Jersey: The Trusts (Amendment No. 4) (Jersey) Law 2006

Last Updated: 3 July 2008


The Trusts (Amendment No.4) (Jersey) Law 2006 (the "Amendment Law") came into force on 27 October 2006. The Amendment Law makes a number of changes to Jersey's existing law on trusts, the Trusts (Jersey) Law 1984 (the "Trusts Law"). The purpose of this memorandum is to summarise those changes.

References to articles in this memorandum are references to articles in the Trusts Law.


The old Article 9 provided some protection for a Jersey trust against claims seeking to challenge the validity of the trust itself or the validity of the transfer of assets into the trust. However, it was thought that some offshore jurisdictions had stolen a march on Jersey by introducing much tougher protection for their trusts. The new Article 9 is intended to strengthen Jersey's provisions in order to bring it into line with those other offshore jurisdictions and provide comprehensive protection against attacks on Jersey trusts based on foreign law principles.

The validity or interpretation of a Jersey trust, the validity or effect of any transfer or disposition of property to a trust, the capacity of the settlor, the administration of a Jersey trust and the existence or extent of powers under such a trust are now determined solely in accordance with Jersey domestic law (excluding, in the case of a settlor who is not domiciled in Jersey, légitime and Jersey's conflicts of law rules). As before, donner et retenir ne vaut continues to be disapplied.

In addition, a new paragraph (4) provides that, to the extent that a foreign judgment is inconsistent with the provisions of the amended Article 9, that foreign judgment shall not be capable of being enforced. This has become significant in the case of attacks on Jersey trusts made by spouses in matrimonial proceedings in other jurisdictions.


A settlor sometimes seeks to retain certain powers under the terms of a trust rather than confer them on the trustee. He may also decide to confer powers on someone other than the trustee, for example, a protector. However, if a settlor reserves too many powers, it might be argued by third parties that the trust is a sham. For example, although on the face of the trust instrument a trust may be called a discretionary trust, if too many powers are reserved it could be argued that, in reality, it is a bare trust or nomineeship.

In addition, if powers were reserved by the settlor or conferred on someone else the question sometimes arose as to whether the trustee should go along with such powers if he thought they were being exercised in a way which was not in the best interests of the beneficiaries. For example, the settlor might, in accordance with a power reserved to him under the terms of the trust, direct the trustee to purchase certain investments which the trustee might think unwise. The trustee is subject to certain overriding duties and, to comply with the settlor's direction in such circumstances, might result in the trustee being in breach of those duties. Essentially the question boiled down to which took precedence, the settlor's direction or the trustee's overriding duties which might require him to ignore the direction, in spite of his obligation under Article 21 to carry out and administer the trust in accordance with its terms.

The Amendment Law deals with these issues. The new Article 9A sets out for the avoidance of doubt the powers which may be reserved by the settlor or granted to someone other than the trustee without the validity of the trust being affected. These include:

  1. The power to revoke, vary or amend the terms of the trust;

  2. The power to advance, pay or apply trust property;

  3. The power to direct the trustee to advance, pay or apply trust property; and

  4. The power to give binding directions to the trustee in connection with the purchase, retention, sale and management of trust property.

Where such a power has been reserved by the settlor or granted to someone else, a trustee who acts in accordance with the exercise of the power will not be acting in breach of trust. For example, if the settlor, in accordance with the terms of the trust, directs the trustee to invest the trust fund in a certain way, the trustee will not be liable for breach of trust in relation to that investment decision. However, the trustee could be liable for breach of trust in relation to the execution of that direction if he does not carry it out properly.


The Amendment Law has clarified the position in relation to the disclaimer of a beneficiary's interest. Previously it appeared that a beneficiary had an absolute right to disclaim his whole interest (and such a disclaimer would be irrevocable) but his right to disclaim part of his interest was not absolute and was instead subject to the terms of the trust and not available to the beneficiary if he had already received some benefit.

