Summary
A trustee of a Jersey trust may incur liability in a separate fiduciary capacity where the counterparty knows that the trustee acts as trustee. Under article 32 of the Trusts (Jersey) Law 1984, the trustee’s personal assets are protected, but creditors generally remain limited to subrogation to the trustee’s indemnity from the trust assets. The proper law of the trust governed these questions under Guernsey private international law.
A liability is reasonably incurred for article 26(2) purposes when incurred. A later unreasonable failure to discharge it may constitute breach of trust, but does not retrospectively remove the statutory indemnity. Contractual arrangements which coherently regulate a payment leave no room for restitution without an unjust factor.
Factual background
These conjoined appeals arose from litigation concerning the administration of the Tchenguiz Discretionary Trust, a Jersey trust administered by Guernsey trustees. The former trustees incurred substantial liabilities in connection with the transfer and refinancing of trust assets. The BVI companies claimed against the former trustees and the trust assets. The current trustees and former replacement trustees alleged breach of trust and challenged the former trustees’ indemnity.
The Lieutenant Bailiff decided most issues in favour of the former trustees. The Court of Appeal of Guernsey upheld the principal findings, rejected a restitution claim by Oscatello, struck out or summarily dismissed parts of later proceedings, and made costs orders. The appeals concerned the interpretation and private international law effect of articles 26 and 32 of the Trusts (Jersey) Law 1984, restitution, retrial and human-rights arguments, abuse of process, and costs.
Held
- Appeal rights. Lord Hodge delivered the majority judgment, with Lord Sumption and Lord Carnwath agreeing. The Court of Appeal of Guernsey had applied a general-public-importance test not found in section 16 of the Court of Appeal (Guernsey) Law 1961. That test was inconsistent with the statutory language. The Board therefore entertained the relevant appeals.
- Article 32. The proper law of the Jersey trust governed the extent of the trustees’ liability. Article 32(1)(a) creates a distinction between personal and fiduciary capacity where the counterparty knows that the trustee acts as trustee. The claim is then against the trustee in that capacity and reaches only the trust property. Article 32 does not create a direct claim against the trust fund. The creditor’s recourse remains by subrogation to the trustee’s indemnity, subject to the limits imposed by the trust deed and general law.
- Article 26(2). A liability reasonably incurred remains within the statutory indemnity even if the trustee later acts unreasonably by failing to discharge it. That later conduct may found a breach-of-trust claim, with loss assessed according to ordinary principles. It does not retrospectively make the original liability unreasonable. The appeal on the indemnity issue and the retrial application therefore failed.
- Restitution and later proceedings. The Framework Agreement and Overdraft Loan Agreement formed a coherent contractual regime which contemplated Oscatello’s discharge of the former trustees’ debt. Their silence about recourse did not create an unjust factor or a tacit repayment obligation. Oscatello’s restitution appeal was dismissed. The Somerfield claim failed because the trustees had acted on strong legal advice and any better outcome was fanciful. The investment claims were an abuse of process because they could and should have been raised in the earlier litigation without a persuasive reason for omission.
- Separate opinions and costs. Lord Briggs agreed with the result and the second and third analyses supporting the application of Jersey law, but not the general status analysis. Lord Mance dissented on article 32 and considered that article 26 should include liabilities unreasonably continued, although his view would not have altered the outcome. The BVI companies’ costs appeal was allowed in part: article 32 and section 42 of the Trusts (Guernsey) Law 2007 did not limit liability for the relevant costs orders. All other appeals were dismissed.
The court’s approach to earlier authorities
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Appellate history
- Privy Council. Appeals from the Court of Appeal of Guernsey were determined on 23 April 2018. The Board dismissed the substantive appeals and allowed the costs appeal to the limited extent stated in its conclusions.
- Court of Appeal of Guernsey. The Court issued judgments between 27 June 2014 and 19 April 2016. It held that article 32 of the Trusts (Jersey) Law 1984 applied, rejected the restitution claim, dismissed or struck out parts of the later proceedings, and made costs orders.
