An ‘anti-Bartlett’ clause is often included in a trust instrument to circumscribe a trustee’s duty to intervene in the affairs of underlying companies and delimit the trustee’s responsibilities vis-à-vis that asset. anti-Bartlett clause and thus that "there is no basis for the existence of the "high level supervisory duty" accepted in the courts below and advocated on this appeal". Such clauses are drafted to exclude the duty of a trustee to supervise or intervene in the business affairs of companies in which the trust holds shares. må
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The bank did not agree with the Court of Appeal’s findings surrounding the anti-Bartlett clause. Watch this space. This is quite different to being empowered not to do so by a traditional anti-Bartlett clause. The trust documentation included an anti-Bartlett clause. The reasoning for the different views taken by the courts appears to be twofold: The anti-Bartlett clauses relied upon by the Citco Trustees were a creature of statute (contained in paragraph 8 to the Second Schedule to the BVI Trustee Act) and were less comprehensive. Copyright © 2010-2020, Chameleon Group Ltd. Advertising '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. Yes please! ££» 25 November 2019. It instead allows the company to function without interference from the trustee and generally relieves the trustee from any duty to intervene in the absence of actual knowledge of dishonesty or misappropriation of funds. As modern trusts have been increasingly used to structure higher-risk investments, including family businesses, the use and scope of anti-Bartlett clauses, which are designed to * Stephen Alexander is a partner at the Jersey office of Mourant Ozannes, and Tony Pursall is a partner at their London office. The importance of a well drafted anti-Bartlett clause could not be starker. Does a recent Hong Kong ruling on the effect of an anti-Bartlett clause spell good news for trustees in the Channel Islands? A A A; To access this content, please login or register for a free 30 day trial. Anti-Bartlett clauses were developed after the English decision of Bartlett v Barclays [1980] Ch 515, where it was held that, in circumstances where a trust holds a controlling block of shares in a company, the trustee has a consequent duty to: (i) take action when the affairs of the company are not being conducted appropriately; and (ii) use its powers to obtain information and decide whether to intervene. Lydia Essa, Director, Trust Corporation International, reports. Text size . The judgment has brought home the importance of settlors, trustees and advisers agreeing the scope and intended effect of any anti-Bartlett clause at the outset of a trust relationship. It's easy to stay current with blglobal.co.uk. The Court of Final Appeal reversed the Court of Appeal's findings and ruled that the anti-Bartlett clause contained in the trust deed effectively excluded any "high level supervisory duty" with any purported residual obligation on the part of the trustee in relation to the losses caused by risky investment decisions made on behalf of the trust's underlying investment company. An important judgment by the Hong Kong Court of Final Appeal (CFA) establishes that so-called anti-Bartlett clauses in the trust deed of a Jersey family trust exempted the trustees from any liability for losses incurred in transactions by the trust's underlying investment company (Arboit, Sutton and Wise Lords Ltd v DBS, 2019 HKCFA 45; also known as Zhang and Ji v DBS Trustee). An important judgment by the Hong Kong Court of Final Appeal (CFA) establishes that so-called anti-Bartlett clauses in the trust deed of a Jersey family trust exempted the trustees from any liability for losses incurred in transactions by the trust’s underlying investment company (Arboit, Sutton and Wise Lords Ltd v DBS, 2019 HKCFA 45; also known as Zhang and Ji v DBS Trustee). These provisions are commonly called “anti-Bartlett” provisions, serving dual purposes of (1) allowing a company to function without interference from the trustee who holds shares in the company and (2) relieving the trustee from any such duty and, in some cases depriving it of the power to intervene. Anti-Bartlett clause trumps trustees’ general supervisory duty: HK Court of Final Appeal. The anti-Bartlett clause is dead—long live the brave new world. An ‘anti-Bartlett’ clause is often included in a trust instrument to circumscribe a trustee’s duty to intervene in the affairs of underlying companies and delimit the trustee’s responsibilities vis-à-vis that asset. Edward Buckland, LGL Trustees. T@ù:¹²Ì :5?myñ
