Professional Trustees Research Articles

Looking for a rhyme, looking for a reason: reasonableness and the trustee

Abstract This article examines the standard of reasonableness required of trustees in the execution of their duties, particularly in light of the case of Perez v Equiom Trust Corporation (UK) Ltd & Anor. It explores the objective test for reasonableness, the heightened expectations placed on professional trustees, and the consequences of unreasonableness, including the impact on the trustee’s indemnity. The discussion delves into the nuances of trustee decision-making, the court’s role in intervening, and the implications of the Perez case on trust law and trustee conduct. The authors provide a critical analysis of the trustee’s obligation to act reasonably and the legal standards applied.

Juridical Analysis of Productive Land WAQF Assets Management Based on Empowerment Conservation of Environmental Functions

BWI participates in preserving nature with the waqf innovation movement and forming a professional trustee (nadzir) to manage productive land waqf assets based on environmental function preservation. However, this has yet to be explained textually in the Waqf Law. This study analyzes the juridical management of productive land waqf assets based on preserving environmental functions. This is a literature study using a normative juridical and legal interpretation approach. The results of the study show that the management of productive land waqf assets based on the preservation of environmental functions can be understood through the interpretation of Articles 5, 22, 40, 42, 47, 49, and 54 of the Waqf Law, which understands that the management of productive land waqf assets is based on the preservation of environmental functions life, it is essential to do. The goal is to improve the general welfare and shape welfare. Management of productive land waqf assets based on the preservation of environmental functions following the objectives of the formation and characteristics of Islamic law, namely being able to maintain religion and the universe. This shows that Islamic law is always flexible and follows the developments and needs of society.

Guernsey Royal Court finds a dishonest breach of trust: acting ‘en bon père de famille’

Abstract In handing down its judgment in the matter of Nina Naustdal v TKC Corporate Services NV and two others on 23 December 2022, the Royal Court of Guernsey found that the First Defendant, a professional trustee, had acted in dishonest breach of trust. At the heart of the judgment was that the principal asset of the Trust had been transferred out of trust to benefit a stranger to the trust, constituting a fraud on a power. Amongst the various other relief that it granted, the Court declared that the purported transfer of trust property by the trustee was void. Furthermore, it ordered that the trustee be deprived of its indemnity for any legal fees and disbursements in connection with the proceedings and to repay any sums that had been taken from the trust.

PTC and DTC: a new perspective from Switzerland

Abstract This article analyses the use of private trust companies and dedicated trust companies (DTCs) in Switzerland. The Swiss trust industry has evolved steadily over the last few years, thanks to the creation of a solid regulatory framework. Professional trustees are now qualified as financial institutions, subject to licensing requirements and placed under the supervision of the Swiss Financial Market Supervisory Authority. This regulation introduced Swiss DTCs as a type of private trust company. DTCs are independent of the family, being held and supervised by a licensed trustee, and allow full flexibility in terms of governance evolving in the concept of a Swiss single-family office.

Protectors in Liechtenstein: protecting or threatening trust and foundation assets?

Abstract When setting up trusts and foundations, settlors and founders struggle with giving away assets and control to professional trustees in Liechtenstein whom, in many cases, they have never met. At first, to bridge that gap, settlors’ confidants accepted roles as protectors and the settlor conferred powers on them aimed at policing and, if necessary, firing the trustee. In the absence of enforceable rights to information and locus standi in Liechtenstein courts, discretionary trust beneficiaries greatly rely on the assistance of such protectors, especially when trusts are in crisis or dispute. More recently, however, protectors have undergone sophisticated (re-)structuring and adopted new identities, e.g. as corporate entities, thus not necessarily facilitating governance, but sometimes adding complexity. Increasingly, the international regulatory framework has impacted that structure, as the threat of being considered a controlling protector might lead to undesired effects, including protectors being registered and exposed in BO Public Registers, or, even worse, being reported as beneficial owners of trusts and foundations to their local tax authorities. As is the case with any legal concept, structuring provides protectors with both opportunities and pitfalls. This article wishes to set out how protectors can save trusts and foundations from collapsing and how to protect assets from the onslaught of the settlors’ creditors. That said, there are some downsides: a very recent Supreme Court case shows that using protectors might doom the trust or foundation to failure unless pristine standards and principles are followed.

