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Dependencies


FOCUS ON Crown


Robert MacRae and Andreas Kistler examine the implications of a recent decision concerning funding of the costs of a claim for breach of trust


BENEFIT TEST


IN A RECENT DECISION of the Royal Court of Jersey,1


directions were given that the costs of a


claim for breach of trust commenced by certain benefi ciaries (the claimants) against the current trustee of the X Trust and others should be funded out of the assets of the trust. The Court also gave directions for reimbursement of costs already incurred by the claimants in commencing the litigation and made a protective costs order in their favour in respect of any adverse costs orders made in the litigation.


Facts


ROBERT MACRAE IS A PARTNER AND ANDREAS KISTLER IS A SENIOR ASSOCIATE AT CAREY OLSEN


The claimants were the principal benefi ciaries of the trust and had begun proceedings against the trustee and others in the Royal Court of Jersey alleging breach of trust resulting in investment losses of just under GBP100 million. The claimants had previously funded their claims against the trustee from distributions that they received from the trust. These distributions had been made by the trustee without reference to the Court. However, the trustee was concerned about potential prejudice to the trust arising from the continuance of legal proceedings against the


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trustee, and obtained an independent report that confi rmed that the litigation could damage the trust’s assets. The trustee was therefore not persuaded that it should continue to make distributions to the claimants but, recognising that its personal interests and the interests of the benefi ciaries of the trust were in confl ict, asked the claimants to make an application to the Court for directions.


The claimants applied for directions that the


trustee of the trust should continue to make distributions to them to fund the litigation. The claimants stated that they had no alternative source of funding, and that they were unable to borrow to fund the litigation. The remedy they sought was that the trustee should reconstitute the trust fund rather than pay damages to the claimants.


The Court’s approach The Court held that the trustee’s approach in asking the claimants to make an application to Court was the proper course to adopt. The Court noted that its jurisdiction to make orders in these circumstances had not previously been considered in a published judgment, nor had it


APRIL 2013 57


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