Isle of Man

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Cases :

A B v C D
- Is Pitt v Holt good law in the Isle of Man? The trustees were asked to take UK tax advice when the settlor changed his residence to the United Kingdom and made the mistake of not doing so.
  A B v C DDownload
AHUJA v. SCHEME MANAGER2 DS 1996/35
- The trustee had deposited £160,000 with BCCI and lost it when the bank failed. The Government’s Depositors Compensation Scheme provided each depositor with a maximum of £20,000 compensation.The trust money had been provided by eight family members, some living in England and some in Canada, India and United States, and all of them were nominated as discretionary beneficiaries, along with the International Red Cross. In practice, each of the eight regarded himself as the beneficial owner of one eighth of the fund. If that had been so, they would each have been entitled to £20,000.The claimants succeeded at first instance on this basis, but the appeal court would have none of it: the document said their interests were mainly discretionary (along with that of the Red Cross) and as such none of them had any interest in any specific part of the trust fund.What the case does not tell us is why the trust instrument did not simply provide for the trustee to hold the fund as nominee for the eight in equal shares. Had it something to do with the tax or exchange control regimes in the countries in which they lived? AHUJA v. SCHEME MANAGERDownload
CUSACK & COTTER v. SCROOP1 OFLR 68/409
- The late Mr. Frawley owned a Manx company called Scroop Ltd. Scroop’s failure to complete a substantial purchase caused the plaintiffs to lose their seat on the Irish Stock Exchange; Mr. Frawley agreed to pay compensation in two instalments, Scroop giving a lien on shares in Atlantic Resources which were held by the second defendant, the accounting firm of Pannell Kerr Forster in the Isle of Man. The second instalment – of IR£200,000 was never paid and the third defendant – a partner in the firm – sold the shares paying the proceeds to a Panamanian company. Held at first instance that the conduct of the second and third defendants was unconscionable and that they accordingly held IR£200,000 on a constructive trust for the plaintiffs and were liable also for interest and costs.The judgement contains useful learning on the nature of the constructive trust – whose use as a remedy has been developed in Canada and Australia, but not (it seems) in England.But on appeal the Court found that the defendants had no reason to suppose Mr. Fawley insolvent and therefore did not act unconscionably. Accordingly, no constructive trust could arise and the lower Court’s observations on this point must be regarded as obiter. CUSACK & COTTER v. SCROOPDownload
KATZ v. MOORE1 OFLR 500
- A thoroughly misconceived action, ancilliary to some other litigation relating to a will trust. The defendant was one of the trustees. The others were the widower and son of the testatrix. The defendant retired, and the son found some advantage in contending that the retirement was ineffective because the remaining trustees were resident abroad. It is plain that under the statutory provision – based, as in many Commonwealth jurisdictions – on the English model, absence abroad triggers a power to appoint a substitute, but it does not in itself disqualify the incumbent. KATZ v. MOOREDownload
Re A’s APPLICATIONCHP 2016 / 108
- The rule in Government of India v Taylor (if it still exists) does not prevent a trustee from discharging foreign tax liabilities.Re A’s APPLICATIONDownload
SCHMIDT v. ROSEWOOD TRUST[2003] UKPC 26 / 3 ITELR 734
- Lord Walker’s speech contains a useful review of the authorities. His opening paragraph is worth a read, if only for its disdainful tone, worthy of Lady Bracknell. His conclusion, while impeccable, is not going to be very helpful to a trustee, trying to decide where his duty lies.(An extract from the judgment of the High Court (3 ITELR 734) appears in the downloadable document.) SCHMIDT v. ROSEWOOD TRUSTDownload
SEGAL v. EDWARDS AND HARTLEY2 ITELR 575
- The interesting – and alarming – aspect of this case is the indication that where a trust company outside Guernsey assumes the trusteeship of a Guernsey trust, the statutory provision by which directors of a corporate trustee are guarantors of the company’s liabilities they apply to the directors of the non-Guernsey trust company. (The law in Jersey is in this respect the same.) SEGAL v. EDWARDS AND HARTLEYDownload
STEELE v. PAZ[1993-5] MLR 102
- At the rougher end of the offshore business, it is common practice to create a trust which is described as “blind”. It has a phoney settlor and a laughable trust fund (both politely described as “nominal”), and it is expressed to be for the benefit of the Red Cross. It provides, however, for someone – generally called a “Protector” – to be appointed and to have power to introduce other beneficiaries. No-one concerned contemplates any charitable benevolence: the true engineer of the scheme is or nominates the Protector and decides who is really going to benefit, but neither he nor any of the ultimate beneficiaries feel compelled to declare themselves as such to the taxing authorities in their own jurisdictions. The Court in this case took such an arrangement seriously, and may have earned the gratitude of some of the local trust companies for doing so, but the decision unfortunately affords a spurious legitimacy to a procedure, which – one may confidently predict – will be seen and declared by some tribunal as a sham.The trust document provided a space for a Protector, which had unaccountably been left blank, and the Acting Deemster declared the trust invalid for want of certainty. The appellate tribunal viewed it differently. Here is the first of its two judgements. STEELE v. PAZDownload

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