received payment, by which point the funds had already left the fraudsters' account. Logix commenced proceedings in England. It initially alleged Siam Aero's complicity in the fraud but dropped that allegation after forensic investigation. The claim was narrowed to a single ground: that Siam Aero's four emails to the fraudsters breached the confidentiality clause and caused Logix's loss. The issues At first instance, Mrs Justice Williams struck out the proceedings under CPR 3.4(2)(a), holding that the claim was "bound to fail". She accepted it was arguable that Siam Aero breached the confidentiality clause by unwittingly "disclosing" documents and information to the fraudsters. She held, however, that it was not arguable that any such breach caused Logix's loss. Lord Justice Males granted permission to appeal solely on causation. On appeal, Logix argued that the Judge wrongly failed to follow Macmillan. In that case, a firm had drawn the cheque negligently, leaving gaps in the figures and words that the clerk exploited to increase the amount from £2 to £120. The House of Lords held that, notwithstanding the intervening fraud, the firm's negligence in drawing the cheque facilitated the forgery and was the effective cause of the loss. As such, the firm was precluded from recovering its loss from the bank on the basis that "forgery is not a remote but a very natural consequence of negligence of this description". Siam Aero opposed the appeal on the ground it was not arguable that its actions breached the confidentiality clause at all. The judgment Lord Justice Phillips (Lord Justice Peter Jackson and Lady Justice Cockerill agreeing) dismissed the appeal. It was common ground that the "but for" test of factual causation was satisfied. The question was whether Siam Aero could be held liable despite the intervention of the fraudsters. The Court identified three principles by which the chain of causation may be broken: 1. First, the breach may not be the "effective" or "dominant" cause of loss but merely the opportunity or occasion for it (Galoo v Bright Grahame Murray; Armstead v Royal & Sun Alliance). The same distinction has been applied in the Cayman Islands. In Omni Securities v Deloitte & Touche, the Court of Appeal considered the Galoo test in the context of auditors' negligence and held that whether a breach was the "effective cause" of loss, or merely the "occasion" for it, was to be resolved by "the application of the court's common s...

Statutory Hastings-Bass in the Cayman Islands: the Grand Court sets aside a deed of exclusion

In the recent decision of The Trustees v AB and Ors (Re the D Trust) the Cayman Grand Court granted relief under section 64A of the Trusts Act (2021 Revision) (the Act) to set aside a deed of exclusion (Deed of Exclusion) executed by previous trustees in reliance on erroneous UK tax advice. The decision adds to the growing body of authority on the statutory Hastings-Bass jurisdiction in the Cayman Islands, and includes guidance on the good faith requirement, standing by successor trustees, notification to tax authorities, and whether section 64A applications should be dealt with on the papers. Background The D Trust is a Cayman Islands discretionary trust with a broad class of beneficiaries. It was originally governed by New Zealand law, but its proper law and forum were changed to the Cayman Islands in November 2019. The trust formed part of a wider estate planning structure. When the D Trust was settled in 2011, the Settlor transferred non-UK situs property into it. A connected trust (the H Trust, governed by Guernsey law) borrowed those funds to purchase a residential property in England. The arrangement was designed to ensure the loan owed by the H Trust to the D Trust remained "excluded property" for UK inheritance tax (IHT) purposes, shielding the value of the UK property from any charge on the Settlor's death. In early 2017, proposed changes to the IHT regime threatened to undermine that planning. The previous trustees instructed a specialist London firm, which recommended (among other options) executing a deed of exclusion to declare the Settlor an "Excluded Person" under the trust deed. The Deed of Exclusion was executed on 30 March 2017, shortly before the new rules took effect on 6 April 2017. In January 2025, a different London firm reviewed the arrangements and concluded that the original advice had been incomplete and in places erroneous. It had failed to consider: (i) the risk that section 102 of the UK Finance Act 1986 would treat the Settlor as having incurred the H Trust's liabilities; (ii) whether the charge over the UK property was an "incumbrance created by a disposition made by [the Settlor]" within section 103 of that Act; and (iii) how the General Anti-Abuse Rule might apply to the 2017 arrangements. The D Trust faced the very IHT exposure the Deed of Exclusion was supposed to prevent. The issues The current trustee applied by originating summons for a declaration that the Deed of Exclusion was void ab initio under section 64A of the Act. The application was dealt with on the papers. The principal issues were: (i) whether the current trustee had standing; (ii) whether the statutory conditions in section 64A(2) were satisfied; (iii) the scope of the court's residual discretion (including the good faith requirement and notification of HMRC); and (iv) whether it was appropriate to determine a section 64A application without an oral hearing. The judgment The applicable law Justice Segal adopted the analysis of Justice Kawaley in Maples Trustee Services v AB (In Re Settlements), describing it as "a clear and authoritative summary of the applicable law". Justice Kawaley had identified three strands of the statutory language: 1. the power must be a fiduciary power; 2. but for the mistake the power would not have been exercised in the same way, at the same time, or at all; and 3. the person exercising the power must have failed to take into account relevant considerations, or taken into account irrelevant ones. Justice Segal adopted Justice Kawaley's tentative view (that section 64A contains an implied good faith requirement), reasoning that such a qualification is necessary to keep the jurisdiction within proper bounds and avoid what Lord Neuberger extrajudicially described as giving trustees a "get out of jail free card". He disagreed, however, with Justice Kawaley's observation that the circumstances required for section 64A relief are "likely in many (if not most) cases to be indistinguishable (legal lab...

