Back to Insights listing

International / offshore, Insolvency, Trusts, probate and estates: contentiousThursday 13 October 2022

Key Privy Council decision: Equity Trust (Jersey) Ltd v Halabi

The Privy Council has handed down judgment in two appeals (ETJL v Halabi; ITGL v Fort Trustees [2022] UKPC 36) concerning the nature and scope of the right of a trustee to recover from or be indemnified out of trust assets in respect of liabilities and other expenditure properly incurred by the trustee. A seven-member Board was convened because the Privy Council was asked to reconsider part of its decision in Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2019] AC 271.

Although both appeals concerned Jersey law, the decision is likely to have significance throughout the common law world. It has particular importance in circumstances where the trust fund is ‘insolvent’, in the sense that the trust assets are insufficient to meet the amounts due under the trustee’s right of indemnity.

There were four principal issues:

  1. Does the right of indemnity confer on the trustee a proprietary interest in the trust assets? Answer: yes. On this issue the Board was unanimous.
  2. If so, does the proprietary interest of a trustee survive the transfer of the trust assets to a successor trustee? Answer: yes. On this issue also the Board was unanimous.
  3. If so, does a former trustee’s proprietary interest in the trust assets take priority over the equivalent interests of successor trustees? On this issue, the Board split 4:3. The majority view, expressed in the judgments of Lord Briggs (with whom Lord Reed and Lady Rose agreed) and Lady Arden was that trustees’ claims rank pari passu. However, the minority view of Lord Richards and Sir Nicholas Patten, with whom Lord Stephens agreed, was that trustees’ claims rank according to the chronological order in which they were appointed, consistently with the usual ‘first in time’ rule applicable to equitable proprietary interests.
  4. Does a trustee’s indemnity extend to the costs of proving its claim against the trust if the trust is ‘insolvent’, in the sense that trustees’ claims to indemnity exceed the value of the trust fund? Answer: yes, unanimously.

Clare Stanley KC acted for the Appellant and James Goodwin acted for the Respondent in ETJL v Halabi.

A copy of the Judgment can be found here.

People to view:

Share by: Email

Related Insights View all thought leadership

  1. Placeholder

    Articles

    Eternal life, or dead and buried – which claims survive death?

    Article by Lemuel Lucan-Wilson, 23rd May 2024 To read or download this article as a PDF, please click here. Lois McMaster Bujold once wrote “the dead cannot cry out for justice. It is the duty of the living to do so... Read more

    By Lemuel Lucan-Wilson
    Thursday 23 May 2024

    View more
  2. Placeholder

    Recent Cases

    Judgment handed down Cowan v Equis Special LP and other

    International / offshore, Professional liability, Trusts, probate and estates: contentious

    Thomas Grant KC
    Thursday 23 May 2024

    View more
  3. Placeholder

    External Conferences

    Junior Litigators’ Forum

    Thursday 9th May 2024
    The Grand Hotel, Birmingham

    Speakers:
    Simon Atkinson

    View more
  4. Placeholder

    News

    Wilberforce shortlisted for Set of the Year at the High Net Worth Awards 2024

    We are delighted to announce that Wilberforce Chambers has been shortlisted at the High Net Worth Awards 2024 for Set of the Year. Chambers and Partners’ criteria for this nomination reads as follows; “These award nominations and the ultimate winners are the... Read more

    Thursday 2 May 2024

    View more

View all thought leadership