The Privy Council has today handed down its much anticipated and landmark judgment in the insolvent trust cases of Equity Trust (Jersey) Ltd (Respondent) v Halabi (in his capacity as Executor of the Estate of the late Madam Intisar Nouri) (Appellant) (on appeal from the Jersey Court of Appeal) and ITG Ltd and others (Respondents) v Fort Trustees Ltd and another (Appellants) (on appeal from the Guernsey Court of Appeal).
The two cases were consolidated and because of their importance, they were heard together by a full Privy Council Board of seven members in June 2021.
In her capacity as a Jersey Advocate, and as the only non-KC acting for one of the parties, Taylor Wessing partner and Head of UK Contentious trusts Emma Jordan represented Equity Trust (Jersey) Limited before the Privy Council (in addition to having represented the client at the hearings in the lower courts). She was assisted by senior counsel, Kate Silbermann.
In its judgment the Board unilaterally upheld three aspects of the Jersey Court of Appeal's judgment, namely that (i) a trustee's right of indemnity confers a proprietary interest in the trust property in favour of the trustee, (ii) that this proprietary interest survives the transfer of the trust assets to a successor trustee, and (iii) that a trustee’s indemnity does extend to the costs of proving its claim against the trust if the trust is “insolvent”.
In a closely run decision 4 members of the Board voted by majority to overturn the Jersey Court of Appeal's decision in relation to the ranking of a trustee's proprietary interest. Lord Briggs, Lady Rose, Lord Reed and Lady Arden held that a former trustee’s proprietary interest in the trust assets ranks pari passu with the equivalent interests of successor trustees. Conversely Lord Richards, Sir Nicholas Patten and Lord Stephens favoured the Court of Appeal's decision and held that a former's trustee's proprietary interest should take priority over successor trustees' indemnities and the indemnities should rank on a first in time basis.
Commenting on the judgment, Emma Jordan said: "This seminal judgment by the Privy Council is truly precedent setting, not only in determining the appropriate ranking of trustee's liens but in clarifying the nature and character of the trustee's equitable lien. This is the first case to determine those general principles under English and Jersey law which will have application in any trusts context, not only those which are insolvent. It has been my great privilege to work on this long-running case which will go on to have an incredibly significant and wide-ranging impact on the trust industry and its practitioners. I am also very proud of the legal team I was supported by for their fantastic work and diligence throughout."
