Trustees: Insolvent Trusts And Conflicts Of Interest

Trustees faced with a "momentous" decision concerning the affairs of a trust are well advised to seek prior sanction from their supervising court. This will help protect the trustee (and its professional indemnity insurers) from exposure to claims for breach of trust relating to the decision.

In the overwhelming majority of cases, the trustee's decision receives the desired court sanction. However, this recent decision of the Royal Court of Jersey illustrates circumstances in which a court may refuse sanction and highlights particular issues to be navigated by trustees when the trust is insolvent.

Background

There were three beneficiaries of the trust in question (the Trust), of which the sole asset was a Jersey company that owned a residential property in London.