Jersey: Jersey Courts unwilling to impute trustee duties to agents

Last Updated: 22 April 2010
Article by Nigel Pearmain and Stephen Brennan

Voisin partner Nigel Pearmain and English Solicitor Stephen Brennan look at the Jersey Courts' recent clarification of certain important issues surrounding the position of agents acting in connection with the affairs of a trust.

In Chvetsov -v- BNP Paribas Jersey Trust Corporation Limited and Maison Anley Property Nominee Limited [2009] JLR 217 a Jersey law trust held a flat located in London, which was occupied by the claimant beneficiary (the "Beneficiary") and his family. BNP Paribas (the "Trustee") was the sole trustee of the Trust but the registered owner was Maison Anley (the "Nominee"), acting as nominee on behalf of the Trustee. The Beneficiary requested that the property undergo certain renovation works. The Trustee duly authorised the Nominee to enter into a contract with a firm of architects for the works to be carried out.

The Beneficiary brought an action alleging that the works were more expensive than they should have been and claiming that the Trustee was in breach of trust in its failure to exercise the requisite skill and care to monitor, control and supervise the costs incurred with respect to the renovation. The Beneficiary also claimed breaches of trust and damages in tort on the part of the Nominee.

The Court held that the Nominee was a mere agent or nominee who was duly appointed by a trustee and thereby did not owe any duties under trust or tort law to the beneficiaries of the trust. The only duties it owed in connection with its appointment as agent were contractual (and possibly tortious) duties to the Trustee, and only the Trustee had a cause of action against it for any breach of those duties.

However, the Court helpfully set out what possible remedies may be available to beneficiaries in respect of the actions of an agent, namely:

  1. to request the trustee to pursue a claim on behalf of the trust against the agent; or if the trustee refused, then
  2. the beneficiaries may institute an administrative action seeking a direction from the Court that the trustee should take proceedings against the agent ;or
  3. as an alternative, in special circumstances, the beneficiaries may institute a derivative action against the agent.

The Beneficiary subsequently appealed against the Royal Court's decision, but the appeal was dismissed and on appeal to the Court of Appeal (to a single judge) the above observations of the Royal Court were judicially approved. On a further (and unsuccessful) appeal before the full Court of Appeal, that court made the following useful observation:

"For the sake of completeness we would add that we do not accept that factors such as the commonality of personnel or [the Trustee's ] control of [the Nominee] make any difference. If the engagement of nominees and agents by trustees is permissible and does not, without more, impose on those engaged the duties owed by trustees to beneficiaries we cannot see how the factors referred to could, of themselves, possibly have the effect of imposing them. Looked at from another point of view [the Nominee] does not appear to be in any different position from an employee of [the Trustee] who was required by [the Trustee] to do the things [the Nominee] did in this case. Is it to be argued that such an employee thereby became subject to the duties of the trustee? We do not consider this to be a tenable position..."

In another "agent" case (Cunningham -v- Cunningham and others [2009] JLR 227) proceedings were brought by a disgruntled beneficiary against Sovereign Trust International Limited (the "Trustee") as trustee of a Jersey law trust alleging various breaches of trust.

As part of the ongoing proceedings, the beneficiary sought to bring Sovereign Trust (Gibraltar) Limited (the administrator duly appointed by the Trustee ("Sovereign Gibraltar")) into the proceedings as a co-defendant, alleging that Sovereign Gibraltar had acted as "trustee de son tort" and was acting in breach of trust, ultra vires and/or had committed a fraud on a power. The beneficiary based the allegation on the fact that Sovereign Gibraltar undertook all of the work of the Trustee and sent out invoices in its name.

It was the belief of the Trustee that this attempt to make Sovereign Gibraltar a party to the action was a tactic to try and find a "deep pocket" against which to make a claim, and thereby try and force a settlement, rather than being based on any properly maintainable claim (issues over insurance cover were a feature of the case).

Although the concept had not come before the Jersey Courts before, the principle of a trustee de son tort is settled law in England and such authority is highly persuasive in Jersey. The Court stated that a duly appointed delegate is not committing any wrong by acting within the scope of his/her delegation and is not intermeddling so as to constitute himself as a Trustee de son tort (in contrast with circumstances where a person takes it upon himself to intermeddle and act as trustee without the authority of the actual trustee; the effect of the latter being that the party is accountable to the beneficiaries of the trust as if he were an express trustee for any trust property received).

The Court concluded that if the Trustee had in fact been validly appointed as trustee of the Trust, there was no arguable case that Sovereign Gibraltar could have been acting Trustee de son tort.

The above cases will be welcomed by those who act in an agency role, as the spectre of being burdened with unintended trustee liabilities would severally affect the manner in which agents would feel able to transact on behalf of the affairs of a trust. Nevertheless, it is clearly desirable for the status of those acting on trust affairs to be properly set out in the appropriate documentation effecting their appointment, whether that be in the form of a trust deed or delegated administration agreements or other agency agreements to rebut any suggestion of de facto trusteeship.

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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