The Bermudian court decided a week ago, in Meritus Trust Co. Ltd v. Butterfield Trust (Bermuda) Ltd  SC (Bda) 82 Civ, that an outgoing trustee had no right either to make a retention from trusts being handed over to meet a prospective liability or to insist on a contractual indemnity from the incoming trustee for trust liabilities. The outgoing trustee had been replaced under a power of removal.
The outgoing trustee had an equitable right to an indemnity; and the equitable right, said the court, persisted after the change of trusteeship and could be enforced against the trust assets in the hands of the incoming trustee. That is certainly correct but the equitable right may not be very useful if the new trustee, or a further successor trustee, is based in Timbuctoo.
The decision in part turned on Bermudian statutory provisions requiring trust property to be vested in the incoming trustee without qualification. But it is of general relevance, because identical provisions appear in the English Trustee Act 1925, ss. 37(1)(d), 40(1)(b) and in many jurisdictions with a trust law based on English law. The Channel Islands are different, because statute there entitled the outgoing trustee to “reasonable security” against liabilities before handing over the assets: Trusts (Jersey) Law 1984 (2014 rev.), art. 34(2); Trusts (Guernsey) Law 2007, s. 43(1)(b).
Nicholas Le Poidevin, Q.C.
New Square Chambers