The question of whether an individual has the mental capacity to exercise his or her legal rights or powers is one fraught with difficulties, and inevitably subject to great debate. In the recent decision of CI Trustees Ltd -v- RDK and GMB1, the Grand Court of the Cayman Islands (the “Court”) was asked to consider whether or not the settlor of a Cayman Islands trust had capacity to exercise her power to amend the trust deed to change the sole beneficiary of the trust. For the reasons explained below, the Court found that, on the balance of probabilities and in circumstances where the settlor had since passed away, the settlor did have capacity, at the material times, to amend the trust deed.

The Cayman Islands Trust

The O Trust (the “Trust”) was established pursuant to a trust deed dated 6 May 1996 (the “Trust Deed”). The Trust was a Cayman Islands trust, containing “reserved powers” provisions sanctioned by the Trusts Law (as revised). One of those reserved powers was a power, found at Article 1.1.5 of the Trust Deed, to amend the Trust Deed “by writing delivered to the Trustee, but subject to acceptance by the Trustee”.

The trustee of the Trust was CI Trustees Ltd (the “Trustee”). The settlor of the Trust was a childless widow, and resident of a Spanish-speaking country in South America (the “Settlor”). Evidence was given in the course of the proceedings, from representatives of the Trustee, to the effect that the Settlor was known to be “a very gullible and lonely person” who had “been taken advantage of in the past”. In July 2012, the Settlor sent a letter to the Trustee (the “2012 Letter”), stating that she wished to amend the Trust Deed to remove the sole beneficiary of the Trust (referred to in the judgment as “RDK”) and to replace her with the Settlor’s friend (“GMB”). It is noteworthy that GMB was also the wife of the Settlor’s lawyer. While the Trustee was satisfied that the Settlor had written the 2012 Letter, the Trustee was concerned about the Settlor’s mental capacity to properly exercise her power of amendment. The Settlor had appeared confused during telephone calls with representatives of the Trustee and, on other occasions, had refused to speak with the Trustee at all. As a result, the Trustee declined to give effect to the Settlor’s amendment request set out in the 2012 Letter.

1Unreported, FSD 199 of 2015, Kawaley J, 19 January 2018.


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