Principles applicable to legal costs incurred in trust-related proceedings in Jersey by trustees, other fiduciaries and beneficiaries

In its decision in Des Pallieres v JP Morgan Chase & Co, the Jersey Court of Appeal has provided a clear view of the principles that apply to costs awards in trust proceedings for parties acting in a fiduciary capacity. The Court of Appeal’s decision was preceded earlier this summer by the Royal Court’s decision in Re Dunlop Settlement in which the costs incurred by a beneficiary in trust-related proceedings were considered and which itself serves as a useful summary of the principles that will be applied.

The key point that emerges from the Court of Appeal’s judgment is that the principle of indemnity is paramount with regard to the costs incurred in trust proceedings by a trustee or other person with fiduciary functions in respect of a trust. The Court of Appeal confirmed that persons exercising fiduciary functions are entitled to an implied equitable indemnity in respect of costs reasonably incurred by that person in the exercise of those functions.

That indemnity is equivalent to the statutory indemnity enjoyed by a trustee and, accordingly, will lead as a matter of principle, to a prima facie entitlement to recover costs on a full trustee indemnity basis. That right of indemnity (whether express or implied) can only be lost in circumstances where the trustee is guilty of misconduct or acting unreasonably…

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