rO|?Ô'ma:"Âøé¡Aßð@áó!ÿçCúVöÄ^Ľ¡âCø9×{PBÀtlDËV>? In a comforting decision for trustees, the Hong Kong Court of Final Appeal in Zhang Hong Li v DBS Bank and others has found that trustees do not owe a “high level supervisory duty” in respect of an underlying company’s investments, where supervisory duties are excluded under the terms of trust (in what is commonly referred to as an “anti-Bartlett” clause). Anti-Bartlett clause and liability. Edward was Worldwide chair of STEP 2014–2016. endobj
This should be a welcomed decision among trust and private wealth practitioners. The decision clarifies the scope of a trustee’s duties under Jersey law where there has been delegation of investment management functions and the trust deed contains an anti-Bartlett clause… Anti-Bartlett clause upheld: no overriding duty to supervise the management of an underlying company. Readers of this publication will no doubt be familiar with so-called ‘Anti-Bartlett’ clauses. In that case, and indeed in preceding cases, the Court found that where a trustee’s shareholding was large enough to confer a substantial measure of control, it is not enough for the trustee to leave the running of the company wholly to its directors—they are under an onerous duty to keep themselves info… stream
A A A; To access this content, please login or register for a free 30 day trial. It remains to be seen, therefore, how the judgment will be interpreted in the Channel Islands and elsewhere. This is a clause negating any duty to enquire into or interfere in the conduct of … But the most recent jurisprudence on anti-Bartlett clauses in Zhang Hong Li and another v DBS (Hong Kong) Ltd and others has arguably brought some long-awaited clarity. Finally, while the Zhang judgment helpfully endorses a carefully drafted anti-Bartlett clause, it is worth noting that the case was based on a relatively unique set of facts. The judgment will be a welcome relief to trustees who, prior to the judgment, were faced with the prospect of owing a high level supervisory duty in relation to the supervision and management of a business conducted by an underlying company, whether investment or trading, despite the existence of an anti-Bartlett clause in the trust instrument. endstream
This is not, of course, the same as directly intervening in the underlying management of the company. It is different to an exclusion clause, which excludes liability for that which a … This in essence amounts to a duty to be very involved in the business, with Brightman J holding that: "… Just sign up for our email updates! The terms of the particular clause meant that the trustee was relieved of any duty to interfere in or become involved in the administration, management, or conduct of the business or affairs of any company in which the ì/÷^¹ò÷ïßïw+°ÒL'»ÝîüÁiþêüz뾩=5ÍÒS%IBÇÂÑUWRïêù|ÞUºôôêúY]uî"GtGü. November Regulatory Round-up: Final judgment on scope of “anti-Bartlett” clause; UBS fined for spread overcharges; Regulators launch AI frameworks as bank adoption increases. Anti-Bartlett Provisions - Back on Track In a judgment delivered on 22 November 2019, the Hong Kong Court of Final Appeal has determined the extent to which ‘anti-Bartlett’ clauses commonly found in trust instruments are effective to relieve trustees of supervisory duties relating to the trust. 5 0 obj
[ENGLISH] In the Zhang and Ji v DBS Trustee case, the Hong Kong Court of Final Appeal (CFA) established that so-called “anti-Bartlett clauses” in the trust deed of a Jersey family trust exempted the trustees from any liability for losses incurred in transactions by the trust’s underlying investment company. It has now obtained leave from the Court of Final Appeal to re-examine the interpretation of the anti-Bartlett clause and to clarify the nature and extent of a trustee’s duty and what effect the clause had to exclude or limit the trustee’s duties. It is a well-established principle of trust law that (in the absence of contrary provision) a trustee has the same duty to safeguard a trust-owned company as it would any other asset, notwithstanding that the trustee may not possess the requisite skills to contribute to the management of that company. What are the practical effects of an anti-Bartlett clause? No thanks! This question has long exercised professional trustees. It is also worth remembering that if there are investment management agreements or other contracts in place delegating trustee authority, the trustee will also always need to understand fully its duties and obligations under that agreement. The judgment will be a welcome relief to trustees who, prior to the judgment, were faced with the prospect of owing a high level supervisory duty in relation to the supervision and management of a business conducted by an underlying company, whether investment or trading, despite the existence of an anti-Bartlett clause in the trust instrument. All underlying investment decisions were made and executed by an investment adviser who was herself connected to the structure and had, for all intents and purposes, acquiesced to the investment activity – in a deep global financial crisis unforeseen by most at the time. Full details on advertising in BL Magazine, together with our annual City, Middle East and Asia editions, plus our online options are available in our Media Pack. Whatever the nature of the anti-Bartlett provisions and delegation of investment powers, a prudent trustee will still undertake a general review of underlying investment activity. The recent case Zhang Hong Li and others v DBS Bank (Hong Kong) Limited and others has confirmed the ability of trustees to rely on terms commonly used in trust deeds known as “anti-Bartlett” clauses. Anti-Bartlett clauses are typically included in trust instruments to provide trustees with a degree of comfort when owning the shares of an underlying company particularly a trading company. Text size . The result can be a tension between commercial imperatives and the fiduciary responsibilities of the trustee. The Court of Final Appeal examined the anti-Bartlett clauses in the Trust Deed, together with the DBS Trustees' statutory duties pursuant to Article 21(1) of the Trusts (Jersey) Law,1984 (Article 21). Notwithstanding that the parties had reached a settlement after the conclusion of the hearing of the appeal, the Court decided that judgment should be handed down, because the case Enter the anti-Bartlett clause. It decided that the anti-Bartlett clauses in that Jersey law trust deed exempted the trustee from any liability incurred in transactions undertaken by the trust’s underlying company at the instigation of its appointed investment manager, the wife of the settlor. A year later, on appeal to the Court of Appeal, the court was asked to examine the anti-Bartlett clause in the trust document (which was governed by … It will seek to maintain a sufficient level of oversight to ensure an appropriate understanding of underlying investment activity and comfort that any mandate has been observed. On 22 November 2019, the Hong Kong Court of Final Appeal allowed an appeal and overturned the decision in Zhang Hong Li and others v DBS Bank (Hong Kong) Limited and others [2019] HKCFA 45. An “anti-Bartlett” clause is often included in a trust instrument to circumscribe a trustee’s duty to intervene in the affairs of underlying companies and delimit the trustee’s responsibilities vis-à-vis that asset. In a unanimous judgment, it was held that the provisions of the trust deed restricted the powers of the trustee to interfere in management of the underlying investment business (in the absence of actual knowledge of dishonesty). In December 2019, the Hong Kong Court of Final Appeal (CFA) handed down a long-awaited decision in Zhang Hong Li v DBS Bank and others and overturned the Court of Appeal’s (CA) findings by upholding the use of anti-Bartlett clauses and criticising the CA for imposing unfounded duties on trustees. The “anti-Bartlett” clause excludes the duty to get involved, but if the trustee goes ahead and gets involved nonetheless he will have assumed a duty of care to the beneficiaries. In November 2019, the Hong Kong Court of Final Appeal (CFA) delivered its highly anticipated judgment, which overturned earlier judgments. It is different to an exclusion clause, which excludes liability for that which a trustee has responsibility. Edward specializes in the management and administration of complex cross-border vehicles, protectorships, and creating and running private trust company structures. It may be that a more appropriate balance of power can be achieved by expressly restricting the trustee from exercising voting rights that attach to its shareholding without the consent of a nominated person. It was clear that the Trust Deed intended that the DBS Trustees' powers should be narrowly confined to the conduct of the investment business of Wise Lords. They affect the extent of the trustee’s duty to the beneficiaries, but they Importantly, there was not, and could not be, any ‘high level supervisory duty’ because any such duty would be inconsistent with the anti-Bartlett provisions in the deed. ‘Anti-Bartlett’ clauses get their name from the English case of Bartlett v Barclays Bank Trust Corporation[1980] 2 WLR 430. <>
In particular, the terms of the Trust Deed relieved the DBS Trustees of any duty to interfere in the management of the underlying companies unless they had … Earlier today, the Hong Kong Court of Final Appeal handed down judgment in Zhang Hong Li v DBS Bank and others a case which has been the cause of considerable discussion in the private wealth and trusts world. It is different to an exclusion clause which excludes liability for that which a … '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. xìÝi¢ÊÖ6àÿÿ˺DdAÀAÁÚû8OG¼ïÊÊê4'ª+û Full details on advertising in BL Magazine, together with our annual City, Middle East and Asia editions, plus our online options are available in our.