When a BVI trust structure comes under strain, one of the first questions I ask is what the trust has opted into?

Section 58B of the Trustee Act, 1961 allows the BVI court to vary a trust, including its dispositive provisions, without the consent of adult beneficiaries. The Virgin Islands Special Trusts Act 2003 (“VISTA”) reshapes what a trustee can be sued for in relation to underlying companies. Part X of the Trustee Act limits what counterparties can claim against trust assets. None of these regimes applies by default, and whether a trust has validly adopted one can itself become the dispute.

In this article, I look at the BVI opt-in provisions from the perspective of a trust litigator: how they are engaged, how they are used and resisted in court, and the drafting points that decide many of these cases long before they reach a judge

Introduction

BVI trust law contains several regimes that apply only where a trust expressly adopts them. For those who draft trusts, these "opt-in" provisions are planning tools. For those of us who litigate them, they frequently decide who can bring a claim, what the Court can order and how a dispute is resolved.

The most significant is section 58B of the Trustee Act 1961, introduced by the Trustee (Amendment) Act 2021, in force since 9 July 2021. It sits alongside two longer-established elective regimes: VISTA and Part X of the Trustee Act. This article considers each from a contentious perspective, and contrasts them with the 2021 reforms that apply to BVI trusts automatically.

Section 58B: a court-led route to variation

Section 58B allows the BVI High Court to vary a trust without the consent of adult beneficiaries, provided the trust has opted in. In practice, it can turn what would otherwise be a deadlock between beneficiaries, or a hostile claim against trustees, into a single application decided on its merits.

It supplements the court's existing powers. Section 58 still requires consent from adult beneficiaries, with the court consenting only on behalf of those who cannot. Section 59, modelled on section 57 of the English Trustee Act 1925, is confined to administrative matters. Section 58B goes further than both.

The threshold question: has the trust opted in?

Section 58B is not engaged by default. The statute recognises two routes in. A trust settled after 9 July 2021 may adopt it in its own terms. Alternatively, a trust of any age may adopt it when it migrates to BVI law, either in the deed of migration itself or in an instrument taking effect at the same moment.

A pre-July 2021 trust that has always been governed by BVI law cannot adopt section 58B by supplemental deed.

This threshold is fertile ground for dispute. A beneficiary opposing an application may argue that the wording does not amount to express adoption, that the opt-in was made with modifications that exclude the variation sought, or that the change of governing law was itself invalid. In a migrated trust, the validity of the migration deed may be the first battleground.

Who can apply, and who will resist

An application may be brought by the trustee, a beneficiary or object, a protector, or any other person the trust instrument authorises to apply. That gives beneficiaries and protectors a direct route to the Court that does not depend on trustee co-operation.

Because the court may make an order whether or not it adversely affects any person or purpose, those whose interests are reduced are the natural respondents. Applicants should expect to address how minor, unborn and unascertained beneficiaries are represented, and to put full evidence before the Court on the effect of the proposed variation of each class.

The test

The jurisdiction reaches every term of the trust, dispositive as well as administrative, and allows the court to amend, supplement, remove or substitute provisions (Trustee Act, s.58B). Before making an order, the court must be satisfied that it is "expedient in the circumstances then existing", taking into account the matters the section requires it to weigh. The provision draws on section 47 of Bermuda's Trustee Act 1975.

The test is one of expediency, not benefit to every beneficiary. The question is whether the variation is expedient for the trust as a whole in present circumstances, and whether any adverse effect on particular beneficiaries is justified.

Where it fits in a dispute

Section 58B can provide a constructive alternative to breach of trust claims, removal applications or construction proceedings where the real problem is a trust that is no longer functioning. Trustees should consider their position carefully, including whether to support the application, remain neutral, or seek the court's directions.

The firewall in section 83A reinforces the point. A foreign judgment that varies a BVI trust without the consent of its adult beneficiaries is to be treated as inconsistent with BVI law. A variation of that kind must be obtained in the BVI court, if at all.

Section 58B does not affect section 12 of VISTA, which governs the exclusion of the rule in Saunders v Vautier for VISTA trusts.

VISTA: narrowing the scope for claims against trustees

VISTA applies only where the trust instrument expressly directs that the Act applies. Its purpose is to release the trustee from the ordinary duty to monitor and safeguard the value of an underlying company, leaving management with the company's directors. For litigators, that changes the shape of any dispute about the company and its value.

