Exoneration clauses are used in trustee documentation in order
to restrict a trustee's liability for loss or damage to the
trust fund. In England, the settled law is that trustees can
validly restrict liability for loss or damage which results from
their own negligence, and even from their own gross negligence, but
cannot restrict liability for loss which is caused by their own
fraud or dishonesty. Under Jersey and Guernsey law, trustees are
also prohibited from restricting liability for gross
negligence.
The benefit of such clauses is that they encourage trustees who
would not otherwise be prepared to accept the risky position of
trustee to do so, and allow them to make decisions with appropriate
speed and without undue caution—in short they provide
protection for trustees in an increasingly uncertain and hostile
climate. On the other hand, where beneficiaries can prove
negligence on the part of the trustees, they will often be left
without a remedy.
