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Ruling delivered on trust law


A long-awaited Privy Council judgment on a Guernsey trust case is expected to have a significant impact on how trust law is interpreted in the future. Carey Olsen’s John Greenfield and Kelly Walton look at the ramifications


Privy Council – in the appeal by Spread Trust Company Ltd against Hutcheson and others – was delivered on 15 June 2011. The ruling found in favour of the trustees, overturning decisions of the Royal Court of Guernsey and Guernsey Court of Appeal. The 67-page reasoned judgment is remarkable in many ways. First, it covers some important and complex components of trust law that will affect not only professional trustees and legal practitioners in the Channel


H 26 businesslife.co August/September 2011


AVING SAT for two full days in December 2010, the long-awaited landmark decision of the Judicial Committee of the


Islands, but also those in the UK and beyond. Second, the finely balanced sensitivity of the issues ruled upon is reflected in the unusual split decision (three to two) of the judges. The case concerned the effect of a clause


in a long-established Guernsey trust deed exonerating trustees for anything other than wilful and individual fraud and wrongdoing. Under these terms the trustees could escape liability for gross negligence, law permitting. The trust in question was established before statutory legislation prohibiting such exoneration had been enacted in Guernsey. At the heart of the matter is that the beneficiaries complained that the trustees failed to adequately diversify investment


of trust funds, and that the trustees were in breach of trust by this action. The Guernsey Court had ruled that the duty of Guernsey trustees to act en bon père de famille (as a good father) was incompatible with the trustee seeking to exonerate itself from acts of gross negligence by a provision in the deed. The Privy Council, however, disagreed,


and has effectively ruled that trustees can be exonerated from their own gross negligence without breaking the duties to act en bon père de famille. This means Guernsey law in this area should follow English law. The decision could mean that the en bon père de famille provision, which is rooted in Norman customary law and is part of


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