Jersey: Amendments To Jersey's Trusts Law Take Effect

Last Updated: 17 December 2012
Article by Paul Matthams

The Trusts (Amendment No. 5) (Jersey) Law 2012 ("Amendment No. 5") was approved by the Privy Council on 17 October 2012 and will take effect on 2 November 2012. Amendment No. 5 makes several important and practical changes to the Trusts (Jersey) Law 1984 (the "Trusts Law").

A copy of the consolidated Trusts Law is available on the website:

Trusts (Jersey) Law 1984 (with amendments up to and including the Trusts (Amendment No.5) (Jersey) Law 2012) - clean version

Trusts (Jersey) Law 1984 (with amendments up to and including the Trusts (Amendment No.5) (Jersey) Law 2012) - showing changes

In summary, the key changes made are as follows:

Statutory right of remuneration for professional trustees

Amendment No. 5 gives, for the first time, a "professional trustee" a statutory right to receive reasonable remuneration for its services provided after 2 November 2012 where the terms of the trust are silent in this regard. In the past, there was no right for a trustee to receive remuneration unless the trust instrument expressly provided for it, a court authorised it or all of the beneficiaries of a trust consented in writing to it.

A "professional trustee" is defined as a trustee who is registered by the Jersey Financial Services Commission under the Financial Services (Jersey) Law 1998 to carry on trust company business. A private trust company does not qualify as a "professional trustee" unless registered.

Ultimate limitation period for breach of trust claims against Trustees

Amendment No. 5 introduces an absolute limitation period of twenty-one years for bringing any claim for breach of trust against a trustee starting from the date on which the breach occurred. This amendment will enable trustees to draw a line under historic claims which can be difficult to defend given the passage of time as records are not sometimes available and relevant personnel may no longer work for the trustee.

Previously, where a beneficiary was a minor or otherwise incapacitated at the time of the alleged breach, the limitation period of three years did not begin to run until that beneficiary came of age, ceased to be otherwise incapacitated or died. In some circumstances this meant that limitation periods did not expire for decades after the occurrence of the actual or alleged breach of trust. Trustees faced long and uncertain periods in which claims for breach of trust could be made against them. Trustees will, understandably, welcome the introduction of this long-stop date before which a claim must be made.

It remains the case that no period of limitation applies to an action brought against a trustee in respect of any fraud to which the trustee was party or privy or to recover from the trustee trust property.

Trustee's right to reasonable security

Under the Trusts Law, an outgoing trustee may require to be provided with reasonable security for liabilities before surrendering trust property to an incoming trustee. Reasonable security usually takes the form of an unsecured contractual indemnity given by the incoming trustee in favour of the outgoing trustee. Such indemnities often include indemnities in favour of former trustees of the trust in order to release the outgoing trustee from any obligations it owes to those former trustees. There has been some debate as to whether or not such former trustees need to be a party to the indemnity documentation in order to receive the benefit of the indemnity given in their favour.

Amendment No. 5 provides clarification that a former trustee does not need to be a party to such contractual documentation. The former trustee now has a statutory right to enforce a term of an indemnity conferring any benefit on it irrespective of whether or not it is a party to the contract in question.

Trustee's ability to contract with itself

In the past there has been uncertainty as to whether or not a trustee in its capacity as trustee of one trust could enter into a valid and enforceable contract with itself in its capacity as trustee of another trust.

Amendment No. 5 clarifies the position by expressly permitting a trustee to enter into a contract with itself in its capacity as trustee of two or more trusts.

Definition of "Purpose"

Following the introduction of non-charitable purpose trusts into Jersey law in May 1996, there has been some concern that the mere holding of shares in a specific company is not, by itself, sufficient to constitute a valid purpose for a non-charitable purpose trust.

Amendment No. 5 clarifies the position by providing that the "acquisition, holding, ownership, management or disposal of property and the exercising of any function" is a valid purpose for a non-charitable purpose trust.

Jersey's conflict of laws rules

In 2006 amendments were made to the Trusts Law to provide Jersey trusts with protection against orders made by any foreign court. Following those amendments the Trusts Law provided that certain questions (such as those regarding the validity or interpretation of a Jersey trust) were to be determined in accordance with the law of Jersey and no rule of foreign law would affect such questions.

Amendment No. 5 expands these provisions to provide expressly that questions regarding the variation of Jersey trusts by foreign courts and the nature and extent of any beneficial rights or interests in the trust property of Jersey trusts are also exclusively matters of Jersey law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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