The new regulation of professional trustees in Switzerland

Abstract The Swiss federal legislator adopted a new federal act on financial institutions (FinIA).1 This legislation came into force on 1 January 2020. It subjects professional trustees and wealth managers to a new licensing and supervisory regime. This law affects not only Swiss institutions, but also foreign institutions operating in Switzerland, whether through a subsidiary, a branch or a representative office. We are approaching the end of the three-year transitional period (from 1 January 2020 to 31 December 2022) during which the institutions concerned must comply with the new legal requirements. This article analyses the scope of the new authorisation and supervision regime, the obligations of professional trustees under the new regulation, the new system of supervision of trustees, the specific rules applying to Swiss branches or representative offices of foreign trustees, the sanctions in case of infringement of obligations and the transitional provisions. This article is mainly addressed to trustees, but the new regulation also applies to professional wealth managers.

Stewards enquiry: challenging a professional trustee’s remuneration

Abstract This article examines how a professional trustee charging remuneration to the trust is approached in respect of non-charitable trusts. It reminds the reader of the legal basis on which a professional trustee is able to charge for its fees, considers certain specific features of a professional trustee’s remuneration and examines the general approach of the courts to assessing a professional trustee’s charges. It also looks at the relative advantages and disadvantages of investigating a professional trustee’s charges before or after the resignation of a trustee and the winding up of a trust.

What are the duties of an outgoing trustee?

Abstract The recent case of Geneva Trust Company SA v D and Ors [2020] JRC 104 has served to shed interesting new light on the duties of outgoing trustees regarding disclosure of documents and information (in other words, trust records) by a retiring trustee to a new trustee. The general principles of Jersey law in this area are relatively well-defined, as per the Trusts (Jersey) Law 1984 (the Trusts Law) and a not inconsiderable body of case law derived from the Royal Court in Jersey as well as of the courts of England and Wales. However, it is useful to both professional trustees and legal practitioners alike when the Court provides further elucidation. The Geneva Trust Company case centred around the transfer of trust records for the D Discretionary Trust (the DDT) from the former trustee, Geneva Trust Company SA (formerly known as Rawlinson & Hunter Trustees SA) (the Former Trustee) to the current joint trustees, Fort Trustees Limited and Balchan Management Limited (collectively, the Current Trustees).

Professional trustees: is it time to get on with the job? A discussion on whether Public Trustee v Cooper “blessing” applications are being abused by overly cautious trustees

Abstract Trustees are fortunate to have available a process where they can seek the Court’s blessing as to proposed actions and decisions, a remedy not widely available to decision-makers outside of a trusts context. However, with blessing applications becoming increasingly common (particularly in offshore jurisdictions), it is questionable whether trustees are being overly cautious in their approach. Are professional trustees who are paid for the performance of their duties too readily rushing to Court (often at great expense to the Trust Fund) in order to safeguard against remote hypothetical risks? Reviewing recent cases, this article will consider whether the industry has gone too far in its adoption of “blessing” applications, and whether Courts may seek to restrict the “momentous” circumstances that justify an application. We will consider the types of matters which may justify a “blessing” application, both from a legal and commercial perspective, and the alternative options which may be available to trustees when making significant decisions.

The future of ‘anti-Bartlett’ clauses: Zhang Hong Li and Ors v DBS Bank (Hong Kong) Limited and Ors

It is common for professional trustees, particularly trustees who are unlikely to have the experience and competence in the relevant business or businesses owned or controlled by the trust, to include in the standard terms on which they accept trusteeships, a clause negating any duty to enquire into or interfere in the conduct of the relevant business or businesses at all, or unless and until they are aware of the circumstances calling for enquiry. Such clauses are commonly known as ‘anti-Bartlett’ clauses. The issue that has long been at the forefront of consideration in the implementation of such clauses is the extent of their scope and effect and, in particular, whether there are any duties that are impossible to negate by such clauses. The decision of the Hong Kong Court of Appeal in Zhang Hong Li and Ors v DBS Bank (Hong Kong) Limited and Ors [2018] HKCA 435 (Zhang Hong Li v DBS) provides clarity on this important issue.

Private trustee companies: an alternative to foundations

In 2014, Malta introduced Private Trust Company provisions into its trusts legislation through the introduction of the concept of a trustee acting for a family trust, as the corporate equivalent of the private individual trustee. In this way, the Maltese legislator created an alternative to the more traditional and widespread professional trustee/administrator or individual private trustee role. The trustee of a family trust or the ‘Private Trust Company’ is not required to undergo a full authorization process with the Malta Financial Services Authority (MFSA). If all conditions are satisfied, a Private Trust Company is merely required to apply for registration with the MFSA, which gives it a huge regulatory advantage over professional trustees or administrators otherwise requiring full MFSA authorization.

