Trustees advised to exercise due diligence

Friday 20 December 2019

Jersey and Guernsey trustees are being urged to take extra care when accepting new appointments following a ruling in a major Channel Islands court case involving a London property developer.

The advice comes from Nick Robison, Partner at Babbé and a Guernsey Advocate, following the latest Royal Court of Guernsey judgment in long-running litigation relating to the affairs of Robert Tchenguiz.

According to the Advocate, the Investec v Glenalla case has given greater certainty to Channel Islands trustees regarding their rights to their predecessor and successor trustees and therefore to creditors claiming through those trustees’ rights of indemnity.

“The Court’s decision on the Global Priorities Issue has great significance for retiring and successor trustees, and perhaps even more so for those advising them," he said.

Pictured: Guernsey's Royal Court.

"Given the 'first in time' finding by the Court, a successor trustee ranks behind its predecessor (as well as any other previous trustees) when seeking to have recourse to the trust assets in the event of a later insolvency.

“The decision will undoubtedly sit uncomfortably with successor trustees, who do not have full visibility on the affairs of their predecessors and may be concerned that liabilities that they have incurred, even many years after their appointment, will only be paid after those liabilities that were incurred by prior trustees.

“It is perhaps now even more important than ever before for a successor trustee to exercise caution when deciding whether to accept an appointment.”

Explaining what Trustees can do to ensure they are protected, Babbé Associate Gareth Parr said they should fully understand the affairs of the trust, thoroughly investigate the likelihood of potential claims against its predecessors before accepting its appointment and look to mitigate risk as far as possible by procuring appropriate indemnities from the retiring trustees.