BVI Court of Appeal reaffirms high threshold for case management stays pending foreign proceedings

In the recent decision of Lim Yew Cheng v Guanghua SS Holdings Limited, the BVI Court of Appeal dismissed an appeal against a first instance refusal to stay BVI recognition and enforcement proceedings pending the outcome of litigation in Hong Kong. The judgment is a useful restatement of the demanding test that an applicant must satisfy where it asks the court to put its own proceedings on hold to await the resolution of foreign litigation. Background In April 2022, Guanghua SS Holdings Limited (Guanghua) obtained a Hong Kong High Court Judgment arising out of two US$80 million loan facilities personally guaranteed by Mr Lim and his son, Lin Minghan. In June 2024, Guanghua commenced recognition and enforcement proceedings in the BVI, which Mr Lim sought to stay, first relying on pending separate Hong Kong proceedings (the Hong Kong Proceedings) and, subsequently a further claim issued in Hong Kong and derivative proceedings brought in the BVI. Mithani J (Ag.) refused both the stay and a related adjournment application, and Mr Lim appealed. The threshold for a case management stay The central question on appeal was whether Mithani J, when considering whether it was appropriate to grant stay of the enforcement proceedings on case management grounds, had applied the wrong test by failing to follow Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See. Ward JA accepted that the single test is whether, in the particular circumstances, it is in the interests of justice to grant a stay. However, drawing on the analysis of Males LJ in Athena Capital, the Court emphasised that the presence of "rare and compelling circumstances" remains a highly relevant factor where the stay sought is to await foreign proceedings. The Court held that, while the "rare and compelling circumstances" formulation is not itself the legal test, "it is only in rare and compelling circumstances that it will be in the interests of justice to grant a stay on case management grounds to await the outcome of foreign proceedings", describing this as a "high threshold" and noting that the usual function of the court is to decide cases, not decline to do so. The appeal The Court observed that while the first instance judge did not expressly articulate the test he applied, the factors he relied upon were "plainly relevant" to the interests of justice question under the applicable test. These included the facts that (a) the Hong Kong Judgment had not been appealed, (b) no application had been made to stay the Hong Kong Judgment in Hong Kong, which would have been an obvious and effective way to bring a halt to the BVI enforcement proceedings, and (c) the relief sought in the Hong Kong Proceedings did not seek to set aside the Hong Kong Judgment. In those circumstances, there was no reason to regard the Hong Kong judgment as not final and no reason why the judge could not proceed with the recognition and enforcement claim. The appellant, Mr Lim, also sought to make much of the judge's statement that he had not considered his late evidence in great detail. The Court noted, however, that the judge had been deluged at the eleventh hour with over 100 pages of evidence and more than 2,000 pages of exhibits, comprising allegations yet to be proven at trial in support of the appellant's stay application. The Court found nothing to suggest that the judge had failed to appreciate the appellant's case for a stay; to the contrary, the judge's recital of the background showed that he was well acquainted with the case. Accordingly, nothing before the judge amounted to "rare and compelling circumstances", and his decision sat comfortably within the generous ambit of his case management discretion. The decision is a clear signal that BVI courts will not lightly stay recognition and enforcement of a final foreign judgment to await collateral foreign proceedings, particularly where no stay has been sought in the originating jurisdiction and the foreign challenge doe...

