Although the substantive judgment in the Crociani litigation was handed down on 11 September last year1, that vine still had some fruit to bear. In particular, two of the inquiries ordered by that judgment have now been decided in a subsequent judgment, which is the subject matter of this note2. This subsequent judgment is particularly illuminative of the approach taken by the Royal Court when assessing liability of trustees for the loss of growth in the value of trust assets that were paid away in breach of trust.


The Crociani litigation is relatively complex and has yielded useful judicial commentary on a number of issues, ranging from electronic discovery to the interpretation of forum and jurisdiction clauses. But for the present purposes, the history can be summarised as follows:

  1. the Grand Trust was established by the settlor, Edoarda Crociani, principally for the benefit of her two daughters;
  2. the Grand Trust was, during the relevant period, a Jersey law trust;
  3. in 2010, the then-trustee, at the instigation of the settlor, made an appointment from the trust to another trust;
  4. this appointment extended to an investment portfolio of significant value together with the benefit of certain loans;
  5. one of the two daughters, Cristiana Crociani, successfully established that the appointment was an improper attempt to deprive her of potential benefit from the appointed assets; and
  6. as a result, the substantive judgment in 2017 ordered the then-trustee and the settlor to restore the trust fund (or rather, a sub-trust established for Cristiana's benefit) commensurate with the value of the appointed assets.

Purpose of the inquiries

Two inquiries were ordered as part of the substantive judgment in order to help quantify exactly what value needed to be restored to the trust fund.

Firstly, the investment portfolio that had previously formed part of the Grand Trust's assets had been valued at $100,347,046 as at 16 May 2011, which was the date it was paid away to the other trust. As one would expect, therefore, that sum was payable by the settlor and the then-trustee to the current trustee. So far, so good. But what about any increase in value that should have occurred between 16 May 2011 and 11 September 2017 when judgment was handed down? It was agreed by the parties as a matter of principle that the settlor and the then-trustee would have to make good on this too. However, it was not agreed what that loss of growth actually amounted to in dollars and cents. Hence the need for the first of the inquiries.

The second inquiry related to the benefit of certain interest-free loans that had also formed part of the 2010 appointment. It had not been clear previously to what extent the relevant debtor entities, which were associated with the settlor, were solvent at the time of the appointment, and therefore to what extent those loans could actually have been recovered. Investigating this issue would allow the Royal Court to reach the value that the settlor and the then-trustee would now be expected to restore to the trust fund.

The first inquiry: loss of growth following the payment out of the investment portfolio

The parties had not previously been able to agree a sum reflective of the loss of growth, principally because they had instructed different types of expert evidence on the basis of different mandates. While the court found both experts to be credible and worthy, their conclusions differed radically. Indeed each expert considered more than one methodology himself.

In assessing these different methodologies, the court noted a fundamental point, which was not disputed by the parties: it should be assumed for the purposes of the calculations that trustees would perform all their duties. Whether or not a particular trustee would actually have done so is irrelevant for these purposes. So the aim of the exercise is to compare, firstly, what actually happened with the trust assets with, secondly, what ought to have happened to them had they not been paid away - not with what would have happened to them had they not been paid away.

Furthermore, the court added, the calculations should be carried out on the basis that, where there are a number of realistic possible outcomes, the presumption would be that the assets would have been used in the way that would be most beneficial to the claimant beneficiary.

The then-trustee's expert's calculations

The then-trustee's expert was a forensic accountant. He was first tasked by the then-trustee with providing a calculation on the basis that the assets in the portfolio were effectively frozen as at the date they were paid away in 2011, with no active management taking place between 2011 and 2017. The process was therefore one of tracking the relevant investments' performance over the period, resulting in a meagre growth in value of $2,000,000 or thereabouts over the period.

This "objective" approach was quickly dismissed by the court. Leaving a portfolio unmanaged over the period would be completely inconsistent with the duties of a prudent trustee and so the projected returns of such an approach were of no relevance.

