Guernsey Legal Resources

The question that I am being asked to decide as a preliminary issue, pursuant to an order made by me on February 25th last, arises in proceedings that were commenced nearly five years ago. The plaintiffs are discretionary beneficiaries under two settlements made in November 1977 by the late Mr. Peter Acatos, and the defendant is the present trustee of those settlements.

2 Put very briefly, the plaintiffs allege that they are entitled to compensation for substantial losses that have occurred in the underlying portfolio of investments of the settlements, resulting from failures on the part of the defendant and its predecessors as trustees to protect the interests of the plaintiffs as discretionary beneficiaries.

“In the execution of the trusts and powers hereof, no trustee shall be liable for any loss to the trust fund arising in consequence of the failure, depreciation or loss of any investments made in good faith, or by reason of any mistake or omission made in good faith, or of any other matter or thing except wilful and individual fraud and wrongdoing on the part of the trustee who is sought to be made liable.”

4 The plaintiffs are alleging that the failings of the defendant and the previous trustees, which principally involve a failure to diversify the trust assets, amount to a breach of trust which results from, inter alia, acts of gross negligence on the part of the defendant and its predecessors as trustees. The defendant pleads in its defences that the exoneration clause referred to above protects it from any liability for breach of trust flowing from its gross negligence.

5 I have noted that the settlements were created in 1977. At that time, trusts were regularly being created and declared to be subject to the laws of this Island. However, there was considerable uncertainty as to what precisely the law relating to trusts was. The problem, in summary, was that the Royal Court, applying the Norman law in which Guernsey law has its roots, never developed the body of jurisprudence relating to the regulation of trusts that the courts of equity developed over the centuries in England. It is not necessary for me to rehearse in this judgment where Guernsey law

6 In 1988, the States resolved to introduce legislation to regulate trusts. The policy letter introducing the subject (Billet d’État IX of 1988, art. VI) proposed legislation broadly on the lines of earlier legislation passed in 1984 in Jersey, although as we shall see, the way in which the Bailiwicks developed their respective laws differed in material respects.

7 The Trusts (Guernsey) Law 1989 (“the 1989 Law”) came into force on April 22nd, 1989. Section 34(7), in its original form, stated: “Nothing in the terms of the trust shall relieve a trustee of liability for a breach of trust arising from his own fraud or wilful misconduct.”

8 Shortly after the law came into force, certain amendments to the original legislation were deemed to be desirable. The States accordingly passed the Trusts (Amendment) (Guernsey) Law 1990 (“the 1990 Law”), which came into force on February 19th, 1991. The material change for the purposes of this judgment was that s.1(f) of the 1990 Law added the words “or gross negligence” to the end of s.34(7) of the 1989 Law.

9 The defendant claims that the exoneration clauses protected it in respect of breaches of trust involving gross negligence occurring before February 19th, 1991, as opposed to those occurring after that date, which the defendant concedes would not be capable of being protected by an exoneration clause in respect of a breach involving gross negligence.

10 The plaintiffs contend that the operation of the relevant provision of the 1991 Law is retrospective, so that the exoneration clause does not protect the defendant (or the former and/or retiring trustees) from liability from breaches of trust which constituted gross negligence which were committed before February 19th, 1991.

“(i) whether the inability of the terms of a trust to relieve a trustee of liability for a breach of trust arising from his own gross negligence applies to breaches of trust occurring prior to February 19th, 1991 (the date on which the Amendment Law came into force); and (ii) if it does, whether it applies to breaches of trust occurring prior to April 22nd, 1989 (the date on which the 1989 Law came into force).”

12 It was Mr. Swan, on behalf of the defendant, who made the running in the argument that there should be a separate trial of the preliminary issue. Mr. Greenfield was, and to a certain extent remains, less sure. As

13 I propose to outline the arguments of Mr. Swan to the effect that, applying the general rules of statutory interpretation, the amendment made in 1991 can only speak from February 19th of that year and cannot be interpreted in a way that will remove the effect of an exoneration clause in the terms I have recorded on breaches of trust committed before that date. I will then record Mr. Greenfield’s response thereto and, in particular, what he has to say in relation to the decision of the Jersey Court of Appeal in the case of Midland Bank Trust Co. Ltd. (Jersey) Ltd. v. Federated Pension Servs. (5). That case held that a provision added to the Jersey Trusts Law in 1989, outlawing the right of trustees to rely on exemption clauses not only for fraud and wilful misconduct, but also, for the first time, gross negligence, could be construed as being of retrospective effect back to the time that the original Trusts Law was introduced in Jersey in 1984.

