Modern trustees under the microscope at international conference
Senior figures from the contentious trusts world gathered at the W Hotel in Barcelona for the Fresh Perspectives: Trust Litigation Conference, “Trusts Under the Hammer” earlier in May to discuss the latest trends in the industry.
Trust Corporation International director Lydia Essa appeared as part of a panel session hosted by Andrea Zavos of Boodle Hatfield entitled “Squaring the Cross Jurisdictional Circle”, providing a Guernsey trustee’s practical perspective on a host of the hot-button issues and the pressures facing offshore trustees. She was joined on the panel by Stella Mitchell-Voisin of Summit Trust International and Thomas Nigg of Gasser Partner Attorneys at Law.
The conference was the perfect forum to consider and debate the landscape and pitfalls generally for trusts and trustees. The format was an effective combination of technical insight from the lawyers into some complex legal issues, coupled with some practical insight from representatives of the trust industry, including Lydia herself.
The sessions throughout the day focused on topical issues including:
- the recent introduction of the “Unexplained Wealth Order” (UWO), a new anti-financial crime tool incorporated into English law in January 2018 which compels the subject to disclose the source of their unexplained wealth. The English High Court has only this week frozen three London homes worth more than £80 million pursuant to an UWO obtained by the National Crime Agency against a unnamed foreign official resident in London. The session focused on the complexities that may arise for trustees under the new regime noting that the legislation specifically confirms that trustees who hold property which is subject to a UWO may be required to provide information relating to the trust – not just the property held in it. Trustees may also be asked to assist a beneficiary in providing a response to a UWO (e.g. by evidencing a loan or distribution from the trust). Very careful consideration will, therefore, need to be given around their confidentiality obligations and, importantly, their own regulatory/AML obligations in this context.
- the most recent jurisprudence on “anti-Bartlett” clauses in the Zhang Hong Li and another v DBS (Hong Kong) Ltd and others. Anti-Bartlett clauses are standard “relieving” provisions, common in the professional trust industry, designed to circumscribe the trustee’s duty to intervene in the affairs of companies in which the trustee holds shares. The Court of Appeal held in the DBS case that, as a matter of Jersey law- the governing law of the trust, anti-Bartlett provisions notwithstanding, the trustee had a residual high level supervisory duty that had been breached when the trustee approved, and did not override or reverse, the purchase of certain investments. This amounted to gross negligence, for which liability cannot be relieved by any exemption clauses under Jersey law. The case is being appealed to the Court of Final Appeal in Hong Kong so the final outcome is yet to be seen but the case has focused minds on the scope of these clauses and how effective they actually are when it comes to relieving a trustee of liabilty.
- the exercise of powers of revocation and undue influence addressed in the Jasmine Trustees case which centered around an attempt, by the settlors of the trusts, to exercise their power to revoke the trusts by serving notices of revocation on the trustees of each trust (the validity of which was challenged by the daughter on the grounds of undue influence/ mistake). The case highlighted the need for trustees and other fiduciaries to be alive to situations where there is a risk of undue influence from family members but also to be very clear of how a trust fund might be distributed upon the revocation of a trust and the potential implications, tax and otherwise, of taking this step.
The overrarching message of the conference was clear: the modern trustee is operating in an increasingly complex and challenging environment. Technical ability and knowledge is an imperative and the “flight to quality” is real. This was a view supported by Lydia who shared with the audience some of her first-hand experience of certain challenges faced by offshore trustees nowadays, including navigating ever-evolving tax regimes, contending with the increasing influence of the “Court of Public Opinion” and the challenges of engaging with families when there has been a significant shift of wealth to the next generation.
Lydia emphasised that the need for offshore trustees to be highly skilled with strong technical ability, exemplary communication skills and the capacity to keep pace with change is stronger than ever - a view shared by the audience. Those who cannot do this will, in all likelihood, not be able to withstand the pressures faced by the industry.
If any of the issues discussed at the Trust Litigation Conference are of interest/relevance to you or your clients and you would like to discuss them with us, please contact us on +44 1481 730430 or email Lydia Essa at Lydia.email@example.com