- Royal Court of Guernsey and Lieutenant Bailiff. Following a trial, judgment was delivered on 6 December 2013. The Lieutenant Bailiff held that the former trustees remained liable for the relevant loans and restitution claim, but were entitled to use trust assets to satisfy those liabilities and had not acted with gross negligence.
Key cases cited
The 30 most senior of 38 authorities cited.
- A v R [2018] UKPC 4
- The Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies [2017] UKSC 29
- Akers v Samba Financial Group [2017] UKSC 6
- McDonald v McDonald and others [2016] UKSC 28
- Manchester City Council v Pinnock (No 2) [2011] UKSC 6
- Johnson v Gore Wood & Co [2002] 2 AC 1
- Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221
- Otkritie Capital International Ltd & Anor v threadneedle Asset Management Ltd & Anor [2017] EWCA Civ 274
- Emerald Bay Worldwide Ltd v Barclays Wealth Directors (Guernsey) Ltd Court of Appeal of Guernsey Judgment 02/2014
- JL, R (on the application of) v Secretary of State for Defence [2013] EWCA Civ 449
- Aldi Stores Ltd v WSP Group Plc & Ors [2007] EWCA Civ 1260
- Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC (The Mount I) (ICL Vikraman, The, Mount I, The) [2001] EWCA Civ 68
- Oxnard Financing SA v Rahn [1998] 1 WLR 1465
- Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387
- Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch)
- Antony Gibbs & Sons v La Societe Industrielle et Commerciale des Metaux (1890) 25 QBD 399
- Pirito v Curth 2005-06 GLR 34
- Rowan Companies Inc v Lambert Eggink Offshore Transport Consultants VOF [1998] CLC 1574
- Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 WLR 161
- Bumper Development Corpn v Comr of Police of the Metropolis [1991] 1 WLR 1362
- Johnson Mathey & Wallace Ltd v Alloush (1984) 135 NLJ 1012
- Boys v Chaplin (Chaplin v Boys) [1971] AC 356
- Adams v National Bank of Greece SA [1961] AC 255
- National Bank of Greece and Athens SA v Metliss [1958] AC 509
- Helbert Wagg & Co Ltd, In re Claim by [1956] 2 WLR 183
- Keiner v Keiner [1952] 1 All ER 643
- In re Scott, Decd [1948] SASR 193
- Mount Albert Borough Council v Australasian Temperance and General Mutual Life Assurance Society Ltd [1938] AC 224
- New Zealand Loan and Mercantile Agency Co Ltd v Morrison [1898] AC 349
- Re Beddoe [1893] 1 Ch 547
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Cases citing this case
10 later cases · 7 positive · 1 neutral · 1 caution · 1 negative
Most senior citing decisions:
- Skatteforvaltningen v MCML Ltd [2025] EWCA Civ 371 applied
- FS Capital Limited & Ors v Alan Adams & Ors [2025] EWCA Civ 53 applied
- Staechelin & Ors v ACLBDD Holdings Ltd & Ors [2019] EWCA Civ 817 applied
- First Tower Trustees Ltd & Anor v CDS (Superstores International) Ltd [2018] EWCA Civ 1396
- Trustees of the AFM and SAG-AFTRA Intellectual Property Rights Distribution Fund v The Secretary of State for Science, Innovation and Technology [2025] EWHC 1944 (Ch)
- Skatteforvaltningen v MCML Limited [2024] EWHC 148 (Comm)
- Alan Adams & Ors v FS Capital Limited & Ors [2023] EWHC 1649 (Ch)
- RUSHBROOKE UK LTD v 4 DESIGNS CONCEPT LTD [2022] EWHC 1416 (Ch)
- Williams & Anor v Simm & Ors [2021] EWHC 121 (Ch)
- Goldman & Ors v Zurich Insurance Plc & Anor [2020] EWHC 192 (TCC)
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