Trustees Lien Flashcards
Q1. (Equity Trust (Jersey) Ltd v Halabi; ITG Ltd v Fort Trustees Ltd)
What did the Privy Council clarify about the trustee’s lien in Equity Trust (Jersey) Ltd v Halabi; ITG Ltd v Fort Trustees Ltd [2022] UKPC 36?
A1. The trustee’s lien is not merely security for reimbursement; it is inherently part of the trustee’s right of indemnity. It arises by operation of law as an “incident” of trusteeship, granting a proprietary interest in trust property for exoneration or reimbursement.
Q2. (General Principle)
Is the trustee’s lien merely a personal right enforceable against someone, or is it proprietary?
A2. It’s a proprietary right against the trust assets, not just a personal claim. This ensures the trustee can claim directly from the trust fund for properly incurred liabilities.
- Right of Indemnity: Reimbursement vs. Exoneration
Q3. (Halabi/Fort Trustees)
Which two aspects make up a trustee’s right of indemnity, as explained in Halabi and Fort Trustees?
A3.
Reimbursement (recoupment) – if a trustee pays liabilities from personal funds, they can reclaim that amount from trust assets.
Exoneration – the trustee can pay liabilities directly from trust assets without first using personal resources.
Q4. (Scope)
To what net sum does the trustee’s lien typically apply?
A4. It covers the net of trustee-incurred liabilities minus any amounts for which the trustee is personally liable to the trust. It’s not automatically for the gross liabilities.
Q5. (Article 53)
In trust litigation, how does Article 53 of the Trusts (Jersey) Law allow the court to handle costs and expenses?
A5. It grants the court discretion to order the costs paid from the trust fund or by any persons involved. Essentially, the court decides how costs of an application are allocated.
Q6. (Alhamrani v Russa Management Ltd)
What principle regarding a trustee’s legal costs did the Royal Court reiterate in Alhamrani v Russa Management Ltd?
A6. A trustee acting reasonably is generally entitled to indemnity from the trust fund for all properly incurred legal costs. The court, however, can reduce or remove this entitlement if the trustee acted unreasonably.
Q7. (Alhamrani v Alhamrani)
Does a trustee have to commit fraud or dishonesty to lose its indemnity for costs, according to Alhamrani v Alhamrani?
A7. No. Dishonesty isn’t required. Simple negligence or honest mistakes aren’t enough to lose indemnity, but misconduct beyond that (excessive or improper) can justify depriving a trustee of reimbursement.
Q8. (Trustee’s Duty)
Must a trustee blindly pay any fee their lawyer demands?
A8. No. The trustee must be robust in reviewing fees, ensuring they’re reasonable and proportionate to the trust’s size and the complexity of the case. Doing otherwise could be seen as unreasonable use of trust funds.
Q9. (Beddoe Procedure)
When a trustee faces potential litigation, how can it protect its indemnity for costs if the trust might lose the case?
A9. By seeking Beddoe directions in advance. If the trustee follows the court’s guidance, it’s acting reasonably. Even if it fails in the litigation, it can recover costs from the trust fund.
Q10. (Reed v Papyrus vs. General)
If a trustee tries to claim legal costs from the fund while the beneficiary sues them for breach, is that seen as acting reasonably?
A10. Typically no. A trustee should not force the trust to pay costs defending a personal breach-of-trust claim. Doing so might be considered misconduct and can lead to removal from office.
Q11. (Alhamrani v Alhamrani)
Do beneficiaries have an automatic right to a detailed assessment (taxation) of the trustee’s costs in Jersey?
A11. No. They may question costs, but they can’t demand formal “taxation” unless they raise valid grounds. The court, in its discretion, may order a review of the trustee’s costs if a proper issue is shown.
Q12. (Jersey vs. English Procedure)
How does the Jersey approach to taxing trustee costs differ from the English Civil Procedure Rules?
A12. There’s no direct Rule 12 equivalent in Jersey for indemnity costs. Jersey uses its inherent jurisdiction; beneficiaries can challenge cost items, and the court decides if it’s better handled by the Greffier or the court itself.
Q13. (Trustee’s Lien Summary)
Summarize why a trustee’s lien or equitable charge is crucial for their role.
A13. It gives the trustee a proprietary right in trust assets to ensure they can cover properly incurred expenses. It arises automatically, isn’t merely security, and lets them be exonerated or reimbursed from the trust fund without personally footing the bill for legitimate costs.
