The Attorney-General of the Cayman Islands (Third Appellant) v Even Wahr-Hansen

[Delivered by Lord Browne-Wilkinson]

This appeal raises a short question as to the validity of a memorandum of agreement dated 20th July 1976 ("the Continental Foundation"). Although the point is a short one, in order to understand how it arises it is necessary to give some background information.

Mr. Anders Jahre was ostensibly a wealthy Norwegian shipowner. However, when he died on 26th February 1982 he appeared only to have left a small estate. The sole respondent to this appeal, Mr. Wahr-Hansen, is the administrator of that estate. In that capacity the respondent has brought proceedings in England and elsewhere to recover assets alleged to be, in truth, beneficially owned by Mr. Jahre. Amongst the claims put forward it was alleged that Mr. Jahre was the true beneficial owner of the property the subject matter of the Continental Foundation. It is said that in June 1976 it was reported that Mr. Jahre's business affairs were the subject of an investigation by the Norwegian central banking and revenue authorities and that the Continental Foundation was purportedly then set up with assets primarily provided by Mr. Jahre. The ostensible settlor of the Continental Foundation was Mr. Monsen but it is alleged that the true settlor was Mr. Jahre.

Following Mr. Jahre's death, on 8th October 1982 Mr. Monsen established a new foundation, the Aall Foundation, which was regulated by a memorandum of agreement of 7th October 1982. On the same day,8th October 1982, the trustees of the Continental Foundation in purported exercise of powers contained in the Continental Foundation Trust Deed transferred all the assets subject thereto to the Aall Foundation. In these proceedings the respondent claims that the trusts of both the Continental Foundation and the Aall Foundation are void and that accordingly the assets subject to those foundations have at all times been held on resulting trusts for the original settlor, be he the ostensible settlor Mr. Monsen or, as the respondent alleges, Mr. Jahre. It was to determine that issue that the trustees of the Aall Foundation started these proceedings in 1994 in the Grand Court of the Cayman Islands (where the Aall Foundation is located) raising the questions:

1. whether the trusts of the Continental Foundation were valid or void;

2. whether the trusts of the Aall Foundation were valid or void;

3. on what trusts the trustees held the assets vested in them.

Preliminary issues were directed to be heard to determine whether the trusts of the Continental Foundation and Aall Foundation were valid or void. Those preliminary issues were heard by Harre C.J. who on 30th April 1996 declared that the Trusts of both funds were valid.

The respondent appealed to the Court of Appeal against the decision that the trusts of the Continental Foundation were valid. There was no appeal to the Court of Appeal against the decision that the trusts of the Aall Foundation were valid since it is immaterial whether or not they are valid: if, as the Court of Appeal held, the trusts of the Continental Foundation were void the purported vesting of the funds subject to the Continental Foundation in the trustees of the Aall Foundation would be invalid and those funds would at all times have been held on resulting trusts for the settlor of the Continental Foundation.

Against that background their Lordships turn to the terms of the Continental Foundation as declared by the memorandum of agreement of 20th July 1976. This memorandum was expressed to be made between Mr. Monsen as settlor of the first part, trustees of the second part and three persons defined as the "Advisors" of the third part. The first recital recorded that the settlor wished "to establish a Trust for the benefit of worthy individuals organizations and corporations all upon the terms and conditions hereinafter set forth, and to be known 'The Continental Foundation'". The memorandum then provided as follows (so far as relevant):-

"3. The Trustees may accumulate and add to the capital, the net annual income derived from the Trust Fund for so long as the law applicable to the Trustees permits them so to do. In any year that the law applicable to the Trustees requires them to distribute income or in any year that the Trustees not being required to distribute income decide in the exercise of an absolute discretion to distribute income then such income or any part thereof shall be paid to any one or more religious, charitable or educational institution or institutions or any organizations or institutions operating for the public good (and the Trustees shall be the sole and absolute judges of whether any organization or institution so qualifies … as a beneficiary hereunder) the intention being to enable the Trustees to endeavour to act for the good or for the benefit of mankind in general or any section of mankind in particular anywhere in the world or throughout the world. In the case of any question as to the propriety of any distribution or selection by the Trustees the written approval of the Advisors to the Trustees, if such exist, shall be an absolute and final determination which shall not be open to question. …

4. The Trustees may at any time or from time to time prior to the date of final distribution provided they first obtain the written approval of the Advisors but otherwise in their discretion, pay or transfer any part of the capital of the Trust Fund (and even if it shall result in a complete distribution of the entire Trust Fund), to any person, persons, institution or organization who at that time qualify as beneficiaries who are entitled or contingently or prospectively entitled to receive income as hereinbefore provided.

5. The Trustees may at any time or from time to time prior to the date of final distribution provided they first obtain the written approval of the Advisors but otherwise in their discretion pay or transfer part or the whole of the Trust Fund, including any accumulated or undistributed income on hand, to any person or persons or other Trustee or Trustees whomsoever and wheresoever resident or situate for the purpose of...