Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Company (Cayman) Limited and others (Cayman Islands)

The jurisdiction under section 37(1) of the Senior Courts Act 1981 is judicially circumscribed but capable of incremental development. A receiver by way of equitable execution may be appointed over an asset that is not presently amenable to legal execution. Where a judgment debtor retains an unfettered, non-fiduciary power to revoke a trust for his own benefit, equity may treat his rights as tantamount to ownership. The court may appoint receivers over that power and order the debtor to delegate it to them.

The demands of justice govern both the jurisdiction and its exercise. A foreign bankruptcy does not necessarily preclude relief where the revocation power has not vested in the trustee in bankruptcy, third parties will not be prejudiced and the proceeds will be made available to creditors generally.

The appellant had obtained a Cayman Islands judgment recognising and enforcing a Turkish judgment for US$30 million against Mr Demirel. He had established two valid Cayman Islands discretionary trusts holding assets of about US$24 million. He retained a power to revoke, amend, vary or alter each trust, and was one of its principal beneficiaries.

The appellant sought receivers by way of equitable execution over the revocation powers, together with orders enabling the receivers to exercise them and reach the trust assets. Smellie CJ dismissed the application. The Court of Appeal of the Cayman Islands dismissed the subsequent appeal, holding that any extension of equitable execution to a revocation power should be made by legislation. It also considered that relief should not be granted to a single creditor following Mr Demirel's Turkish bankruptcy.

The central issues were whether the powers could be treated as sufficiently close to property for equitable execution, whether they could be delegated to receivers and whether the court should exercise its discretion.

1. Appeal allowed. Lord Collins, delivering the opinion of the Board, held that the Cayman Islands court had jurisdiction to appoint receivers by way of equitable execution over the powers of revocation and to order their delegation to the receivers.
2. The jurisdiction incorporated through section 11(1) of the Grand Court Law (2008 Revision) was governed by section 37(1) of the Senior Courts Act 1981. Applying Masri v Consolidated Contractors International (UK) Ltd (No 2) [2008] EWCA Civ 303, the demands of justice were overriding. The jurisdiction was not frozen by pre-1873 practice. It could develop incrementally by applying established equitable principles to new situations, and a receiver could be appointed over an asset not presently amenable to execution at law. The statutory power nevertheless remained circumscribed by judicial authority: paras 55–59.
3. The distinction between a power and property depended on context and was not an invariable rule. A completely general power may be treated as tantamount to ownership because its holder has an absolute disposing power over the affected property. Mr Demirel's unfettered, non-fiduciary revocation powers were exercisable solely for his own benefit. In equity, and for the purpose of enforcing the judgment, his rights could therefore be regarded as tantamount to ownership: paras 33, 43–46 and 59–62.
4. The powers were delegable. A power may be delegated where it involves no personal trust, confidence or fiduciary judgment. The principle in Re Triffitt's Settlement [1958] Ch 852 applied because Mr Demirel owed no fiduciary duty and the powers were beneficial powers conferred for his own benefit. The court could make an ancillary mandatory order requiring delegation to the receivers; the judgment creditor did not have to establish a pre-existing duty to delegate: paras 51–53 and 61–62.
5. The discretion should be exercised in favour of the appellant. There was no serious suggestion of prejudice to a third party. The revocation powers had not vested in the Turkish trustee in bankruptcy, and the appellant undertook to make the recovered proceeds available to creditors generally: para 64.
6. The Board did not decide whether it could instead order Mr Demirel to revoke the trusts directly. Earlier objections based on orders compelling the exercise of powers did not conclusively determine that question, and the reasoning in Field v Field [2003] 1 FLR 376 was open to substantial criticism: para 63.

The parties were given 21 days to provide written submissions on costs and the form of the order.

1. Privy Council: Allowed the appeal. It held that receivers could be appointed over the revocation powers and that Mr Demirel could be ordered to delegate those powers to the receivers.
2. Court of Appeal of the Cayman Islands: On 9 September 2009, dismissed the appeal from Smellie CJ. It held that extending equitable execution to a power of revocation required legislation and that, without further information, relief should not be granted following Mr Demirel's Turkish bankruptcy. It granted leave to appeal to the Board.
3. Grand Court of the Cayman Islands: On 21 July 2009, Smellie CJ dismissed the application for receivers and associated orders. He held that a power of revocation was not property for this purpose and was not delegable.