The second calculation the then-trustee's expert was asked to carry out was to ascertain the increase in growth in the portfolio that would have resulted from the investments being managed in a manner consistent with how they had been managed prior to the transfer out of the trust. In other words, he was asked to identify the prior investment strategy and then extrapolate its performance into the years between 2011 and 2017. This approach yielded a larger increase, although still unimpressive in percentage terms, of just over $7,000,000.

However, this "subjective" approach ran into "insurmountable difficulties", the court held, given that the settlor was effectively the investment manager. She displayed no consistent pattern of behaviour, as the expert pointed out. Sometimes she would take professional advice; sometimes she would make decisions based on hard-to-ascertain or emotional motives. As a result, this led to considerable uncertainty when trying to work out the likely composition of the portfolio post-2011. Furthermore, the court pointed out, the expert's calculations, of necessity, had assumed that there was no asset-currency reallocation. Since there had actually been a certain amount of reallocation prior to 2011, the subjective approach did not in fact achieve its purpose of showing how the assets would have been invested after 2011. Finally, although the court did not say so expressly in this section of the judgment, this approach would appear to be defective on the grounds that it did not seek to calculate what ought to have happened with the investments after 2011, which, as mentioned above, was the better prism through which the Royal Court wished to determine the matter.

Cristiana's expert's calculations

Cristiana's expert was not a forensic accountant but rather someone who was well-versed in trustee investment management. He preferred to focus on how the investments ought to have performed, but using peer groups rather than benchmarks. This was on the basis that it was rare for investment managers to match or exceed benchmark returns in practice. Thus he relied on a weighted calculation of returns of the investment industry following an appropriate risk profile.

In his view, it was difficult to speculate on how the settlor would have managed the portfolio, but a prudent trustee would have appointed a professional adviser who would have taken a more aggressive approach than had been the case previously, given that the principal beneficiaries of the Grand Trust were relatively young and would normally be expected to tolerate more volatility than would someone of their mother's age. Furthermore, given the size of the investment portfolio, the expert's view was that a trustee in this situation would expect to have access to the best advisers at the best rates.

Taking that all into account, he suggested that it would be expected for the performance then to end up sitting on the border of the first and second quartiles of a moderate-risk peer group, resulting in a return of 31% over the six year period.

The court agreed with this approach entirely, focusing as it did on the results that could be expected from a prudent trustee taking appropriate advice and adopting a moderate-risk approach. The expert's calculated figure of $31,107,584 was the one the court therefore ordered that the settlor and the then-trustee pay into Cristiana's trust to reflect the loss of growth in value of the investments, together with interest from the date of the substantive judgment until payment.

The second inquiry: recoverability of loans

The court dealt with this issue briskly, again endorsing the view of Cristiana's expert for these purposes (an accountant), who had concluded that certain of the debtor entities had been solvent but not the others.

The then-trustee sought to establish that none of the loans had ever been intended to be called in, and that ultimately they would all have been written off so they should not be treated as being recoverable. But the court appeared not to be swayed by that, dismissing the matter of the future treatment of the loans as a matter of speculation.

The court therefore held that two of the loans had been properly recoverable at the time of the appointment in 2010, and the settlor and the then-trustee were, as a result, ordered to pay the full values of those loans over to the current trustee, again with interest accruing for the period from the date of the substantive judgment until actual payment.


This is a good illustration of how a trustee's liability for breach of trust can extend not only to the value of any assets improperly appointed out, but also to any loss of growth that follows. Calculation of that loss is measured objectively by reference to the high standards of a prudent trustee, with a higher standard still applying where the actual trustee in question is a professional. Furthermore, the claimant beneficiary will get the benefit of the doubt where there is more than one realistic outcome to the calculation.

It makes sense that this objective approach prevails. Otherwise, the effect would be to allow shoddy trustees to be judged by their own slapdash standards rather than by the standards of their better-managed competitors. Theoretically, this could result in a trust fund being restored to a better financial position than would be the case for an equivalent trust fund where no improper appointment had been made and the assets merely managed somewhat sub-optimally (but not so badly as to constitute an actionable failure).


1 Crociani v Crociani [2017] JRC 146

2 Crociani v Crociani [2018] JRC 091A

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.