High Court confirms: directors of corporate trustees protected from Civil claims

19 June 2008

Gregson v. HAE Trustees Ltd concerns a discretionary private trust, whose only trust assets related to shares in a family business.

Following years of successful trading, the business went into administration, making the trust assets worthless. A beneficiary of the trust brought a claim against the trustee company for failing to diversify the investments of the trust and take proper professional advice.  However, the real targets of the claim were the directors of the trustee company.  The beneficiary made a claim against them for breach of their duty of care as directors, the basis of the claim being the corporate trustee holds such claims as trust property for the benefit of the beneficiaries.   These claims are called "dog leg claims".
The High Court ruled:

  • the company may have a claim against the directors but the corporate trustee did not hold such a claim on trust for the beneficiaries; and
  • directors owe a duty of care to the company only.  This duty is different from the duty which a corporate trustee owes to the beneficiaries of a trust; to find otherwise would mean setting aside established company and employment law principles.


This decision confirmed the rule laid down in HR v. JAPT [1997] PLR 99 in which it was held the directors of a trustee company do not owe a direct fiduciary duty to the members of a pension scheme of which the company is the trustee.  This is one strong reason for establishing a corporate trustee in relation to pension schemes as it adds a layer of protection for those individuals who would otherwise be the trustees of the scheme.  It is surprising that in many schemes, individual trustees remain and are not put behind the veil as directors of a corporate trustee.

Gregson v. HAE Trustees Ltd and others, 8 May 2008

 

Contacts

If you would like further information on this subject please get in touch with your usual contact or:

Alan Jarvis,
Partner, Employment & Pensions T: +44 (0)20 7246 7038

Elmer Doonan,
Partner, Employment & Pensions T: +44 (0)20 7246 7151

Andrew Patten,
Partner, Employment & Pensions T: +44 (0)20 7246 7306

Karen Prince,
Senior Professional Support Lawyer, Employment & Pensions T: +44 (0)20 7246 7471


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