14 The starting point of the defendant’s argument is the basic principle of statutory interpretation, reflected in Bennion on Statutory Interpretation, 5th ed., at 315 (2008): “Unless the contrary intention appears, an enactment is presumed not to be intended to have a retrospective operation.” In the commentary thereon (op. cit., at 316), the author says:

“The essential idea of a legal system is that current law should govern current activities. Elsewhere in this work a particular Act is likened to a floodlight switched on or off, and the general body of law to the circumambient air. Clumsy though these images are, they show the inappropriateness of retrospective laws. If we do something today, we feel that the law applying to it should be the law in force today, not tomorrow’s backward adjustment of it . . .

The basis of the principle against retrospectivity ‘is no more than simple fairness, which ought to be the basis of every legal rule.’”

Later in the paragraph (op. cit., at 316), Maxwell on the Interpretation of Statutes, 12th ed., at 215 (1969) is quoted as follows:

“It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication.”

A relatively recent example of the application of this principle is to be found in the decision of the House of Lords in Plewa v. Chief Adjudication Officer (6).

15 Mr. Swan, on behalf of the defendant, argues that there is no contrary intention discernable from the context of the legislation or clear implication that there was an intention that the legislation should be retrospective. He draws attention to the policy letter of 1990 (Billet d’État No. VIII of 1990, art. VI). The policy letter was mainly concerned with problems relating to foreign rules of forced heirship and, again, there is reference to the desirability “that the legal basis of such trusts should be beyond doubt and should be on the same basis as trusts established in other jurisdictions such as the Isle of Man and Jersey.”

16 The only reference in the policy letter to the particular provision which is now for me to consider—namely, the additional words “and gross negligence”—is in the last two paragraphs of the policy letter which read as follows:

“The Committee is also advised that there are a number of minor technical amendments to the law which are desirable and we consider that this is an appropriate opportunity to proceed with them.

The proposed changes relate to the validity of trusts; trustees’ expenses; jurisdiction of the court; liability of the trustees and the recovery of property disposed of in breach of trust.”

Mr. Swan argues that one can read nothing into that somewhat brief direction for the preparation of legislation to indicate that the States is intending it to be retrospective, and the finished article is likewise silent on retrospectivity.

17 Mr. Swan goes on to remind me that we are not concerned with the particular facts of this case, but that the question I have to ask myself is: what effect does the amendment of 1990 have on every Guernsey trust then in existence? Mr. Swan argues that it is not fair suddenly to move the goal posts and retrospectively impose liability on trustees for honest incompetence, even if amounting to gross negligence. Trustees may have been comfortable with accepting office on the basis that the trust deed provided that they could only be liable if they were guilty of fraud or wilful misconduct. They may not have been prepared to accept office if they were potentially to be liable for gross negligence. It is this issue of fairness that should weigh heavily against allowing an interpretation that would give the new provision retrospective effect.

18 Mr. Greenfield does not directly challenge the principles outlined in Bennion, to which I have referred, but challenges their applicability to the circumstances of this case. The plaintiffs’ argument is, first, that as it is inconceivable that s.34(7) had the effect of exonerating trustees from liability arising from their own fraud or wilful misconduct committed

19 Mr. Greenfield, on behalf of the plaintiffs, makes the point that professional people such as the principals of the defendant would, in the normal course of things, be liable for gross negligence in the exercise of their professional duties, and therefore it is not unfair that when discharging the role of a professional trustee they should be held liable for actions of gross negligence in the exercise of their duties as trustees—even if they had previously thought that they would get away with the most appalling incompetence—so long as they were not actually stealing trust money.

20 Mr. Greenfield goes on to point out that s.1(f) of the 1990 Law does not have the effect of imposing any new duty on a trustee. What is happening is that he is having withdrawn from him the right to rely on a clause excluding his accountability for acts arising from his gross negligence. In these circumstances, it is argued by Mr. Greenfield that once the States had decided to prohibit gross negligence exclusions it would have required clear and express words if the consequence of the new provision was to be that trustees should remain entitled to avoid liability for breaches of trust involving gross negligence committed at an earlier date.

