Friday 18 June 2021
Clare Stanley QC and James Goodwin appear in landmark Privy Council appeal
This week, Clare Stanley QC represented the Appellant on appeal from the Court of Appeal in Jersey in a Privy Council appeal which considers whether the claim of a former trustee of a Jersey law trust takes priority over the claims of successor trustees on a first in time basis and trust creditors and what is the status of a trustee’s right of indemnity and associated equitable lien in relation to a trust governed by Jersey law. James Goodwin represented the Respondent.
The Appellant and the Respondent are assumed to be creditors of a Jersey law discretionary trust whose liabilities substantially exceed its assets. The Respondent is a former trustee of the Trust which contends that its rights of recourse to the trust fund take priority to those of other creditors, including the Appellant, who disputes that contention.
The Royal Court of Jersey, giving judgment in favour of Clare’s client, held that as between a former and current trustee, their liens rank on a pari passu basis and not first in time. It also held, in the alternative, that a trustee’s right of indemnity and lien arise on a liability by liability basis with the trustee acquiring (and releasing) successive rights of indemnity and lien as it acquires (and exonerates) liabilities. The Royal Court further held that a creditor of an “insolvent” trust, including a former trustee claiming pursuant to its right of indemnity, was not entitled to claim its costs of proving its claim from the insolvent fund.
The Court of Appeal of Jersey reversed those findings and held that a trustee’s equitable lien ranks in accordance with the time of its creation; a trustee has priority over the creditors with which it has transacted as trustee.
The Appeal was heard over three days this week, alongside an appeal from the Guernsey Court of Appeal in a different case but which raised similar issues. The Committee’s advice to Her Majesty will be handed down in due course.
Clare Stanley QC is instructed by Damian James of Collas Crill, and appeared along with Shân Warnock-Smith QC and Simon Hurry of Collas Crill for the Appellant.
James Goodwin is instructed by Taylor Wessing and appeared along with Emma Jordan of Taylor Wessing for the Respondent.