British Deed of Trust by pnv52623


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    In Guernsey We Trust

          21st September 2010
         In Guernsey We Trust

                  RUPERT TICEHURST

Head of Private Wealth and Charities,
                       Herbert Smith

Trust litigation: avoiding the risks

• Anti-Bartlett clauses

• Trust company investments with related party

• The future of Hastings-Bass

  Anti-Bartlett clauses

                 White Star Line
                 Trust Company

               Titanic Speculative
Settlor           Investment Co

How effective are anti-Bartlett clauses?

• “The trustee is not required to enquire into or interfere in the
  management of any Company”

• “The Trustees shall leave the management of the company’s
  business affairs or business wholly to the directors of any

• “The Trustees shall have no power to enquire into or intervene in
  the management of any Company”

• “unless they have actual knowledge of circumstances of a
  dishonest nature which call for enquiry”

How effective are anti-Bartlett clauses?

• Is the trustee involved in any way with the underlying company

• Local regulatory requirements

• Absent a duty to intervene, is there a reason why the trustee
  should intervene

• Duty to act when called upon by a beneficiary

• Continuing duty to seek court’s assistance

• Consider alternative regimes: VISTA

Trust company investments with related
             White Star Line
             Banking group

              White Star Line
              Trust Company

Trust company investments with related

• No absolute prohibition on using group company’s services

• But there is a clear risk of a conflict of interest

Conflict not permitted under the trust deed

         Would reasonable man looking at all the relevant facts and
         circumstances think that there is a real and sensible
         possibility of a conflict?

          Is investment is in the best interests of the

Real and sensible possibility of a conflict

• Previous history of selecting third party investment managers

• Stringent selection process (more than if third party selected)

• Documentation of selection process:

     Full reasons for selection of related party
     Evidence that conflict has been considered and how and why it
      does not exist

• Ongoing review of investment management to ensure that related
  party continues to perform

Conflict permitted under the trust deed

          Is investment in the best interests of the beneficiaries?

The future of Hastings-Bass

Why does Hastings-Bass exist?

• If a Trustee is exercising a discretion

• It can only properly do so by giving due consideration to all
  relevant circumstances

• The tax consequences of a decision are relevant considerations

• If the Trustee has not given due consideration to all relevant
  factors, the Trustee will have acted improperly

• A court can therefore set aside their actions as being void

Why are trustees treated differently to
• Individuals can be foolish or reckless with their own money

• Trustees owe duties to beneficiaries

• This is why Hastings-Bass has developed as a distinct remedy to

• With mistake have to show a mistake as to the effect of the

• With Hastings-Bass only have to show that a consequence was
  not considered

Hastings-Bass: timeline

• Hastings-Bass (1975)

• Mettoy Pension Trustees v Evans (1990)

• Sieff v Fox (2005)

• Revenue Bulletin 2006

• Smithson v Hamilton (2008)

• Gresh v RBC Trust Company (Guernsey) Limited (2010)
• Pitt v Holt (2010 - January)
• Futter v Futter (2010 - March)

• Jiggens v Low (2010)

High Court

             “The time is ripe for the Court of Appeal to
             consider the rule in Hastings-Bass”
             Robert Englehart QC (sitting as a deputy
             in Pitt v Holt)

Court of Appeal?

           “We are in a mess”
           “Sooner or later the Court of Appeal may be
           given the opportunity to pronounce on [Hastings-
           Bass]…if and when they do it is devoutly hoped
           that the Revenue will take part” Lord Neuberger
           of Abbotsbury

Supreme Court?

          “The case was concerned with tax-avoidance which
          went wrong and threatened those involved with the
          disaster of having to pay the same amount of tax as
          the rest of us” Lord Walker of Gestingthorpe

Will Hastings-Bass survive?

• The application of the principle in cases like Green v Cobham
  (2000) show that the principle must be restricted

• But How?