21 Mr. Greenfield responded on the fairness point and quoted the case of Plewa (6) in greater detail—in particular, the adoption by Lord Woolf of the principle identified by Staughton, L.J. in Social Sec. Secy. v. Tunnicliffe (7), to which I will return. Mr. Greenfield distinguished Plewa by saying that the change in the legislation with potentially retrospective application affected third party rights, whereas here what was at issue was the right of a trustee to avoid the consequences of his own grossly negligent acts.

22 Before looking at the decision of the Jersey Court of Appeal in Midland Bank Trust (5), I should record the different statutory histories leading up to the adoption in both Bailiwicks of provisions prohibiting the reliance by trustees on clauses in trust deeds excluding liability for acts of gross negligence.

23 The original piece of legislation in Jersey was the Trusts (Jersey) Law 1984, which law was amended by the Trusts (Amendment) (Jersey) Law 1989. I adopt the summary of the main provisions of both Laws contained in Midland Bank Trust (1995 JLR at 369–70):

“In art. 1(1) ‘trust’ is defined as including—

‘(a)    the trust property; and

‘(b)    the rights, powers, duties, interests, relationships and obligations under a trust . . .’

‘Terms of a trust’ are defined as meaning—‘. . . the written or oral terms of a trust, and also means any other terms made applicable by the proper law.’ Art. 1(5) provides: ‘This Law shall not be construed as a codification of laws regarding trusts, trustees and persons interested under trusts.’ Article 10, which is headed ‘Validity of a Jersey Trust,’ provides, inter alia:

‘(2)    A trust shall be invalid—

(a)    to the extent that—

(i)    it purports to do anything the doing of which is contrary to the law of Jersey . . .

(b)    to the extent that the court declares that—

    . . .

(ii)    the trust is immoral or contrary to public policy . . .’

Article 17, headed ‘Duties of a trustee,’ provides:

‘(1) A trustee shall in the execution of his duties and in the exercise of his powers and discretions—

(a)    act—

ii(i)    with due diligence;

i(ii)    as would a prudent person;

(iii)    to the best of his ability and skill; and

(iv)    observe the utmost good faith.’

Article 20, headed ‘Powers of a trustee,’ provides, inter alia: ‘(2) A trustee shall exercise his powers only in the interests of the beneficiaries and in accordance with the terms of the trust.’ Article 26, headed ‘Liability for breach of trust,’ and which was amended by the 1989 Law, provided, before amendment, inter alia:

‘(1) A trustee who commits or concurs in a breach of trust shall be liable for—

(a)    the loss or depreciation in value of the trust property resulting from such breach; and

(b)    the profit, if any, which would have accrued to the trust property if there had been no such breach.

. . .

(9) Subject to the terms of the trust, a trustee shall not be liable—

. . .

(b)    for any loss to the trust property unless such loss is due to—

i(i)    his wilful default, act or concurrence; or

(ii)    his neglect or failure to exercise reasonable care to prevent such loss.

By art. 5 of the 1989 Law, two relevant amendments were made. There was inserted at the beginning of art. 26 a new paragraph (A1): ‘Subject to this Law and to the terms of the trust, a trustee shall be liable for a breach of trust committed by him or in which he has concurred.’ Also, for para. (9) there was substituted a new para. (9): ‘Nothing in the terms of a trust shall relieve, release or exonerate a trustee from liability for breach of trust arising from his own fraud, wilful misconduct or gross negligence.’

Article 30, as enacted in 1984, provided, inter alia:

‘INDEMNITY OF RETIRING TRUSTEE

    (1) When a trustee resigns, retires or is removed, he shall duly surrender trust property in his possession or under his control.

    (2) A trustee who resigns, retires or is removed and has complied with paragraph (1) shall be released from liability to any beneficiary, trustee or person interested under the trust for any act or omission in relation to the trust property or his duty as a trustee except actions—

(a)    arising from any breach of trust to which such trustee (or in the case of a corporate trustee any of its officers or employees) was a party or to which he was privy;

. . .

    (3) Any provisions in the terms of a trust purporting to indemnify a trustee to an extent greater than is provided by this Article shall be invalid.’

By art. 7 of the 1989 Law, the following amendments were made to art. 30:

(a)    A new heading was substituted: ‘Position of outgoing trustee.’

