Wragge Lawrence Graham & Co

A warning to trustees: contracts and personal liability

In the Royal Court of Guernsey case Investec Trust (Guernsey) Ltd & Bayeux Trustees Ltd v Glenalla Properties Ltd and others [Civ 1462/2010], the court was asked to consider the circumstances in which trustees could be personally liable to repay loans obtained in their capacity as a trustee. The court specifically highlighted the importance of using express wording in agreements to ensure that the trustee’s liability is restricted to exactly what was intended.

Investec Trust (Guernsey) and Bayeux Trustees (the trustees) were the former trustees of TDT, a Jersey law trust. While they were trustees of the trust, the trustees entered into deeds of novation in order to assume liabilities for loans owing to four British Virgin Islands (BVI) companies, which were owned by the trust. These loans were not recorded in any formal written agreements. They were unsecured, interest free and repayable on demand. The loans were not intended to constitute corporate borrowing, but rather were intended as intergroup transfers.

The relevant issues arose when the BVI companies were put into liquidation and the companies’ liquidators sought repayment of the loans from the trustees…

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