Investec Trust (Guernsey) Ltd (2) Bayeux Trustees Ltd v Glenalla Properties Ltd (2) Thorson Investments Ltd (3) Eliza Ltd (4) Oscatello Investment Ltd (5) Rawlinson & Hunter Trustees SA

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.

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.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

• 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.