Beneficial Ownership - Joint Bank Accounts

Beneficial Ownership - Joint Bank Accounts
FEB 13, 2018

Beneficial Ownership - Joint Bank Accounts

A recent decision of the Privy Council from a Bahamian case (Whitlock v Moree Privy Council Appeal No 0075 of 2016) is likely to have an impact on a significant number of families in the Cayman Islands.

A common practice in the Cayman Islands was and remains for persons to add a trusted friend or family member to their bank accounts. This practice originated from the many seamen who left the islands to provide for their families and needed someone here to look after their money and continues where people need others pay personal expenses whilst away or in cases of potential infirmity. Equally common practice is for the banks here to incorporate standard terms stating that the account holders hold the funds as joint property with the right of survivorship and for these to be signed without any understanding of their meaning or effect.

The decision of the Privy Council means that unless the parties actually state in writing their intention and amend the standard forms (which rarely happens in practice) then no further enquiry will be made and the funds automatically pass to the surviving account holder. The potential injustice is that even if the person who survives contributed none of the funds and was not intended to benefit from the funds, they will gain a windfall at the expense of other family members who would otherwise have inherited some or all the funds.

Whilst the decision brings clarity and will be welcomed by Banks and the Grand Court as greatly reducing disputes arising from the death of a joint account holder it is likely to result in significant injustice in practice due to the inflexible operation of the rule and the fact in many instances these forms are signed without a true understanding of the legal effects and the actual purpose was not to gift the money to the added party.

With the Courts hands tied by the decision the way to avoid possible injustice is for the parties to state in writing the purpose of the addition of the joint account holder if the intention is not to gift those funds on death.

Whilst the decision is persuasive authority, it would not be surprising to see further common law cases seeking to distinguish the decision should the same issue arise.