The provisions on disclaimer have now been removed from Article 10 and set out in a new Article 10A. A beneficiary now has an absolute right to disclaim the whole or part of his interest either permanently or for a limited period (and may do so even if he has received some benefit). A disclaimer may now be revoked in accordance with its terms, provided the trust instrument permits it.


Previously, Jersey trusts (other than charitable trusts to which Article 15 did not apply) could not continue for more than 100 years. The Amendment Law has amended Article 15 so that a Jersey trust may now continue in existence for an unlimited period.

The new Article 15 also confirms that there is no rule against perpetuities in Jersey law and therefore trust property may be appointed from one trust to another even if the second trust will continue beyond the date upon which the first trust must terminate.

If the trust instrument of an existing trust provides for a trust period of 100 years, it should be noted that the trust will still terminate at the end of that period. However, as explained above and provided the terms of the trust permit it, the trust fund could be appointed from that trust into a new trust of unlimited duration.


The old Article 16 provided that a Jersey trust must not have less than two trustees unless only one was originally appointed. Difficulties sometimes arose where two trustees had originally been appointed but, for whatever reason, one of them ceased to be trustee. In such circumstances the remaining trustee was stuck in a state of limbo – unable to take any action other than to preserve the trust fund – until an additional trustee, or trustees, was appointed.

The new Article 16 now provides that, subject to the terms of the trust which may provide for a greater number, the minimum number of trustees is now one. A trust will not fail for having less than the number of trustees required by law or the terms of the trust, but, if the number of trustees does fall below the limit, a new trustee or additional trustees (as the case may be) must be appointed as soon as practicable. As before, in the intervening period any remaining trustee or trustees may only act for the purpose of preserving the trust property.


There was something of a lacuna in the old Article 17. It set out a statutory power for the appointment of new or additional trustees if there was no such power in the trust instrument itself. However, it did not deal with situations in which the trust instrument did contain such a provision but it had lapsed or failed or the person having the power was not capable of exercising it.

The Amendment Law has now dealt with this. Under the provisions of the new Article 17, the trustees for the time being, the last remaining trustee or personal representatives or liquidator of the last remaining trustee (as before) now have the power to appoint a new or additional trustee if (a) the terms of the trust do not provide for it, (b) a power is set out in the trust instrument but has lapsed or failed, or (c) the person in whom the power is vested is not capable of exercising the power.


Previously the resignation of a trustee in order to facilitate a breach of trust was of no effect. This sometimes led to uncertainty. The suggestion that a trustee had resigned to facilitate a breach of trust meant that there would be doubt about whether or not that trustee had actually resigned.

The Amendment Law removes that provision from Article 19(3) and therefore a resignation in such circumstances will still be effective. However, a new Article 30(3A) provides that "a trustee who resigns in order to facilitate a breach of trust shall be liable for that breach as if he or she had not resigned".

In addition, if two or more trustees attempt to resign simultaneously such that there would be no trustee, such a resignation is of no effect.


The position with regard to delegation by a trustee has now been made clear by the amendment of Article 25(1). Subject to the terms of the trust, a trustee now has the widest possible powers of delegation. It can delegate the execution or exercise of trusts and powers (dispositive as well as administrative). Furthermore, a trustee can sub-delegate and grant powers of attorney.


The old Article 32(1) provided, in relation to a transaction with a third party, that, if the trustee informed that another party that he was acting as trustee, a claim by that party in relation to that transaction would extend only to the trust property. A claim against a trustee in such circumstances would therefore be limited to the value of the trust fund.

Under the old Article 32(3), if the trustee failed to inform the other party that he was acting as trustee and that party was otherwise unaware of that fact, the trustee would be personally liable (but would have a right of recourse to the trust fund).

Unfortunately the Trusts Law did not say what would happen if the trustee failed to inform the other party but the other party was aware that the trustee was acting as such by some other means. On the face of it, both paragraphs (1) and (3) of the old Article 32 appeared not to apply.