CITIZEN’S SAVINGS AS A TOOL FOR THE SYSTEMIC DEVELOPMENT OF THE ECONOMY

The article examines investment tools available for use by a wide range of citizens. The purpose of this paper is finding investment instruments that can perform the function of the systemic economic development. It is suggested that such tools should have the following characteristics: Are available for investment to the average citizen Ensuring a positive return after adjustments for inflation and deducting costs The funds raised with the help of such an instrument are directed to the development of the economy. The latter feature is particularly relevant since Russia’s share in the global economy is declining as the result of slowing GDP growth. In our work, we used the following research methods: study, measurement, comparison and generalization. Thus, as a result of the study of investment instruments, we identified the advantages and disadvantages of each investment instrument. For the retrospective period, we estimated the returns, which should receive investors after adjustments to the level of inflation and costs. Further, we compared the characteristics of individual investment instruments and estimated their potential as instruments capable performing the function of systemic development of the economy. As investment tools available for use by the average citizen, there was investigated: currency, precious metals, real estate, bank deposits, deposits in micro-finance companies, securities (Federal loan bonds, corporate bonds, stocks), mutual funds, individual investment accounts opened with the professional trustee, investment life insurance. As a result, we draw conclusions concerning the potential of each instrument as a tool for the systemic development of the economy, as well as giving recommendations on the use of investment instruments, depending on the preferences of investors.

A Practical Guide to the Transfer of Trusteeships

I shall start this review with what some might seem to be a remarkable assertion. In my view, A Practical Guide to the Transfer of Trusteeships is the most relevant and, therefore, important work in the whole area of trusts and trusteeships. So, how can I possibly make such a bold assertion? Put quite simply, the area of law and practice concerning the transfer of trusteeships is one that is hugely important to all professional trustees and those that advise them. The reality of life for a professional trustee is that the vast majority of ‘new’ business they receive these days, actually comes in the form of what might euphemistically be described as ‘previously enjoyed’ trusts. It used to be the case that a trustee was for life, now it is quite often the case that the trustee does not even make it to Christmas. It is far from unusual to see trusts that are yet to celebrate their 10-year anniversary but are already on their third set of trustees. Add into this mix the fact that trust companies are still being bought and sold freely, obviously, when the trust company itself is sold this is not a case of a change of trustee but if there is a sale of the business (not the company) and trusts are transferred on an individual case by case basis, then of course another change of trusteeships occurs.

Bank, Stock Market And Economic Growth: Bangladesh Perspective

The paper empirically investigates the relationship between bank, stock market and economic growth in Bangladesh. In investigating empirical relationship, GDP at the current price, private sector credit given by banks and market capitalization are considered as indicators of economic growth, banks' development and stock market development, respectively. Three possible regression models are estimated to know the relationship between economic growth and financial sector development. The paper shows that bank's credit to the private sector is both positively and robustly contributing to the economic development of the country when bank credit to private sector entered alone in regression as an independent variable. Besides long-term relationship, contemporaneous change in bank's credit to the private sector has profound positive short-run feedback effects to the economic growth. In assessing impact of stock market development on economic growth, no significant long-run relationship is found between stock market development and economic growth in Bangladesh. However, net positive subdued short-term effect of stock market development is evident. But when both bank and equity market jointly enter the model to find out the relationship of both variables with economic growth, a long-run relationship has been evident without statistical significance. It indicates that Bangladeshi financial system comprising both banking sector and stock market jointly is not still a strong promoter of its economic growth, although banking development alone is robustly associated with economic development.Bangladesh therefore needs to enhance the efficiency of banks for increasing credit to the private sector. An immediate initiative is also required to make both equity and debt market as regular sources of finance for the economy. In this perspective, ensuring smooth operation of primary and secondary market, increasing financial literacy among investors, minimizing volatility of the market, expanding issuer base, creating both individual and institutional investors, enhancing efficiency of the brokerage house, adding innovative financial services, initiating knowledge based trading, introducing shelf registration system, creating more professional trustee and ensuring authenticate credit rating from the rating agencies are required to be ensured.

The application of section 61 of the Trustee Act 1925: the court’s dubious prerogative of mercy?