By your leave? Cayman experts (maybe) need not apply

In the recent decision of State House Trust v Friend Media Technology Systems the Jersey Royal Court allowed an appeal against the Master's refusal to exclude an opinion from English counsel filed in support of a summary judgment application. Commissioner Sir Michael Birt (who is also a Justice of Appeal of the Cayman Islands Court of Appeal) held that there was no requirement to obtain the leave of the court to obtain evidence from a single expert witness, but that in this instance the opinion was inadmissible, and used the occasion to call for the introduction of a rule equivalent to English CPR 35.4. His analysis of the absence of a requirement for leave raises questions that Cayman Islands attorneys will recognise, because it is not clear that the position under the Grand Court Rules is materially different. Background The proceedings arise out of a shareholder dispute in which three Defendants applied for summary judgment and filed an opinion from English counsel (the Opinion) in support. The Plaintiffs sought to exclude the Opinion – the Master refused, and the Plaintiffs appealed. The judgment Commissioner Sir Michael Birt, hearing the appeal afresh, addressed three issues: 1. whether leave was required; 2. whether summary judgment must be decided on admissible evidence; and 3. whether the Opinion was admissible. He answered yes to the second and no to the first and third issues. It is the first issue – the requirement for leave – that has the most significance for the Cayman Islands. The Plaintiffs argued that Royal Court Rule 6/20(2)(d), which allows the court to "order that not more than a specified number of expert witnesses may be called", read with Practice Direction 17/09, created a leave requirement. The Commissioner rejected that submission. The rule merely empowers the court to limit the number of experts; it does not require leave. The wording is similar to, and Commissioner Birt decided has the same meaning as, the former English Supreme Court Rules Order 38, rule 4, which the English Court of Appeal in Sullivan v West Yorkshire Passenger Transport Executive held gives jurisdiction only to limit numbers, not to exclude expert evidence entirely. The absence of language equivalent to the English CPR 35.4(1), which expressly requires leave, confirmed the position. Commissioner Birt added that he had not reached the conclusion on leave with "any great enthusiasm". He recommended the introduction of a provision equivalent to CPR 35.4, which would impose a simple requirement to obtain the court's leave to submit expert evidence, and this would allow the court to consider admissibility and case management at an early stage. The Cayman position GCR O38, r4 is the Cayman analogue, in materially similar terms to Jersey's RCR 6/20(2)(d): it empowers the court to limit expert numbers rather than imposing a leave requirement. On a strict reading of the GCR, no express leave requirement appears to exist. O38, r36(1) restricts expert evidence unless one of four conditions is satisfied: (i) leave of the court; (ii) agreement of all parties; (iii) an application for a disclosure direction under r37 or r41; or (iv) compliance with automatic directions under O25, r8(1)(b). The third and fourth routes are procedural steps concerning the form and timing of disclosure; they are not applications for permission to call an expert. The party-agreement route is, in particular, difficult to reconcile with a blanket leave requirement. FSD Guide B5.1(a) provides that "[a]ny application for leave to call an expert witness or to serve an expert's report should be made at a case management conference or on a summons for directions". The use of "any" rather than "an" is conditional: it addresses what should happen if such an application is made, not that one must be made. The Guide also uses "should" rather than "must", and as a practice guide issued under the inherent jurisdiction of the court (not a statutory instrument or rule of court...