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Trustees & Private Wealth Practitioners: Time to Review, Reset & Reload

Recent world events have offered both individuals and businesses across the world an opportunity for introspection. In a period of constant change, the businesses that thrive will be those capable of rapidly adapting to new challenges and changing circumstances. For trustees and those operating in the private wealth sector, it is likely that recent events will accelerate and exacerbate existing challenges and trends. As such, there is no time like the present to review governing documents, corporate governance procedures and succession planning to ensure that it is fit for purpose in light of the current crisis and those to come. This article will consider some practical considerations for trustees and private wealth practitioners as they look to the future.

Investment Performance

One of the few certainties of the current crisis is that it will have a major and long-lasting impact on global financial markets. The initial hopes for a “V-shaped recovery” no longer seem plausible and the consensus now seems to be that the world is facing a genuine, and not short-lived, economic crisis.

The downturn obviously puts pressure on private wealth practitioners, particularly those that have custody or control of assets. For trustees, the value of most trust funds will be diminished, meaning a raft of potential claims from disgruntled beneficiaries seeking to recoup their losses. Notwithstanding that the downturn has been prompted by circumstances beyond their control, many trustees will find themselves in the firing line. This could even be the case where trustees consider that they are blameless or that they have adequate protection from liability under the terms of the relevant trust deed.

It was the 2008 global financial crisis (the “GFC”) that precipitated the circumstances in the case of Zhang Hong Li v. DBS Bank1, which was recently determined by the Hong Kong Court of Final Appeal. The case concerned a Jersey trust which was structured (at the settlors’ request) to allow one of the settlors to direct the Trust’s investments.  To achieve this goal, a common investment structure was put in place whereby the settlor was appointed as investment advisor to the underlying company which held the Trust’s investments.  Furthermore, the Trust Deed contained a provision which broadly provided that the Trustee was not responsible to supervise the underlying company’s investment decisions (referred to as an “anti-Bartlett” clause).


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Trustees & Private Wealth Practitioners: Time to Review, Reset & Reload


Robert Lindley
Partner, Head of Cayman & BVI Private Client & Trust

British Virgin Islands, Cayman Islands   +1 345 814 7360

Wesley O’Brien

Cayman Islands   +1 345 814 7350

1 Zhang Hong Li and others v. DBS Bank and others


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