(b)    In para. (1) there were inserted at the beginning of art. 30 the words ‘Subject to paragraph (1A).’

(c)    After para. (1) there was inserted a new paragraph (1A): ‘A trustee who resigns, retires or is removed may require to be

(d)    In para. (2), at the end of the opening words, ‘liability’ was substituted for ‘actions.’

(e)    Paragraph (3) was deleted (no doubt because it was considered to be superseded by the new art. 26(9)).

The 1989 Law also added a new art. 8A, dealing with transfers of property to a trust. Paragraph (3) of this new article provides:

    ‘For the avoidance of doubt it is declared that the provisions of this Article shall apply notwithstanding any other provisions of this Law and shall apply only to transfers or dispositions of property made to a trust after the commencement of [the 1989 Law], but this declaration shall be without prejudice to the validity or otherwise of transfers or dispositions made before that time.’”

24 Section 34(1) of the Trusts (Guernsey) Law 1989 deals with the issue of liability for breach of trust in the following terms:

“Subject to the provisions of this law and to the terms of the trust, a trustee who commits or concurs in a breach of trust is liable for—

(a)    any loss or depreciation in value of the trust property resulting from the breach; and

(b)    any profit which would have accrued to the trust had there been no breach.”

The important words are those at the beginning—“subject to the provisions of this law and to the terms of the trust.” [Emphasis supplied.]

25 The “provisions of the law” must mean s.34(7), which provides that nothing in the terms of the trust shall relieve a trustee of liability for a breach of trust arising from his own fraud or wilful misconduct (later amended to add gross negligence—see the 1990 Law). The “terms of the trust” must refer to the exoneration clause, which I have set out at para. 3 above.

26 Mr. Swan argues forcefully that the differences in the way that the laws developed requires a different approach to retrospectivity in Guernsey from that adopted by the Court of Appeal in Jersey. The pre-1989 situation in Jersey was that under art. 26(9) of the 1984 Jersey Law, it was not possible to exclude liability for “neglect or failure to exercise reasonable care.” He submits that the effect of the 1989 amendment was to

27 In Midland Bank Trust (5), the court held that on its interpretation of the exculpation clause (any doubt as to its construction being resolved against the trustee), the trustee had not, in the circumstances of that case, been able to persuade the court that it should be excluded from liability for what it had done wrong, in that its actions had been in breach of trust and had been knowingly and wilfully committed.

28 The exculpation clause in Midland Bank Trust was in somewhat different terms. It provided as follows (1995 JLR at 360):

“Trustee indemnified

The trustee shall be indemnified against all liabilities incurred by it in the execution of the trusts hereof and the management and administration of the scheme and shall have a lien on the fund for such indemnity and the trustee shall not be liable for anything whatever other than a breach of trust knowingly and wilfully committed.”

29 In summary, the facts of Midland Bank Trust were that the respondent had been the trustee of one of the States of Jersey pension funds for a number of years, and a decision was made to transfer the management of the fund to another bank. There was a two-month delay in handing over the funds whilst the respondent mistakenly believed that it could not transfer the funds to the new manager without completion by the States of a customer agreement, in accordance with the provisions of the English Financial Services Act 1986.

30 In the interim, the stock market had gone up and the States were claiming damages for the loss of the opportunity to re-invest the fund whilst the market was at a lower level. The Jersey Court of Appeal engaged in a full review of the English and Scottish cases dealing with exemption clauses in trusts. It looked at the wording of rule 29 in detail and had to decide on the proper meaning of the words, “trustees shall not be liable for anything whatever other than a breach of trust knowingly and wilfully committed”; it preferred an objective interpretation of these words, to the effect that notwithstanding the exculpation clause the trustee is liable if it knowingly and wilfully commits an act which amounts to a breach of trust, regardless of whether at the time of commission the trustee knew that it was committing such a breach.

