A trustee can be faced with many forms of liability including liabilities to third parties, contractual liabilities, liabilities in tort and liabilities as a titleholder (e.g. shareholder or owner or land). But perhaps one of the biggest concerns to trustees is potential liability to beneficiaries for breaches of trust. In order to fully appreciate the extent to which trustees may face liability for breaches of trust it is important to understand the duties of trustees.
2. TRUSTEE DUTIES
Trustee duties are obligations contained in the trust instrument or imposed by common law or statute, which must be carried out by the trustees. In the Channel Islands (unlike other offshore jurisdictions) generally trustee duties are imposed by statute.
Duties and powers prescribed by general law may be modified by the trust instrument, but there are minimum core obligations placed on trustees that cannot be avoided. At their basic, a duty to act honestly and in good faith1 and an overriding obligation to preserve and safeguard the trust property.
Importantly there is a “duty of care” on the trustees which is a standard that they must meet in every aspect of the performance of the role as trustees. The standard applied to the duty of care differs for lay and professional trustees. Licensed trustees in offshore jurisdictions will also be subject to the Regulations and Codes of Practice issued by the relevant governing authority in that jurisdiction.