Mourant Ozannes achieves Privy Council success for Investec Trust (Guernsey) Limited in a landmark decision for trustees in the Channel Islands

In a judgment given on Monday 23 April, the Judicial Committee of the Privy Council decided for the first time two points of public importance relating to the operation of the legislation in Jersey and Guernsey governing the relationship between trustees and third parties to a trust. The Privy Council also decided an important point of public international law and dismissed a number of other appeals.

In (1) Investec Trust (Guernsey) Ltd (2) Bayeux Trustees Ltd (Respondents) v (1) Glenalla Properties Ltd (2) Thorson Investments Ltd (3) Eliza Ltd (4) Oscatello Investment Ltd (5) Rawlinson & Hunter Trustees SA (Appellants) (Guernsey) [2018] UKPC 7, the Privy Council decided that Article 32 of the Trusts (Jersey) Law, 1984, abrogates the rule of English law that a trustee is personally liable for debts properly incurred for the benefit of the trust so that the trustee’s creditors have no recourse to the trustee’s personal estate. However, the Privy Council also decided that Article 32 did not modify the rule that a creditor can only access the trust assets by way of the trustee’s right of indemnity, which depends upon the terms of the trust deed and the state of account between the trustee and the beneficiaries. On the facts of the case this meant that the former trustee’s personal estate was not exposed to claims for very substantial debts that had arisen during the operation of a Jersey law discretionary trust, the TDT, where the trust assets were insufficient to pay those debts.

The case also gave rise to an important issue of private international law. The former trustee of the TDT was sued in Guernsey for the debts which were governed by either Guernsey or English law. The Court had to decide if Article 32 applied in Guernsey to prevent the creditor proceeding against the trustee’s personal estate.

The Privy Council held that the limitation of a trustee’s personal liability under the Jersey and Guernsey trust legislation was a matter of status and should be recognised at common law and given effect to even though a trust does not have separate legal personality. This meant that although Article 32 was a provision of the Jersey legislation, it applied to the creditor’s claims in the litigation in Guernsey even though the disputed debts were not governed by Jersey law.

The decision also dismissed two separate appeals relating to claims alleging breach of duty against the former trustee of the TDT. An appeal against the dismissal of a claim in unjust enrichment against the former trustees was also dismissed.

Guernsey Litigation and Dispute Resolution Partners, Jeremy Wessels and Jessica Roland, led the Mourant Ozannes team advising former trustees Investec Trust (Guernsey) Ltd and Bayeux Trustees Ltd (Respondents), acting in conjunction with Macfarlanes LLP and Investec's General Counsel, Lauren Ekon.