A late 19th-century concern to encourage lay trustees to accept office led to what is now section 61 of the Trustee Act 1925, which provides discretionary relief to trustees who acted honestly and reasonably and ought fairly to be excused. It had, until recently, only rarely been successfully invoked by professional trustees. In the light of two recent decisions holding that such relief would have been granted had professional trustees been held in breach of trust, this article reconsiders the principles and desirability of discretionary relief, and argues that considerable caution and care is required before such relief is granted.

Position of a Trustee: The Capacity to Be a Trustee and a Trustee’s Duty of Care

On 1 January 2014, the regulation of trusts, inspired by the regulation of the Canadian province of Quebec, became part of Czech law. This article deals with two aspects of the regulation from the position of the trustee: the capacity to be a trustee and the dependence of the trustee´s duty of care based on their (non-)profession. In this respect, the Czech regulation is assessed in the context of foreign regulations. The Czech regulation of the capacity to be a trustee allows any natural person on one hand and only a restricted number of regulated legal persons on the other hand to act as a trustee is found to be justified. On the contrary, the lack of differentiation between a professional and non-professional trustee with regard to their duty of care in Czech law is considered unsatisfactory and worth improving.

Reliance on a professional trustee: a case for a change to the rule in Armitage v Nurse

Given the relatively unrestricted nature of trustee exoneration clauses, it can be strongly argued that one of the prime concerns of trust law, namely the protection of the beneficiaries, has weakened over the course of time. The dissenting judgments in Spread Trustees have given some food for thought as to whether the general rule governing clauses exonerating trustees with advertised business experience from gross negligence should be revisited. Looking back at the Law Commission’s proposal, this article will analyse whether considerations promoting legislative change concede to those that point at its potential distorting effect on the trusts industry by engaging in their close analysis, together with a comparison with other Anglophone jurisdictions (notably Jersey, Guernsey and New Zealand) and by making a few sectoral comparisons.

Trustee exculpation--the law, the quirks and the business sense

Trustee exculpation clauses: the law as it stands–what duties/liabilities fall outside the standard clause and/or cannot be lawfully excluded: the meaning of ‘wilful default’–how far it extends in practice–the borderline with dishonesty. To what extent can the supine trustee rely on a clause which excepts wilful default? See the Weavering decision. Is the ‘wilful default’ standard applied differently depending on remuneration, professional, and business experience? Points arising on fraud or dishonesty. Are wide-form exculpation clauses a bad thing? Special considerations affecting professional trustees: the standards applicable, and whether such clauses relied on by professional trustees bring the trust industry into disrepute. The need to explain the clause to the settlor and solicitors’ potential liability for not doing so.

Excellence as a habit

Robert Clifford, the founder of Fidusys Online, argues that, in getting fit for the future, it is time for professional trustees of complex structures to reconsider their habits.

Mandatory Arbitration of Internal Trust Disputes - Improving Arbitrability and Enforceability through Proper Procedural Choices

Trusts and their civil law equivalents, often known as foundations or associations, play a large and increasing role in the global economy, holding trillions of dollars worth of assets and generating billions of dollars worth of revenue and trustees' fees annually. Once considered nothing more than ‘mere’ estate planning devices, trusts are now more often seen in commercial rather than in private contexts, and often feature sophisticated financial institutions as professional trustees. With favorable tax laws in various off-shore jurisdictions making international trusts increasingly popular and hostile trust litigation reaching epidemic proportions, arbitration would seem to be many parties' dispute resolution mechanism of choice. To some extent, this is very much the case, with arbitration often being used to resolve conflicts between trusts and external third parties. However, arbitration of internal trust disputes – by far the more common type of concern in this area of law – is much more controversial and has been the subject of extensive and vigorous debate in the trust industry. Although trust experts have written extensively on mandatory trust arbitration, the arbitration community has been strangely silent in these discussions, and this Article is among the first to consider the unique challenges facing future arbitration of internal trust disputes from the arbitral perspective. In so doing, this Article provides new insights on the types of procedures that are necessary to ensure procedural fairness in what is often a complex, multiparty proceeding. This Article also considers what steps settlors can take to improve the enforceability of an arbitration provision located in the trust itself and analyzes the only set of institutional rules targeted specifically toward trust disputes – the AAA Trust Arbitration Rules – by comparing the AAA approach to the newly identified best practices in this field and to certain related initiatives from the ICC and the DIS.