Insolvent trusts: latest decision in the Z Trust cases

The Royal Court has now imposed comprehensive directions to deal with an insolvent trust in the latest Z Trust case: [2019] JRC 069. These were based on those proposed by Bedell Cristin and approved by the Court in the Hickman insolvent estate case back in 2009.

The full background to the Z Trust cases is set out in our briefing.

In the light of developments since 2015, the Court considered again the three options for the handling of an insolvent trust:

• The trustee assuming the role of "liquidating trustee" under the supervision of the Court.
• The trustee appointing an insolvency practitioner to assist the trustee with the liquidation of the trust assets.
• The Court appointing an independent insolvency practitioner in respect of each trust, reducing the trustee to a bare trustee.

The Court again decided to follow the first option. But as to procedure, rather than leave it in hands of the trustee (as it had done in 2015), this time it decided to adopt a formal procedure based on that used in the case In Estate of Hickman [2009] JRC 040. The procedure in Hickman was proposed by Bedell Cristin and adopted by the executor (and approved by the Court) in the absence of any insolvency regime for deceased individuals.

For any other parties facing these issues, reference should also be made to INSOL's "Standard Directions for an Insolvent Trust" which were published in 2017 with input from Bedell Cristin.

Click here for a link to the judgment.