07 October 2019
Carey Olsen's Guernsey trusts conference urges caution over reliance on 'Anti-Bartlett' clauses
'Anti-Bartlett' clauses remain a useful tool in trust structuring but should not be seen as providing infallible protection for trustees, according to Carey Olsen trusts and private wealth partner Natasha Kapp.
Speaking at the firm's Guernsey autumn trust conference, Natasha referenced the recent Hong Kong Court of Appeal decision in Zhang Hong Li and others v DBS (Hong Kong) Ltd and others, which held a professional trustee was in breach of trust in failing to intervene in an underlying company's investment decisions despite the incorporation of 'anti-Bartlett' provisions in the trust instrument.
'Anti-Bartlett' clauses are included in trust instruments as a way of allowing trust owned companies to be managed independently by relieving the trustee from any duty to enquire into or interfere in the conduct of the relevant company or companies, unless the trustees are aware of circumstances calling for enquiry. In Zhang, despite the inclusion of 'anti-Bartlett' provisions within the trust instrument which were held to be enforceable, the court held that such clauses did not exclude the high level supervisory duty of the trustee, particularly in relation to the investment decisions and transactions being taken by the investment manager that ultimately led to large financial losses for the trust and its beneficiaries.
"Where assets in trusts are financial investments held through underlying companies, trustees should consider the scope of their existing 'Anti-Bartlett' provisions and reflect whether there may be room for this to be widened. For example, it is possible in certain cases to expressly disclaim liability for withholding approval for investments recommended by an investment adviser," said Natasha.
"However, what is important to stress is that we shouldn't throw out 'Anti-Bartlett' clauses when structuring a trust because there is still an important difference between a trustee discharging a high level supervisory role in respect of trust assets and involving themselves deeply in the day-to-day management and oversight of those assets – the two are not the same."
Natasha explained that the court in Zhang was clear that what a trustee needed to ask itself is, essentially, whether it is actively taking steps in understanding the matters for which it is ultimately responsible.
"The nature of the high level supervisory role will always be fact-specific and dependent. It will involve making appropriate enquiries, carrying out an analysis and, in some cases, challenging and overriding decisions or proposed decisions in connection with investments put before it," said Natasha.
"When considering the structuring of a trust and the risk involved in taking on a trusteeship, 'Anti-Bartlett' provisions still remain a tool that are able to meet the needs of settlors and beneficiaries, and also protect trustees to a certain extent. However, such clauses should not be seen as providing infallible protection for trustees."
Other members of the Guernsey trusts and private wealth team to speak at the event included partner Russell Clark, counsel Laila Arstall and associates Chloe Carnachan, Alexandra Gill and Chloe Whitmore. Between them, they covered regulatory updates concerning economic substance and data protection, as well as the Guernsey Financial Services Commission's new guidance on private trust companies and its consultation paper on proposals to create a single fiduciary handbook, including proposed changes to pension and gratuity scheme rules.
In addition, partner and general counsel Karen Le Cras and senior associate Elliot Aron, members of the Guernsey dispute resolution and litigation team, provided overviews of recent trust cases that had been heard in the Guernsey and Jersey courts.
The event, which took place at the OGH Hotel, was attended by 100 professionals from Guernsey's fiduciary sector. The firm's autumn trust conference series also incorporates similar events in Jersey and London.