A long-awaited Privy Council judgement on a Guernsey trust case
has overturned decisions of the Royal Court of Guernsey and
Guernsey Court of Appeal in a move that is set to have a
significant impact on how trust law is interpreted in the
In one of the most important trust law cases to date, the
Judicial Committee of the Privy Council sat for two full days in
December to hear the appeal by Spread Trust Company Ltd against
Hutcheson and others before ruling in favour of the trustees on 15
Olsen Advocate John Greenfield said the impact of the Hutcheson
case to English trust law, and similar trust law in common law
jurisdictions, cannot be overemphasised.
"I have had a number of City trust and chancery lawyers
calling me waiting for the judgement, knowing that this case would
significantly impact on trust law in the future," he said.
"This is definitely Guernsey leading the world in testing
case law and providing a channel for change and, on a personal
level, it is exciting to be involved in something which has such a
significant role in the future of trust law around the
Acting for the beneficiaries, Advocate Greenfield said the case
itself concerned the effect of a clause in a long-established
Guernsey trust deeds seeking to exonerate the trustees from certain
liabilities, including gross negligence. The trust was established
before statutory legislation was brought in which prevented
trustees from building exoneration of this type into the trust
"At the heart of the matter is that the beneficiaries'
complained that the trustees failed to adequately diversify
investment of trust funds and we argued that the trustees were in
breach of trust by this action," Advocate John Greenfield
The Guernsey Court had ruled that the duty imposed on Guernsey
trustees to act "en bon père de famille"
(as a good father) was incompatible with the trustee at the same
time seeking to exonerate itself from its own acts of gross
negligence by a provision in the settlement deed.
The Privy Council however disagreed and have effectively ruled
that trustees can be exonerated from their own gross negligence
without breaking the duties to act "en bon père de
famille". The Privy Council effectively followed English
law in this area. The council's decision clearly narrows the
meaning of this provision which has its roots in Norman customary
law and is part of Guernsey's statutory legislation; it has
reduced one long-established distinction between English and
Guernsey trust law.
Advocate Greenfield said: "The Privy Council decision
covers some very important and complex issues of trust law that
have significance not only for professional trustees and legal
practitioners in the Channel Islands but also in the United Kingdom
"The circumstances under Guernsey common law or customary
law where a trustee could lawfully exclude its liability from a
breach of trust had never previously been determined. The English
Court of Appeal had ruled upon this, for English law purposes, in
the 1998 case of Armitage v. Nurse.
"However there are a significant number of trust
specialists who believe that the wrong decision was reached in the
Armitage case and it has not been robustly endorsed. The
very fact that these issues are finely balanced is reflected in the
split decision (3:2) of the judges. It is highly unusual for the
Privy Council to not give a unanimous judgement.
"The case will be a major aid to legal advisors in
assessing the chances of a claim being successful against trustees.
For trustees themselves that exoneration clause, depending on where
the trustees' conduct comes in on the sliding scale, looks as
though it will indeed be worth the paper it is written on.
"It took the council six months to consider and deliver its
ruling which indicates just how important they believed their
judgement would be."
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