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The impact of the Hutcheson case on English trust law, and similar trust law in common law jurisdictions, cannot be overemphasised

Guernsey’s statutory legislation, no longer has significance for trustees, despite it being a key distinction between English and Guernsey law. Privy Council Law Lord Clarke stated:

“If, as is common ground, the essential obligation is to act as a prudent trustee would act, namely with reasonable care and skill, it can be said with force that the core obligation of a person acting en bon père de famille includes a duty to act with reasonable care and skill – and thus without negligence.” The circumstances under Guernsey

common law or customary law where a trustee could lawfully exclude its liability from a breach of trust had never previously been determined. While the English Court of Appeal had ruled on this in the 1998 case of Armitage v Nurse, many trust specialists believed that the wrong decision was reached, and so it has not been robustly endorsed. Indeed, two of the Law Lords didn’t

agree with the ruling regarding en bon père de famille. Lady Hale reminded the court that this case was about the law of Guernsey (as opposed to that of England, Wales or Scotland). She also reminded the court that the law of England was by no means clear and

unanimous on this point, and referred to a number of concerns about the decision in Armitage v Nurse. Lord Kerr agreed with Lady Hale, noting

the Guernsey Court of Appeal’s conclusion: “That the law of trusts in Guernsey should not slavishly follow English trust law on the question of whether gross negligence could be exempted by a settlement provision.” The impact of the Hutcheson case on English

trust law, and similar trust law in common law jurisdictions, cannot be overemphasised. It took the Board an unusually long six months to consider and deliver its ruling, which indicates just how important they believed their judgment would be. So where does this leave beneficiaries,

trustees and legal advisers? The decision appears to mean that en bon père de famille no longer has any significance for Guernsey trustees. Equally, those trustees who have been wondering (post Armitage) whether their old exoneration clause would actually provide any protection, can now feel much safer. Also, it should not put off would-be settlors or beneficiaries using Guernsey trusts because as a result of legislation any future

acts of gross negligence by their trustee can be actioned by the beneficiaries. The claim will now be referred back to the Royal Court of Guernsey for trial. n

ADVOCATE JOHN GREENFIELD and KELLY WALTON are Managing Partner and Senior Associate respectively at Carey Olsen in Guernsey

Complex issue

COMMENTING on the Privy Council ruling, Paul Buckle, Group Partner at AO Hall, noted: “It is easy to consider this decision in isolation on its facts, and conclude it will be of limited use going forward because it deals with a situation that can no longer arise. But that would be to miss the case’s real significance, which is that it placed the development of Guernsey trust law in line with the more complex English law, in terms of breach of trust and negligence. That is unlikely to simplify things for local professionals, and that the Privy Council took six months to reach a decision by a three-to-two majority indicates they too found the case hard. What effect all that will have for Guernsey as a trust jurisdiction remains to be seen.”

August/September 2011 27


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