A landmark Privy Council ruling has been hailed as good news for Guernsey by an island-based lawyer.
Nick Robison acted for trustees of the Tchenguiz Discretionary Trust, who had appealed a Guernsey Court of Appeal ruling of 2015 to the Privy Council.
The Guernsey court had held that a creditor of a trustee may enforce a debt directly against the assets of a trust, even if the trustee had no right to indemnify itself from the trust in order to pay the debt.
The Privy Council overturned this aspect of the Court of Appeal judgment, which Mr Robison said would bring comfort to settlors that, in the event that a trustee unreasonably incurs a liability or acts in breach of trust – invalidating its indemnity – the assets in trust will still be protected from creditors.
“This new ruling in the Privy Council has restored confidence in the security of assets held in Jersey and Guernsey trusts,” said Mr Robison, of Guernsey law firm Babbe, who acted alongside colleague Ian Swan in the proceedings.
“The Privy Council decision will prove to be of huge importance to settlors, beneficiaries and trustees across the offshore world but particularly those interested in Jersey and Guernsey law trusts. ”
Mr Robison added: “The judgment is good news for settlors as well as for those working in the private wealth sector who are advising individuals looking to settle their assets into jurisdictions like Jersey or Guernsey. They know that even if a fiduciary in the islands unreasonably incurs a liability or acts in breach of trust, the trust’s assets will still be protected from the trustee’s creditors.
“Prior to the Privy Council judgment the issue of trustee’s creditor’s rights was unresolved throughout the Commonwealth and it is one of critical, international importance. The judgment will now be considered the leading authority when such matters are considered in other jurisdictions and will be highly persuasive in similar circumstances in other finance centres such as the Cayman and British Virgin Islands.”