¶ 4001
Overview
Scope of the chapter. This chapter addresses the position of the trustee, and of the protector, when the settlor or a beneficiary is sued, enjoined, held in contempt or made bankrupt. It covers the trustee's duties in that setting, the reach of foreign courts over the trustee, applications to the trustee's own court for directions and for approval of decisions, the trustee's personal exposure as a transferee and as an accessory, the statutes that protect trusts and trustees against foreign judgments, the protector's position, the trustee's indemnity and costs, the disclosure of trust information, and a practice protocol for trustees under pressure.
Why the trustee's conduct decides cases. The protective value of a trust depends in the end on what the trustee does. A trustee that acts on the settlor's instructions after a claim arises supplies the evidence of control on which repatriation orders and contempt findings rest (see supra ch. 39). A trustee that submits to a foreign court may expose the trust to enforcement of a judgment that its own court would have refused to recognize. A trustee that ignores a foreign order without seeking directions may face personal liability or lose its indemnity. The trustee is also the party with the most to lose personally: it holds legal title, it is the natural defendant to a claim against the trust property, and its licence and reputation are at stake.
The governing principle. The trustee's duties are owed to the beneficiaries, are defined by the trust instrument and the governing law, and are supervised by the trustee's own court. A foreign court's order against the settlor does not change those duties, though it may be a fact the trustee must take into account in exercising them. When the trustee is uncertain of the proper course, the governing law provides a remedy: the trustee may apply to its own court for directions, and a trustee that acts on those directions is protected.
Relation to other chapters. The design of the offshore trust, including the choice of trustee, protector provisions and duress clauses, is addressed in chapter 30 (see supra ch. 30). Freezing orders and the provisions limiting their effect on persons abroad are addressed in chapter 38 (see supra ¶¶ 3820, 3880). Contempt and repatriation orders against the settlor are addressed in chapter 39 (see supra ch. 39). Recognition of foreign judgments in the trust's jurisdiction is addressed in chapter 41 (see infra ch. 41).