31 The court therefore held that the exculpation clause did not protect the trustee, but notwithstanding that finding went on to consider the effects of the 1984 Jersey Law and the 1989 Jersey Law on the limits of

32 Article 26, paras. (1) and (9) have already been quoted in the extract set out above (see para. 23). After quoting it again, Le Quesne, J.A. said this (1995 JLR at 387):

“Paragraph (9) introduced an exemption from the liability thus affirmed. It is not the initial liability but the exemption from it which is made ‘subject to the terms of the trust.’ In other words, the terms of the trust can override the exemption. This they do if they reduce the ambit of the exemption. In such a case, para. (9) confers immunity over a certain area. The trust confers immunity over a part of that area and by clear implication provides that there shall be no exemption beyond that part. The two provisions are therefore inconsistent, in the sense that they cannot both operate. By virtue of the opening words of para. (9), the provision of the trust prevails.

    What is the position if the terms of the trust purport to enlarge the area of the exemption? In such a case, para. (9) confers immunity over a certain area; the trust confers immunity over both that area and an additional area as well. The trust does not affect the statutory exemption which is then being made subject to the terms of the trust, but the initial liability as it remains after the statutory exemption has operated on it. The 1984 Law did not provide for its terms to be overridden in this way and the terms of the trust do not enlarge the statutory exemption.”

This passage again helps to emphasize the different state that Jersey law was in prior to the 1989 amendment from that which pertained in Guernsey prior to the 1990 Guernsey amendment.

33 Le Quesne, J.A. then considered the effect of the amendments made to the 1984 Law by the 1989 Law. He records that art. 5 of the 1989 Law replaced art. 26(9) of the 1984 Law with a provision in the following terms: “Nothing in the terms of the trust shall relieve, release or exonerate a trustee from liability for breach of trust arising from his own fraud, wilful misconduct or gross negligence.”

34 After further discussion on the retrospectivity of the provision, during which he contrasts the fact that the donner et retenir amendment was only to apply to future settlements so as not interfere with the outcome of a case currently pending in Jersey, he says this (1995 JLR at 388–389):

“What appears to us to be conclusive is the approach of the House of Lords in Plewa v. Chief Adjudication Officer, which is the latest authority on the retrospective operation of statutes. Lord Woolf, with

‘. . . Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them, unless a contrary intention appears.’

We see nothing unfair in preventing a trustee from taking advantage of immunity from liability for his gross negligence. A case like this is not a case of action taken by a trustee in reliance upon protection believed by him to exist, for a trustee could hardly contend that he decided to act with gross negligence because he thought he was protected from the consequences.”

Le Quesne, J.A. continued to draw support for the view that the amendments made by the 1989 Jersey Law to the 1984 Jersey law were to be treated as being of retrospective effect, by looking at the explanatory notes issued when the draft 1989 Law was lodged at the Greffe.

35 The judgment concluded the findings of the court on this particular issue in the following terms (1995 JLR at 389):

“The aim of the legislature in amending arts. 26 and 30 was primarily to clarify rather than to change provisions intended in 1984 to have the effect made clear by the 1989 amendments. It is consistent with that aim to treat the 1984 Law as amended in 1989 as having effect in relation to trusts then in existence and to breaches of trust taking place between the coming into force of the 1984 Law and the coming into force of the 1989 amendments. In our judgment, therefore, the new art. 26(9) was intended to affect liability for antecedent breaches of existing trusts. It follows that after the commencement of the 1989 Law, the new art. 26(9) prevented the application of Rule 29 to a case of gross negligence.”

36 The first point for me to ask myself is what approach I should be taking to a decision of the Jersey Court of Appeal such as this. Whereas I am bound by decisions of the Guernsey Court of Appeal, Jersey decisions can be no more than highly persuasive, depending on the proximity of the point decided in Jersey to the point that I am having to decide in Guernsey. I also acknowledge that I am bound by decisions of the Court of Appeal and the Privy Council, but that I am not bound by obiter dicta in any judgment of those courts, although such dicta may, on occasion, be highly persuasive.

37 Mr. Swan has emphasized the obiter nature of what I have quoted from the judgment in Midland Bank Trust (5), but inevitably the significance of the difference between the ratio decidendi and obiter dicta will, on occasion, be less where one is dealing with a judgment that is at best highly persuasive.

38 There is clear evidence that the enactment of a Trusts Law in Guernsey stemmed from a desire to keep in step with Jersey, and this can be directly inferred from the reports in the Billets d’État previously cited and from the fact that much of the legislation is similarly worded. The law was to ensure clarity, to the benefit of both those who were wishing to better themselves and the insular economy by establishing businesses as “commercial and professional trustees” and those who were going to be settlors and beneficiaries of trusts. The latter needed to have the reassurance that Guernsey was a suitable place to bring their wealth for looking after.