Core requirements

• Express adoption in writing. The trust instrument must say, in terms, that VISTA governs it.

• BVI shares only. Only shares in a BVI company can be "designated shares", and some regulated entities are excluded.

• A designated trustee. At least one trustee must hold a BVI trust licence or be a BVI private trust company.

• Separation from the board. The trustee may not also sit as a director of the underlying company.

A failure to satisfy these conditions may itself be contested, since it determines whether the trustee enjoys VISTA's protections at all.

How VISTA reshapes disputes

The central feature of the Act is that the trustee holds the designated shares in order to keep them. Its obligation to keep the shares outranks the general duty to protect and grow the trust fund. Practically, this means that a beneficiary aggrieved by the company's performance will usually be unable to frame the familiar claim that the trustee should have supervised the directors or sold the shares.

The battleground moves to the trust instrument. A VISTA deed can lay down binding rules on how the trustee uses its votes to put directors in place, remove them or fix their pay. It can also identify the specific grievances that entitle interested persons to require the trustee to step into the company's affairs. Litigation tends to focus on whether those triggers were met and whether the trustee's response was adequate.

If the trustee fails to comply with its VISTA obligations, the Act gives standing to apply to Court not only to interested persons but also to the company's directors and those entitled to be directors. Absent contrary provision in the deed, a sale of the shares needs the consent of the board or of persons the deed names. The deed may also disapply the rule in Saunders v Vautier for a period of up to 20 years, preventing beneficiaries from bringing the structure to an end.

Conversion

Existing trusts may be brought within VISTA, and VISTA may later be disapplied. The timing and validity of a conversion can be significant where a claim relates to events before or after the change.

Part X: limiting third-party claims

Part X of the Trustee Act governs dealings between trustees and third parties. It applies automatically to trusts created after it came into force, and older BVI trusts can choose to elect into it.

Two aspects of Part X matter most when things go wrong. The first is its treatment of third parties who acquire trust property in good faith and for value: it restates and adjusts the protection those purchasers enjoy, which directly affects a beneficiary's ability to follow or recover assets that have left the trust. The second is that a trustee and counterparty can agree that the counterparty's claims will be satisfied from the trust fund alone, with no personal claim against the trustee. Lenders and other counterparties commonly insist on these provisions, and lawyers give opinions on that basis.

Since the 2021 amendments, section 104(2) allows the trustees of a BVI trust, whenever created, to apply Part X by deed. Where a claim arises from a transaction, whether and when that election was made may determine the remedies available to beneficiaries, creditors and counterparties alike.

What applies automatically

The opt-in regimes should be distinguished from the other 2021 reforms, which apply without any election and are often central to contentious trust work.

Lessons from the contentious side

• Check the opt-in first. In any dispute over a BVI trust, establish early which regimes the trust has adopted, and when. It determines the claims available and the forum for resolving them.

• Express means express. General language importing "all powers under BVI law" invites argument about whether a regime applies. Clear wording avoids a threshold fight.

• Scrutinise migrations. Where a trust has moved to BVI law, the validity and terms of the change of governing law may decide whether section 58B is available.

• Consider section 58B before hostile proceedings. Where the underlying problem is a trust that no longer fits the family's circumstances, a variation application may achieve more, at lower cost, than claims against trustees.

• Read the VISTA instrument closely. Intervention conditions and office of director rules, not general trustee duties, will usually define the trustee's exposure.

• Trustees should take a considered stance. In variation and directions applications, the trustee's position on neutrality, support or surrender of discretion should be decided early and explained to the court.

• Drafting prevents disputes. Tailoring a section 58B opt-in, including who may apply and which provisions sit outside the court's reach, reduces the scope for later conflict.
  

Conclusion

The BVI's opt-in provisions are often discussed as planning tools, but their real test comes when a structure is under pressure. Whether a trust has opted in, and on what terms, can determine who may come to court, what relief is available and whether a dispute can be resolved by variation rather than adversarial litigation.

We act for trustees, protectors, beneficiaries and settlors in contentious BVI trust matters, including variation applications, directions and blessing applications, breach of trust claims and disputes concerning VISTA structures. Please contact David Harby, partner in our BVI office (dharby@candey.com) to discuss how these provisions may bear on your matter.

Note: This is a general summary of an evolving field of law, and is made available for general discussion purposes only between CANDEY and its clients and prospective clients. This memorandum does not constitute legal advice and must not be relied on as such. It should also not be cited as legal or academic authority