Criminal Liability Of Trustee Flashcards
- Criminal Liability of Trustees
Q1. (General Principle)
Does the Trusts (Jersey) Law 1984 itself impose any criminal sanctions on trustees for breaches of trust?
A1. No. The 1984 Law is silent on criminal matters. However, a trustee who commits a breach of trust can still face criminal charges for offenses like fraudulent conversion or larcin under Jersey law.
- Trustee Liability to Third Parties – Article 32
Q2. (Conceptual Setup)
Why might third parties, rather than beneficiaries, sometimes seek to hold trustees liable for obligations, contracts, or torts?
A2. Because trustees often transact with outsiders. If something goes wrong, the third party may try to enforce that liability against either the trust assets or the trustees’ personal assets.
Q3. (Article 32)
How does Article 32(1)(a) protect a trustee from personal liability if a third party knows they’re dealing with the trustee “as trustee”?
A3. The third party’s claim is then only against the trust property. The trustee does not incur unlimited personal liability; they are liable “as trustee” only, so the claim extends solely to the trust fund.
Q4. (Article 32(1)(b))
What if the third party does not know the trustee is acting in a fiduciary capacity?
A4. In that scenario, the trustee is personally liable. But they still have a right of indemnity from trust assets, assuming they incurred the liability reasonably while acting for the trust.
Q5. (InvestecTrust (Guernsey) Ltd v Glenalla Properties Ltd)
What did the Privy Council clarify in InvestecTrust about Article 32 creating a “separate capacity” for trustees?
A5. They held that Article 32 effectively treats trustees as having two capacities: personal and fiduciary. If the third party knows it’s a fiduciary transaction, liability applies only to trust assets, not the trustee’s personal estate.
Q6. (Comparison to English Law)
How does the Jersey approach differ from traditional English trust law on trustee liability to outsiders?
A6. In English law, trustees generally incur personal liability, but can then seek indemnity from the trust. Under Jersey law (Article 32), if the other party knows the trustee is acting as such, they can only claim from the trust fund.
Q7. (Article 9(1)(d))
Which article says the trustee’s “powers, obligations, liabilities, and rights” are determined by Jersey law and “no rule of foreign law” shall affect that question?
A7. Article 9(1)(d). It states that issues around a Jersey trustee’s obligations or liabilities (e.g., under Article 32) should be governed by Jersey law, not foreign law.
Q8. (Potential Conflict)
If a trustee enters a contract governed by another legal system, can that system override Article 32?
A8. In principle, it may create tension. However, per InvestecTrust, the Privy Council has recognized that Article 32 still “follows” the trustee internationally, limiting personal liability even where the contract is governed by foreign law—unless the foreign court refuses to apply it.
Q9. (Article 54(4))
Why did the Privy Council observe that Article 54(4) presumes the trustee’s creditors still rely on the trustee’s indemnity in the trust?
A9. Because Article 54(4) says if the trustee is insolvent, third-party creditors have no claim on trust property unless the trustee has a right of indemnity. This implies the standard route of recovery is via subrogation to the trustee’s indemnity.
Q10. (Practical Effect)
What economic risk shift occurs if trustees are personally protected under Article 32(1)(a)?
A10. The third party dealing with the trustee must bear the risk of shortfall in trust assets—similar to dealing with a limited liability company. Meanwhile, the trustee avoids exposing personal assets.
Q11. (Fraudulent Conversion, Larcin)
How can a trustee’s mishandling of trust property lead to criminal charges, not just civil liability?
A11. If the trustee intentionally misappropriates or converts trust property for personal use, it may constitute fraudulent conversion or larcin under Jersey’s criminal statutes, leading to prosecution and penalties.
Q12. (Trustee Civil vs. Criminal)
Is there any mention of criminal penalties in the Trusts (Jersey) Law 1984 for a trustee’s breach?
A12. No. The Law doesn’t impose criminal sanctions. But general criminal law can still apply, independent of trust statutes, where the trustee’s conduct amounts to theft or fraud.
Q13. (Summary)
Explain the significance of Article 32 and how it fits with the trustee’s broader liability framework in Jersey.
A13. Article 32 is pivotal: if a third party knows the trustee acts “as trustee,” liability is restricted to trust assets. The trustee’s personal estate is sheltered. This breaks from English law, where trustees typically incur personal liability first. Meanwhile, criminal liability can still arise under general law if the trustee commits fraud or theft.
