Spread Trustee Company Limited v Sarah Ann Hutcheson & Others [2011] UKPC 13

20 June 2011

This appeal from the Court of Appeal of Guernsey was about the circumstances in which a trustee under the law of Guernsey can exclude his liability for a breach of trust. It was alleged that the trustees had failed to investigate breaches of trust by previous trustees that had led the trust to sustain losses in excess of £50 million. It was common ground that a trustee cannot exclude liability for his own fraud or wilful misconduct but can exclude liability for negligence. The issue between the parties was whether he can exclude liability for gross negligence.

There was legislation on this point in Guernsey in 1989, so the issue for the court was the position in the customary law of Guernsey before 1989. The trustee argued that that law should be and would have been drawn from English law. The beneficiaries maintained that the law should be drawn from a number of sources, in particular Scots law and Roman law. The Guernsey Court of Appeal held that, although it was uncertain whether an exclusion of liability for gross negligence would have been valid in English law, it was clear that it would not be valid in Scots law; and that, because both Guernsey and Scotland have legal systems based on or influenced by Roman law, it was likely that the law of Guernsey would be the same as that of Scotland. It was therefore not possible to exclude liability for gross negligence.

The Privy Council by a majority disagreed and allowed the trustees' appeal. It held that prior to 1989 it was possible to exclude liability for gross negligence. While much of the judgment deals with issues of English law, there are extended discussions of the issue in Scots law and of the leading Scottish cases.

David Johnston QC of Axiom appeared for the trustees in relation to the Scots and Roman law arguments, while Philip Jones QC of the English Bar dealt with the English law arguments.

http://www.jcpc.gov.uk/docs/JCPC_2010_0007_judgment.pdf