Jersey Courts unwilling to impute trustee duties to agents

Voisin partner Nigel Pearmain and English Solicitor Stephen Brennan look at the Jersey Courts' recent clarification of certain important issues surrounding the position of agents acting in connection with the affairs of a trust.

In Chvetsov -v- BNP Paribas Jersey Trust Corporation Limited and Maison Anley Property Nominee Limited [2009] JLR 217 a Jersey law trust held a flat located in London, which was occupied by the claimant beneficiary (the "Beneficiary") and his family. BNP Paribas (the "Trustee") was the sole trustee of the Trust but the registered owner was Maison Anley (the "Nominee"), acting as nominee on behalf of the Trustee. The Beneficiary requested that the property undergo certain renovation works. The Trustee duly authorised the Nominee to enter into a contract with a firm of architects for the works to be carried out.

The Beneficiary brought an action alleging that the works were more expensive than they should have been and claiming that the Trustee was in breach of trust in its failure to exercise the requisite skill and care to monitor, control and supervise the costs incurred with respect to the renovation. The Beneficiary also claimed breaches of trust and damages in tort on the part of the Nominee.

The Court held that the Nominee was a mere agent or nominee who was duly appointed by a trustee and thereby did not owe any duties under trust or tort law to the beneficiaries of the trust. The only duties it owed in connection with its appointment as agent were contractual (and possibly tortious) duties to the Trustee, and only the Trustee had a cause of action against it for any breach of those duties.

However, the Court helpfully set out what possible remedies may be available to beneficiaries in respect of the actions of an agent, namely:

to request the trustee to pursue a claim on behalf of the trust against the agent; or if the trustee refused, then the beneficiaries may institute an administrative action seeking a direction from the Court that the trustee should take proceedings against the agent ;or as an alternative, in special circumstances, the beneficiaries may institute a derivative action against the agent. The Beneficiary subsequently appealed against the Royal Court's decision, but the appeal was dismissed and on appeal to the Court of Appeal (to a single judge) the above observations of the Royal Court were judicially approved. On a further (and unsuccessful) appeal before the full Court of Appeal, that...