Grand Court Justice Ian Kawaley last week released his reasons for allowing the beneficiaries of a trust involved in a legal matter to remain confidential.

Justice Kawaley’s decision stems from an originating summons made by a trustee, seeking directions from the Grand Court in administering a trust – trustees sometimes seek directions from a court when making decisions over complex matters in order to limit their legal liability.

In this matter, the trustee also filed a motion to have the beneficiaries of the trust to be anonymous.

The trustee argued that the beneficiaries should remain anonymous to protect their personal safety risks of being associated to a large fortune, and because the grandchildren of the trust’s creators had all been revocably excluded as beneficiaries.

“The beneficiaries did not wish these children to become aware of their family’s link to the substantial wealth for fear that it would adversely affect their personal development,” Justice Kawaley wrote.

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Justice Kawaley granted the trustee’s motion to keep the beneficiaries confidential, and ordered that an anonymized version of the originating summons be filed at the court’s public registry of writs.

In making his decision, the justice said he weighed the principles of open justice against the rights to privacy.

“The [Cayman Islands Constitution’s] public hearing requirement, it seems to me, is not a protection for individual litigants so much as a general protection for the independence and impartiality of court proceedings generally,” he wrote, adding, “However, there is a danger that the countervailing protected rights of privacy will be diminished to an unacceptable degree.”

In this matter, Justice Kawaley stated that he was satisfied there is no public interest in open justice that outweighs the countervailing interests of protecting the welfare of minor beneficiaries and protecting the private lives of adult beneficiaries.

The justice added that a jurisdiction like Cayman, which promotes the trust business, may give more importance to confidentiality than other jurisdictions.

“Where an offshore jurisdiction promotes the establishment of trusts as an effective mechanism for legitimately conserving and protecting settlors’ wealth, the host courts must, to my mind, be at least sympathetic to confidentiality applications such as the one made in the present case,” he stated, adding, “The public interest in the Cayman Islands on confidentiality applications may, in terms of an initial knee-jerk judicial response at least, be somewhat less cynical about confidentiality than might be the case elsewhere.”

Justice Kawaley also provided principles for when confidentiality should be provided for trust proceedings, including that the trust should be compliant with anti-money laundering rules and other regulations, should not be subject to a law enforcement investigation, and should not on its face be operated in an “eyebrow-raising manner.”

“The needs for transparency will be strongest where persons linked to the trust are subject to tax or regulatory proceedings, or the sources and ‘concealment’ of their wealth are matters which are already the subject of media scrutiny,” he stated. “In such cases, there will be an obvious risk that the granting of a confidentiality order will have the effect of this Court providing (or appearing to provide) a cloak for impropriety.”

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  1. interesting last paragraph – the learned Judge is suggesting that anonymity is not appropriate where the reason for it would be to ‘mask impropriety’ and that, I would suggest, include, where the reason for the deposit was in whole or part, the avoidance of paying taxes in the state in which they should be paid.
    Name and shame them.