39 I have taken note that the judgment of the Jersey Court of Appeal was reached in circumstances where there had been a somewhat different legislative history to that experienced in Guernsey, but the basic principles are the same in both Islands and, indeed, the Guernsey legislation relating to the issue in question before me is now in very similar terms to that in Jersey.

40 The Jersey Court of Appeal looked at the point that Mr. Swan has urged very strongly on behalf of the defendant, namely, that it is grossly unfair to remove retrospectively the protection which a trustee may hitherto have enjoyed, exculpating them from responsibility for acts of gross negligence.

41 The Court of Appeal in Jersey has clearly expressed itself as not being impressed by such arguments; the last passage I have quoted (see para. 35 above) from the judgment could not be clearer—there is nothing unfair in removing from a fiduciary practising in the financial services industry today protection from claims of gross negligence as well as claims for wilful default or fraud.

42 I have, over the years, in a number of decisions, most of which have not been formally published because they have been in the nature of Beddoes applications or applications from trustees for approval of rearrangements or distributions where the interests of minors are engaged, from time to time in argument expressed a feeling that the gentler treatment and lower aspirations of English courts in respect of the way in which trustees, who in the past often accepted office out of a sense of duty to the beneficiaries rather than in the expectation of high professional reward, conducted themselves were perhaps no longer appropriate in the age of the establishment in this Island of a thrusting financial services

43 Consequently, I find myself empathizing with the remarks of Brightman, J. in an authority not previously known to me, Bartlett v. Barclays Bank Trust Co. Ltd. (No. 1) (2), quoted by Le Quesne, J.A. in Midland Bank Trust (5) (1995 JLR at 381–382):

“So far, I have applied the test of the ordinary prudent man of business. Although I am not aware that the point has previously been considered, except briefly in Re Waterman’s Will Trusts, I am of opinion that a higher duty of care is plainly due from someone like a trust corporation which carries on a specialised business of trust management. A trust corporation holds itself out in its advertising literature as being above ordinary mortals. With a specialist staff of trained trust officers and managers, with ready access to financial information and professional advice, dealing with and solving trust problems day after day, the trust corporation holds itself out, and rightly, as capable of providing an expertise which it would be unrealistic to expect and unjust to demand from the ordinary prudent man or woman who accepts, probably unpaid and sometimes reluctantly from a sense of family duty, the burdens of a trusteeship. Just as, under the law of contract, a professional person possessed of a particular skill is liable for breach of contract if he neglects to use the skill and experience which he professes, so I think that a professional corporate trustee is liable for breach of trust if loss is caused to the trust fund because it neglects to exercise the special care and skill which it professes to have. The advertising literature of the bank was not in evidence (other than the scale of the fees) but counsel for the bank did not dispute that trust corporations, including the bank, hold themselves out as possessing a superior ability for the conduct of trust business, and in any event I would take judicial notice of that fact. Having expressed my view of the higher duty required from a trust corporation, I should add that the bank’s counsel did not dispute the proposition.”

“At the same time, it must be acknowledged that the view is widely held that these clauses have gone too far, and that trustees who charge for their services and who, as professional men, would not dream of excluding liability for ordinary professional negligence should not be able to rely on a trustee exemption clause excluding liability for gross negligence. Jersey introduced a law in 1989 which denies effect to a trustee exemption clause which purports to absolve a trustee from liability for his own “fraud, wilful misconduct or gross

45 I have to say that based on principles enunciated in Bennion and in Maxwell, and the careful approach of the House of Lords in Plewa (6) to the effect that unfairness must be avoided in retrospective interpretation of statutory amendments, I began with considerable sympathy with the arguments of Mr. Swan. I acknowledge the great difference between being accountable for acts of incompetence committed in good faith (which can so easily be categorized as gross negligence, whatever the precise parameters of this recently refined sub-class of tort) and those committed in bad faith which should be so easily identifiable by the perpetrator. However—not for the first time—my initial response to a question before me has been challenged by a decision of three distinguished judges of our Court of Appeal, albeit that they were sitting in Jersey construing a similar provision of the Jersey Trusts Law.

