The Trusts (Guernsey) Law, 2007

13th December 2007

Today I received my “Ogier Guernsey Updater” and it contains several items of interest, including a short piece about the new Trusts Law. It has been approved by the States of Guernsey, and is expected to receive Privy Council approval shortly and be in force by the start of 2008. They tell me that the changes have been extensive and the existing Trusts (Guernsey) Law, 1989 has been replaced, rather than amended.

They highlight the following:

In particular, we note the following changes:

to permit the formation of trusts that have no time limit;

to permit the valid establishment of non-charitable purpose trusts;

to expressly permit a settlor to reserve certain powers to himself (or grant certain powers to another) to retain a degree of control over that trust and to absolve trustees from any liability resulting from the valid exercise of such powers;

to clarify the circumstances in which information may be disclosed to the enforcer, any beneficiaries, the settlor or any trust officer;

to provide all trustees and former trustees with an automatic non-possessory lien over trust property as security against liability;
to remove the requirement for directors of a corporate trustee to act as guarantors in respect to any liabilities arising from breach of trust proceedings; and

to clarify the rules relating to the limitation period for breach of trust actions brought against a trustee and to provide a maximum 18 year limitation period for all matters other than trustee fraud.

A number of changes, including those discussed below, should provide greater clarity and a number of safeguards to trustees.

Trustees’ Security

The statutory non-possessory lien over trust property offers an alternative to the “chain” of indemnities commonly requested by outgoing trustees.

Notably the lien continues after the trustee retires regardless of whether the assets are held by a successor trustee or a beneficiary. The lien may apply irrespective of any indemnities entered into by the parties, unless expressly waived. The only specific exceptions are that the lien does not attach to assets of real property, unidentifiable property nor to any property transferred to a bona fide purchaser for value.

Limitation Periods

Under the Current Law, the rules relating to limitation (i.e. the period in which claims may be brought against a trustee) are not as clear as they could be and can potentially be very long.

Under the Trusts Law, the limitation period during which a party will be able to bring a claim against a trustee will be:

three years from the date the claimant first has knowledge of the breach giving rise to the claim; but

if the claimant is a minor or under a legal disability, three years from the earlier of: the date the claimant ceases to be a minor or under a legal disability; and to the date the claimant’s guardian first has knowledge of the breach; but

save for claims relating to a trustee’s own fraud, an absolute maximum of 18 years from the date of breach; but

there is no limitation period for claims relating to a trustee’s own fraud.

The new Trusts Law clarifies many aspects of Guernsey trust law, provides a number of innovations and should provide parties with much greater certainty