UK Privy Council rules on Investec v Glenalla trustee indemnity dispute

Monday, 23 April 2018
The Privy Council has handed down judgment in Investec Trust (Guernsey) v Glenalla Properties (2018 UKPC 7), concerning the personal liability of trustees for loans they had made to some offshore companies.

The ruling in this long-running dispute is a significant one in the international law of trustee engagements, and the scope of trustee indemnification.

The former trustees of the Jersey-based Tchenguiz Discretionary Trust (TDT), of which Robert Tchenguiz's family is a beneficiary, had made loan arrangements with various BVI companies for large sums of the order of GBP200 million. When the 2007 financial crisis broke, re-financing of these arrangements was urgently needed. Ultimately, however, the BVI companies went into liquidation, and the liquidators demanded that the former trustees, Investec and Bayeux, pay up.

The judgment considered whether the original trustees were personally liable for the loans, and whether they were entitled to recover trust property from a subsequent trustee in order to discharge their liabilities.

It turns largely on art.32 of the Trusts (Jersey) Law 1984, which states that, where a trustee is a party to a transaction or matter affecting the trust, and the other party knows that the trustee is acting as trustee, that party's claims to the trust property are restricted. The question was whether this local limitation should be recognised as applying where the obligations themselves were non-Jersey obligations adjudicated outside Jersey.

The Guernsey Court of Appeal had already held that, in such a situation, the Jersey law should apply. Now, the Privy Council has by a majority upheld that decision. It confirmed that art.32 ensures that a Jersey trustee has no personal liability for trust obligations, and the creditor has no claim against the trust assets.

However, according to Kathryn Purkis of Serle Court, acting for the current trustees, the decision went even wider. The judgment advised that 'the time has come to recognise that as a general rule the common law will recognise and give effect to limitations of liability which arise under an entity's constitutive law by reason of the particular status or capacity in which its members or officers assume an obligation...The Board would not confine this rule to entities which have separate legal personality but would apply it to partnerships...associations of persons without legal personality and also a Jersey or Guernsey trust.'

The Privy Council’s decision was not unanimous, though, with Lord Mance and Lord Briggs dissenting on some or all of its reasoning. Moreover, notes Purkis, it reversed the Guernsey appellate court's ruling in three respects, holding that art.32:

  • does not offer the trustee a discharge once the trust fund is exhausted;
  • does not have the effect of enabling a creditor to seek payment from the trustee regardless of the state of the account between the trustee and the beneficiaries; and
  • does not apply to costs orders made against trustees, which are always liabilities personal to the trustee.

The judgment is complex, and readers are referred to the sources cited below.


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