On 15 June 2011, the Judicial Committee of the Privy Council handed down its long awaited decision in the case of Spread Trustee Company Limited v Sarah Anne Hutchinson and others. In this long running Guernsey case the appellant, Spread Trustee Company, appealed against a decision by the Guernsey Court of Appeal by which it ruled that it has always been part of Guernsey customary law that an exoneration clause in a trust deed could not exonerate a trustee from liability for gross negligence.
The Court of Appeal had considered a preliminary issue as to whether the introduction of a bar on excluding liability for gross negligence under the Trusts (Guernsey) (Amendment) Law, 1990 was retrospective in effect. In contrast to its own earlier decision in related litigation where the Court of Appeal had held that the Guernsey law of trusts was essentially English in origin, in this case the court preferred to follow an analysis of Scottish case law holding an exclusion of gross negligence was invalid under Guernsey customary law. This was based on their assessment of the common origins of Guernsey and Scottish trusts in a mixed legal system evolving principles of Roman law.
The apparently divergent approach by the Court of Appeal raised fundamental issues as to where lawyers and the courts should go to look for guidance as to undecided issues in relation to Guernsey trusts – was the destination to be England or Scotland?
In their decision the Judicial Committee of the Privy Council, as the final appeal court for Guernsey, held that the liability of a trustee for gross negligence could lawfully be excluded as a matter of Guernsey customary law (prior to the 1990 amendment). Crucially, the Court has held that there was no reason to treat Guernsey law as following the Scottish view on this point in preference to the view taken under English law – the system with which the Guernsey law of trusts is more closely associated. Their Lordships held that the underlying and undefined obligation of a Guernsey trustee to act “en bon père de famille” (literally to act as the good father) does not point to a conclusion that Guernsey would have adopted the Scot’s approach; the expression was French in origin and was not used in Scots law. It remains to be seen if that expression does, indeed, add anything over and above the usual obligations of a trustee under Guernsey law.
It now appears settled that when undertaking a journey in considering the principles to apply to trust issues, where there is no clear answer under Guernsey law, the Guernsey Courts should rest at the border rather than cross over Hadrian’s Wall.