In a landmark decision, the Privy Council has upheld a Guernsey trustee exoneration clause.
In Spread Trustee Co Ltd v Hutcheson & Ors  UKPC 13, the Privy Council (by a majority of 3:2) overturned the decision at first instance and the decision of the Court of Appeal of Guernsey, holding that the customary law of Guernsey which preceded the coming into force of the Trusts Law 1989 s34(7) was to the same effect as the legislation and, accordingly it was permissible for a trust to contain a term excluding liability for gross negligence as a matter of Guernsey customary law. The Privy Council held that the Guernsey courts would have looked to English law rather than Scots law, but that English law would have yielded to Guernsey customary law. Philip Jones QC and Jonathan Harris appeared for the appellant trustees.
Trustee exoneration clauses are of critical importance to trustees in all jurisdictions. However, the approach to be followed in deciding whether settlors were able to exonerate their trustees' negligence was not clear. The case has implications for jurisdictions with similar law, not only in relation to trustee exoneration clauses, but in relation to the extent to which English law is to be applied.