<i>In the Matter of the S Trust</i> : Cayman court agrees to unwind establishment of a trust tainted by a mistaken advice as to the Settlor’s domicile

Abstract The Grand Court of the Cayman Islands used its statutory power under Section 64A of the Trusts Act to set aside the establishment of a discretionary trust based on mistaken advice regarding the settlor’s domicile, highlighting the court’s flexible and pragmatic approach to rectifying flawed fiduciary decisions with unintended tax consequences. The case illustrates that applications under Section 64A can be made by beneficiaries, not just trustees, and that the Cayman courts are willing to efficiently use this jurisdiction to address flawed fiduciary decisions beyond trusts, including directors’ decisions. The Grand Court of the Cayman Islands has again demonstrated the scope and practical utility of its statutory “Hastings Bass” jurisdiction contained in Section 64A of the Cayman Islands’ Trusts Act (2021 Revision), which provides a broad remedial jurisdiction for unwinding flawed fiduciary decisions. In the Matter of the S Trust,2 Kawaley J set aside, ab initio, the establishment of a 2012 Cayman discretionary trust founded on mistaken advice as to the settlor’s domicile. The case demonstrates the flexibility of the Section 64A jurisdiction and the Cayman court’s pragmatic approach to delivering relief in unforeseen circumstances which may arise in the administration of trusts. It also highlights the court’s emerging emphasis on “clean hands” as a discretionary consideration when unintended tax consequences are at stake.