Alliance offices

      In Guernsey We Trust

                   STEPHEN TREVOR

 Director of Fiduciary and Intelligence
Services, Guernsey Financial Services
                  Commission (GFSC)
In Guernsey We Trust


 Head of Fiduciary, Collas Day
Relevant AML issues
   Comparative Study

    Is Guernsey’s AML regime more strict than that of our competitors?
When should you report – Lessons from recent examples
   A typical facts situation…
When should you report?
   Mr Shah’s argument

     – HSBC failed to promptly carry out his instructions.

     – Sought to require HSBC to prove that it had actually formed the
       necessary suspicion.

     – HSBC failed to make the Suspicious Activity Report (“SAR”) as soon
       as reasonably possible.

   HSBC’s argument

     – It had a suspicion of money-laundering. Acted to avoid committing
       criminal offence.
The Decision
   Mr Shah was entitled to require the Bank to prove its case that it had the
    relevant suspicion

     – Take away point: Important to have appropriate systems in place to
       ensure that the suspicions are appropriately evidenced.

   No evidence that HSBC had delayed in making its SAR

     – Take away point : Undue delay in making a SAR could be a breach of
       a banker's duty of care.

     – The process following disclosure can be time consuming and therefore
       prompt action is prudent
Problems with current Guernsey Law
   No Consent Procedure

     – In the UK, the relevant authorities have a 31 day limit in the time they
       take to give consent to a transaction (section 335 of the Proceeds of
       Crime Act, 2002 (UK)).

     – No such position exists in Guernsey Law.

     – Need for reform
Practical Steps for Trustees
   Make sure that you are clear:

     – As to the nature of your suspicion;
     – That the suspicion is a relevant one; and
     – How your suspicion was formed.
   Keep detailed records.
   A disclosure report should be made as soon as a person knows or
    suspects money laundering.
   Managing customer’s expectations - we have had success at
    negotiating the release of funds with FIS
How Collas Day have been helping its clients
   Advice on whether your suspicion is reasonable (the Shah Case)
   Advice on what to say, what not to say, or we can act as an intermediary to
    prevent tipping off
   Once disclosure has been made, negotiating with the FIS concerning the
    release :
     – of information
     – of funds in whole or in part;
     – of funds to administer the trust (including your and our fees), and any
       underlying businesses

   Dedicated Multi Disciplinary Risk and Regulatory team
Minimising Trustee Risk - Investments
Minimising Trustee Risk - Investments
   The problem – monitoring investments and family businesses/high
    risk assets

   Opinion:
     – It ought to be a position of last resort that a trustee accepts trusteeship where
       it has unfettered responsibility for the investment of the Trust assets

     – There are a myriad of options available to a trustee to minimise risk, including
       hybrid purpose trusts

   Today in Guernsey
     – Reserved Powers (section 15(1) Trusts (Guernsey) Law, 2007)
Minimising Trustee Risk - Investments
   Historical context:
     – Traditional solutions

          • Luckings Will Trusts

            “The trustees have no duty to enquire into the conduct of a company in which they
            are interested unless they are on actual notice of circumstances which call for
            enquiry. “

          • Speculative Investments clause

          • Consents
Minimising Trustee Risk - Investments
   Modern solutions – legislative reform
     – British Virgin Islands – VISTA

     – Cayman Islands – Reserved Powers; STAR

     – Jersey – Reserved Powers

     – Guernsey – Reserved Powers

   The context of reserved powers for Guernsey
Minimising Trustee Risk - Investments
   An alternative option – Purpose Trusts
     – Combination of persons and purposes as objects of the trust

     – Typical beneficiaries as the beneficiaries

     – Create following overriding purposes:
         • to hold shares in the family business (overrides the trustee’s duty to
           diversify investments)

         • Leave management to the directors
In Guernsey We Trust
        Questions Time
                                          Thank you

      We look forward to seeing you at our next seminars:

                                 Tuesday 28th September
                             Funds: First Impressions Last
                                    Location: Beau Sejour

                                   Tuesday 12th October
Guernsey expects that every director will do their duties....
                                     Location: Les Cotils

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