Trust Disputes

Where a trustee breaches any duty imposed on it under the law, this can give rise to a claim by the beneficiaries for breach of trust.

The core duty of a trustee is essentially as a fiduciary. The trustee has an obligation to act with utmost good faith and loyalty towards the beneficiaries. A trustee must act in the best interests of the beneficiaries of the trust and ensure that it puts those interests ahead of their own, or any other third party.

A trustee also owes other duties in how it discharges its powers such as duty of care and skill in how it invests the trust fund.

There are a number of situations in which a breach of trust might arise, but a breach of duty usually has to cause a loss to the trust fund. A profit that the trustee makes for itself or a third party at the expense of the trust fund may also be a breach of trust.

A successful claim for breach of trust means that the trustee will be personally liable to make good any loss to the trust fund caused by the breach of trust.

Baker & Partners has been closely involved in Crociani v Crociani, one of the largest breaches of trust claims to have been brought in Jersey in over 20 years.

It is possible to use trust-law principles to recover assets improperly placed into a trust or to seek remedies against those involved in the breaches of trust and the misappropriation of assets.

It is possible for a person who is not a trustee, to be held liable as if they were a trustee. Where a person makes and or receives any profit, gain or advantage from a breach of trust that person is deemed to hold that benefit on trust and can be required to deliver up the property to the person rightfully entitled to it. Jersey has developed sophisticated and practical remedies to identify and then recover misappropriated funds.

Where there has been a breach of trust in which a third party either assists or receives trust property, they can be made personally liable to pay compensation even if the misappropriated funds have vanished.

Baker & Partners is acting in ‘CMC v Forster & Others’, the largest claim for dishonest assistance in a breach of trust to have been brought in Jersey.

More information on asset-tracing can be found here.

The Jersey Courts have wide powers to make rulings and give directions in relation to the administration of trusts. While not an exhaustive list, there are a number of circumstances which commonly give rise to applications.

Disputes About the Proper Interpretation of the Trust Documents

Sometimes there will be a dispute or uncertainty about the meaning of a trust document. That might be because the trust document has been poorly drafted or because the intention of the settlor is not clear.

An ambiguity in the drafting of a trust may mean that the words of the trust documents don’t properly reflect the real intention of the settlor.

The Jersey Court has power to rectify the wording of a trust document so that its language and meaning properly reflects what was intended when the trust was set up.

Baker & Partners acted for beneficiaries in Jersey’s leading case on the rectification of trusts.

The Royal Court also has the power to vary a trust in certain circumstances where the court is satisfied that it will benefit the beneficiaries.

Disputes Concerning the Disclosure of Documents and Information to Beneficiaries

Beneficiaries are entitled to commence legal proceedings in order to safeguard their rights and hold their trustee to account.

A beneficiary is entitled to request certain information and documents from their trustee about the administration of the trust. The issue of information or documents beneficiaries are entitled to is an area where disputes often arise.

A beneficiary may want disclosure to find out if there are grounds to bring further legal proceedings against the trustee for breach of trust or to challenge a decision of the trustee. Sometimes disclosure is sought in the context of a matrimonial dispute.

The scope of what documents the trustee should and should not disclose to beneficiaries is subject to the overriding power of the Jersey Court. This discretion may result in wider or narrower disclosure depending upon the facts of the case.

Trustee Applications to Court for a ‘Blessing’ of a Momentous Decision

Getting Directions from the Jersey Court

Administering a modern trust structure can be very complex.

Where there is a dispute between “warring” beneficiaries or between the beneficiaries and the trustee about the way the trustee administers the trust, or the trustee would like the approval of the court to take a particularly important step, such as selling a major asset or litigating on behalf of the trust fund, the trustees and beneficiaries can seek guidance and a ruling on how to proceed from the Jersey Court.

Such an application may also be necessary where the trustee’s duties conflict with its other legal obligations such as under anti-money laundering regulations.

Disputes About Trustee Decisions

Trustees have two principal types of power to run the trust: administrative powers and dispositive powers.

Generally speaking, administrative powers are used to manage the trust assets while dispositive powers are used to make distributions to beneficiaries.

The scope of, and any restrictions upon, the way a trustee exercises its powers are governed by the terms of the trust and the general law. The exercise of trust powers are also subject to certain duties trustees owe to beneficiaries.

In some circumstances, it is possible for beneficiaries to challenge or revisit the exercise of a power by the trustee.

Hastings-Bass & Mistake Applications

Running a trust can be complex. Often trusts will form part of a complex structure and the way the trustee’s powers are exercised may often have tax implications in more than one country.

The Jersey Court has power to set aside the decisions of trustees and even the trust itself where relevant considerations have not been taken into account and/or irrelevant considerations have been taken into account and had this not been the case the trustee would have made a different decision.

The court’s power to set aside decisions is very valuable to a trustee, settlor and beneficiary. The power is often used to avoid adverse and unexpected tax consequences. The power of the Jersey Court is considerably wider than that which exists in English law.

Very often, it is possible to have such applications about the administration of a trust heard by the court in private.

Sometimes there is a fundamental break down in the relationship between beneficiaries and the trustee that can only be resolved by the trustee being replaced.

Where a trustee does not resign voluntarily it may be necessary to seek the court’s intervention to substitute a new trustee. The guiding principle will be whether the removal of the trustee is in the best interests of the administration of the trust.

The Jersey Court also has the power to remove and substitute a protector or other power holder.

Baker & Partners has extensive experience acting for beneficiaries in the removal of trustees.

Getting a foreign judgment recognised and enforced against an offshore structure can be a complex process that requires expert advice.

Jersey has been a leading offshore financial centre for decades through which private individuals and institutions have structured their wealth and asset holdings. Finding a path through complex trust and corporate structures often requires a clear understanding of local law and procedure.

Where a trust structure is complex, the enforcement of personal and proprietary remedies requires a multi-jurisdictional coordinated approach involving injunctions, disclosure orders and even mutual legal assistance in insolvency mechanisms to establish a path to realising assets.

Baker & Partners has extensive experience assisting judgment creditors and insolvency practitioners in the enforcement of foreign judgments against offshore structures.