46 In Midland Bank Trust (5), the alleged failings of the defendant clearly arose in 1988 and 1989 well after the Law of 1984 was enacted. No issue arose as to the effect of the legislation on anything that had occurred prior to the enactment of a Trust Law in Jersey. There is no guidance as to whether art. 26(9) was to be construed as disentitling a trustee from benefit from an exculpation clause where the breach of trust or act of gross negligence occurred prior to the enactment of any legislation. It would appear that this is the reason why it has been considered appropriate to divide the question before me into two parts, as previously recited (at para. 11 above).

47 I do not consider that it is necessary when interpreting the effect of s.1(f) of the 1990 Law to make any such distinction. Either the States of Guernsey were making a fundamental change to the law relating to the liabilities of trustees which was so novel and revolutionary that it could not have been in anyone’s contemplation that it was to apply to prior acts and omissions of trustees in respect of trusts already in existence, or it was a “for avoidance of doubt” provision of the kind so often sought by those who are anxious as to what is the law in this small jurisdiction where much of the customary law has remained untested and under-clarified over the centuries. If the latter, there is a strong argument for saying that prior failings by trustees amounting to gross negligence would not be excused by the exculpation clause.

48 The extrinsic evidence points to the legislature being of the mind that what it was enacting was a minor matter—see the 1990 policy letter—but that cannot be conclusive in deciding what the law was prior to the enactment of the 1990 Law. A similar proposal in Jersey was treated in a similar vein—see the notes to the draft projet when it was lodged at the Greffe, referred to in Le Quesne, J.A.’s judgment (1995 JLR at 389).

49 Mr. Greenfield makes the point that it would be strange if the provision prescribing reliance on an exculpation clause in cases of fraud and wilful misconduct found in the original 1989 version of s.34(7) were retrospective, whereas the addition introduced by s.1(f) of the 1990 Law were not. In my view, it is clear that the original s.34(7) was declaratory—a trustee in Guernsey has never been able to opt out of the responsibility to act honestly and to refrain from misconduct that is fraudulent or wilful.

50 Section 18(1) of the Law of 1989 provides that “a trustee shall, in the exercise of his functions, observe the utmost good faith and act en bon père de famille.” In my view, this provision is, again, declaratory of the existing law. Before 1989, the responsibility of a paid trustee could not have been less than that of a person appointed by the court as tuteur, or guardian, of a minor. A classic statement of the role of a guardian of a minor is to be found in a judgment of de Sausmarez, Bailiff in In re Blücher von Wahlstatt (3) in 1928, helpfully quoted (in translation) in Dawes, Laws of Guernsey, at 125 (2003). They—

“. . . have the duty to oversee the maintenance, welfare and education of the said minors, according to their station, and full power and authority to hold, possess, manage and administer (acting always as a prudent head of the family) and to divide and determine the movable and immovable assets of the said minors and to invest and alter the investment of the said minors’ monies and to approve and sign all legal documentation and instruments to the above effect and also, if it is for the benefit and advantage of the minors in the opinion of the competent authority in the material jurisdiction, and after obtaining the approval of the relevant authority when required, the said tuteurs have full power to make acquisitions on behalf of the said minors and to dispose of their movable and immovable assets, whether by alienation or mortgage, and even to renounce an interest, as appropriate in the circumstances, and full power to carry on judicial proceedings, whether as claimant or defendant, and to act before or during every judicial process, together with every power to do, sign, seal, approve and register every legal document and instrument to the above effect.”

51 I cannot countenance the argument that the obligation to act en bon père de famille did not attach to a paid trustee in the discharge of his

52 I further cannot see how any clause in a trust deed completed before 1989, which purported to discharge a trustee from liability to the trust for failures to act en bon père de famille could have been upheld by the court. I conclude, therefore, that the change of emphasis introduced by the 1990 Law, clarifying that a trustee could not exclude liability for acts of gross negligence, was a minor change. I have alluded to the uncertainty of the law defining the parameters between gross negligence and negligence, but it may well be that defining the extent of the duty to act en bon père de famille could be equally fraught with difficulty.

53 Following these conclusions, and fortified by the judgment in Midland Bank Trust (5), I reject the argument of Mr. Swan that it is unfair to his client that the provisions of s.34(7) as amended should, in effect, negate the effect of the exoneration clause to earlier failings on the part of his client. My answer to both the questions posed is, therefore, “Yes.”