This text, first published by STEP in 2007 and now in its third edition, reviews the difficulties that arise on the transfer of trusteeships, particularly in respect of the negotiation of indemnities, and sets out a suggested approach. It contains: * a core section dealing with trusts governed by English law; * jurisdictional chapters, which explain the differences under local law for trusts governed by the laws of The Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Hong Kong, the Isle of Man, Jersey, New Zealand and Singapore; * precedent deeds of change of trustee for each of those jurisdictions; * a detailed drafting commentary; * a U.S. commentary which outlines general principles involved in the transfer of trusteeships of U.S. trusts and general tendencies among states, with a particular focus on the trusteeship laws of the State of New York; and * a table of references listing the statutes and cases, for ease of reference. The text is an essential reference work for any legal practitioners, trust company professionals and others involved in advising on the transfer of trusteeships.
A Practical Guide to the Transfer of Trusteeships
By Richard Williams, Arabella Murphy, Toby GrahamGlobe Law and Business Ltd
Copyright © 2017 Globe Law and Business Ltd
All rights reserved.
ISBN: 978-1-78742-113-4Contents
Foreword to the 1st edition, 7,
Table of legislation, 9,
Cases, 13,
STEP, 15,
1. Introduction, 17,
2. English law trusts, 21,
3. Bahamian law trusts, 61,
4. Bermuda law trusts, 71,
5. British Virgin Islands law trusts, 79,
6. Cayman Islands law trusts, 87,
7. Guernsey law trusts, 97,
8. Hong Kong law trusts, 107,
9. Isle of Man law trusts, 123,
10. Jersey law trusts, 127,
11. New Zealand law trusts, 137,
12. Singapore law trusts, 149,
13. United States trusts, 159,
14. Commentary on the model precedents, 171,
Appendices, 197,
Appendix A English law precedents, 197,
Appendix B Bahamian law precedents, 243,
Appendix C Bermuda law precedents, 255,
Appendix D British Virgin Islands law precedents, 281,
Appendix E Cayman Islands law precedents, 293,
Appendix F Guernsey law precedents, 319,
Appendix G Hong Kong law precedents, 345,
Appendix H Isle of Man law precedents, 357,
Appendix I Jersey law precedents, 383,
Appendix J New Zealand precedents, 403,
Appendix K Singapore law precedents, 429,
About the authors, 441,
CHAPTER 1
Introduction
Richard Williams Queensland Bar
1. Introduction
In December 1999, the Trust Law Committee in England issued a consultation paper, The proper protection by liens, indemnities or otherwise of those who cease to be trustees. The paper provided an illuminating analysis of the law in this area, in particular as regards the equitable non-possessory lien and the steps that an outgoing trustee may take to protect his position in relation to the reimbursement of properly incurred liabilities. The Society of Trust and Estate Practitioners (STEP), through its technical committee, issued a response in April 2000, after consultation with James Kessler QC. The conclusion was that, while the present law in this area was not ideal, statutory reform was not necessary. The technical committee did, however, put forward a proposal:
The most common source of difficulty in practice in this area arises, we believe, on the appointment of new trustees. Retiring trustees seek covenants which are not acceptable to the new trustees, and the negotiation of these covenants sometimes gives rise to considerable expense and delay. We think this problem could be mitigated if there existed a protocol (perhaps with standard precedents) setting out what is regarded as an appropriate covenant in normal cases.
This guide, the first edition of which was published by STEP in 2007, seeks to provide such a protocol on indemnities in connection with the transfer of trusteeships, together with precedents. It is not intended as a substitute for the existing practitioner texts on trust law, which address these topics in detail, nor of course for appropriate legal advice. Rather, it is intended to address some of the practicalities, and to provide a STEP standard approach for dealing with indemnities on transfer. Guidance has also been included on the related topics of the inspection and transfer of trust documents, the handling of the transfer of trusteeships in contentious situations, and trustee indemnity insurance.
The approach that is put forward in respect of indemnities can be summarised as follows:
1. In all of the offshore jurisdictions that are covered in this guide, apart from The Bahamas, the British Virgin Islands, Hong Kong and Singapore, chains of indemnity appear to be regarded as commonplace in the local trust industry. This is despite the view expressed in the STEP response of 2000, referred to above, that it may be satisfactory to rely on the non-possessory lien (where available) without also using a chain of covenants. For the reasons that are stated at 2.3 below, practitioners are urged to adopt a much more cautious approach to the inclusion of chains of indemnity, particularly if the past administration of the trust has been straightforward and there are no factors that indicate that there might be any possible current or future liability for the retiring trustee. In many cases, consideration could be given to relying instead on the trustees' lien.
2. There is, nevertheless, an obvious need in the industry for precedents that provide for chains of covenants, for those cases where there are contentious issues or known or anticipated liabilities. The authors have therefore aimed to provide in the offshore precedents contained in this guide, a standardised form of indemnity clause that provides for such chains. In the course of preparing the precedents, it has become apparent that there are many pitfalls associated with the drafting of such indemnity clauses, and those matters have been addressed, so far as possible, in the drafting commentary in chapter 14. We are indebted to Lynton Tucker of New Square Chambers for the time that he generously devoted to this project, on a pro bono basis, by way of settling, under English law, the longform indemnity clause (and ancillary provisions) which appears in the precedents in the appendices. Practitioners may at first sight be surprised at the length of these indemnity provisions but it should be appreciated that these precedents are not intended for use in every situation but rather as a starting point for the draftsman in those particular cases where, after careful consideration, a chain is thought to be needed. These indemnity clauses have also been included in the England and Wales precedents, on the basis that chains of covenants may be needed for more complex cases. It should be stressed again that these precedents will not be appropriate for many straightforward cases where the lien, or a simpler form of indemnity without any chain, may be sufficient.
3. The precedent deeds provided for trusts under Bahamian, British Virgin Islands and Singapore law do not include any chains of covenants. This is intentional because it appears inappropriate to encourage the use of such chains where that is not currently the local practice. The same approach has been taken for the Hong Kong and New Zealand law precedents. It is understood that the use of chains of covenants is not as common in those jurisdictions as in the other offshore jurisdictions covered in this guide, although practitioners' views may vary in Hong Kong regarding indemnities.
4. The position is also different in Jersey, where a simplified form of chain of covenants is often used.
It should also be noted that this guide relates only to private inter vivos (lifetime) trusts – reference should be made to the appropriate practitioner texts for details of the special considerations that apply to charitable trusts, will trusts, employee benefit trusts, pension trusts and commercial trusts.
Two particular matters that are outside the scope of this guide are flee clauses (and other provisions for the automatic removal of trustees in specified circumstances) and conflict of laws. The Hague Trust Convention 1985 provides, in Article 8, that the proper law of the trust shall govern "the appointment, resignation and removal of trustees". Other laws may also be relevant, particularly the lex situs of the property that is to be transferred (ie the law of the place where the property is situated). The issue of conflict of laws in relation to...
