Trusts Update - Freeman v Ansbacher

In an important judgment, the Deputy Bailiff of the Royal Court of Jersey has clarified the Jersey law position in relation to two points. Firstly, whether the object of a mere power has standing to sue for breach of trust against trustees. Secondly, whether the principle of 'reflective loss' is directly applicable to a discretionary trust which wholly owns a company.

THE OBJECT OF A MERE POWER

The application in the present case was a strike out application by Ansbacher Trustees (Jersey) Limited against the Plaintiffs, Sarah Daile Freeman, Robert Keith Freeman and Rosanna Freeman. The order of justice claimed several causes of action for breach of trust and negligence.

The Deputy Bailiff found that the first two plaintiffs' claims were statutorily time barred by Article 57(2) (b) of the Trusts (Jersey) Law 1984 (as amended). The plaintiffs had been adults at all material time and had knowledge of the occurrence of the alleged breaches of trust for more than three years before the order of the justice was served. They were therefore removed from the action.

Rosanna's claim however was not time barred because she was a minor for part of the period when the Plaintiffs had the relevant knowledge. The argument was that she was unable to bring a claim for breach of trust against the Trustees, being the object of a mere power to appoint capital and income and the mere power to distribute income. She also had a contingent interest, being named as a beneficiary of the ultimate default trust which arose at the end of the trust period.

The Deputy Bailiff accepted that the position in English law as stated in Lewin was equally applicable in Jersey law, namely that the object of a fiduciary power (whether a trust power or a mere power) has locus standi to apply to the Court for relief. Further that such relief can include the reconstitution of the trust fund where loss has been caused by a trustee's breach of trust. The Deputy Bailiff also decided that a person with a contingent interest had locus standi to bring an action for breach of trust. In the circumstances of the object of either a mere power or a contingent interest claiming reconstitution of the trust fund following a breach of trust, it would be a matter of discretion for the Court as to what relief, if any, should be granted in any particular case.

THE PRINCIPLE OF REFLECTIVE LOSS

The second point of some importance was the question of whether the principle of reflective loss (the Foss v...