The Amendment Law has resolved this issue. The new Article 32 states that if the other party knows (by whatever means) that the trustee is acting as a trustee, any claim by that other party is limited to the value of the trust property. If the other party does not know, the trustee is personally liable. This of course deals with a trustee's dealings with third parties. It does not apply between the trustee and the beneficiaries and does not apply to a claim for breach of trust.


Paragraphs (3) and (4) of Article 35 were identified as serving no useful purpose and have been removed.


As explained above, charitable trusts have always been permitted to continue for an unlimited period. Because they can last forever their provisions can sometimes become outdated and as a result it can become difficult for the trustee to give full effect to their terms.

A trustee has always been able to seek the assistance of the Royal Court in circumstances where it has become impossible to carry out the terms of a charitable trust (under the doctrine of cy-pres). However, to obtain the assistance of the Court it was not enough to demonstrate that it was very difficult (but not impossible) to carry out the terms of the trust.

The Amendment Law has introduced Article 47A to deal with this in relation to both charitable and noncharitable purpose trusts. A trustee (and also the Attorney-General) can now apply to the Royal Court for a declaration that the property of a charitable or non-charitable purpose trust is to be held for such charitable or non-charitable purposes as the Court considers to be consistent with the original intention of the settlor. The circumstances in which the Court may make such a declaration are set out in Article 47A(2) and include where the purpose has, as far as is reasonably possible, been fulfilled, has ceased to exist or is no longer applicable. In addition, the Court can approve an arrangement that varies or revokes the purposes of the trust in certain circumstances.


Previously, where a corporate trustee committed a breach of trust, every director of it at the time of the breach of trust was deemed to be a guarantor of the corporate trustee in respect of damages and costs awarded against the corporate trustee. This has now been repealed entirely.

The corporate guarantee was considered by many to be redundant in light of the Financial Services (Jersey) Law 1998, as amended (the "Financial Services Law"). The Codes of Practice introduced under the Financial Services Law set out minimum requirements for trust company businesses in terms of financial resources and professional indemnity insurance. However, it has been noted by others that the Financial Services Law does not provide a remedy for beneficiaries, whereas the old Article 56 did. Although it may be unlikely, where do beneficiaries stand now in the absence of Article 56 if the corporate trustee which they are suing for breach of trust has failed to comply with the Financial Services Law and does not have sufficient financial resources or insurance cover to meet the beneficiaries' claim?

Furthermore, some considered that the added protection of Article 56 was attractive to prospective settlors and sometimes gave Jersey trusts an edge over the trusts of competitor jurisdictions. On the other hand, many thought that the corporate guarantee led to a loss of business; discouraging prospective settlors from using (and sitting on the board of directors of) private trust companies.

Whatever your view, the corporate guarantee is a thing of the past. Or is it? There has been some discussion amongst lawyers about the effect of the repeal and it has been suggested by some that because the repeal was not retrospective Article 56 may still apply to breaches of trust committed by a corporate trustee prior to 27 October.


Save as provided in Article 57(1), claims against a former trustee by a new trustee for breach of trust are now time barred three years after the date on which the former trustee ceased to be a trustee. It should be remembered that on taking up a trusteeship the new trustee is under a duty to check whether the former trustee has committed a breach of trust. If the new trustee does become aware of such a breach but runs out of time to issue proceedings against the former trustee that might constitute a breach of trust on the part of the new trustee.

This memorandum is not intended to be comprehensive in its scope, and we recommend that clients seek legal advice on any particular matters.

Memoranda, on other aspects of Jersey law have been prepared by Walkers and are available on request, or on our website at


Peter Harris, Partner

David Pytches, Associate

Cayman Islands

Grant Stein, Partner

Andrew Miller, Partner


David Whittome, Partner

British Virgin Islands

Christopher McKenzie, Partner

Hong Kong

Carol Hall, Partner


Rod Palmer, Partner

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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