An obvious conflict for trustees

Conflicts are not always going to be easy to spot or immediately obvious but the trustee In the matter of the E,L,O vs R Trusts (a recent Jersey Royal Court case) failed to heed a rather obvious conflict and, as a result of its delay in resigning, substantial costs were awarded against it. 

At the relevant time, the defendant trust company was trustee of 12 family trusts, four of which were for the benefit of one brother's family while the remaining eight were for the benefit of the other brother's family.  The 12 trust funds collectively owned the shareholding of one company which owned a successful business.  After the brothers fell out, one brother considered bringing a minority shareholder action in the High Court which may have required the trustee, as holder of the minority shares, to bring the action against, possibly, itself.  The conflict was spelled out to the trustee, and a request issued to resign. However, the trustee refused on the basis that there had been no criticism of its conduct (an irrelevant consideration in this situation) but asked for more background information, seeking to take a back seat while the brothers negotiated between themselves. After 13 months of repeated requests to resign, the trustee eventually agreed, but only after it had issued (and withdrawn) an application to the court for directions, which then forced the beneficiaries to issue their own application for the trustee's resignation.

While the Court accepted that the trustee had acted in good faith, believing that its continuing role as co-trustee would assist the family as a whole, the Court admonished the trustee for the delay in agreeing to resign and for its unreasonable withdrawal of the first court application, prompted by the relevant brother not meeting the costs of the application, and so awarded costs against them. The Royal Court stressed that while it may be entirely reasonable for a trustee to surrender its discretion to the Court when a potential conflict is raised - which depends entirely on the factual circumstances of each case - where the conflict is "as plain as could be" it is thoroughly unreasonable for a trustee not to recognise that it must resign, without needing to seek the Court's direction.

For more information, please contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Speechly Bircham LLP
6 New Street Square 
London EC4A 3LX
Tel: +44 (0) 207 427 6400
Fax: +44 (0) 207 427 6600
This e-mail address is being protected from spambots. You need JavaScript enabled to view it