JOHN CONTI ESQ

KATZ WILL TRUST

NOTE ON PRIVY COUNCIL DECISION

7. In the present circumstances, however, it appears to have been assumed in the Isle of Man that the indemnity contained in the deed of discharge would have been invalid if the retirement itself was invalid. If the retirement was valid, but was itself a breach of trust, it is possible that the Respondent will wish to argue that the indemnity is still valid. This is a question beyond the scope of our present Instructions. While we are not as familiar with the matter as our Instructing Advocate, we would offer the following observations. Firstly, it is arguable that if the retirement were improper, the indemnity would likewise fall to the ground. One way in which this could be put is that it would be given in consideration of an illegal act, namely the retirement in breach of trust, and is therefore unenforceable on grounds of public policy.

8. Another question which might be raised is as to the scope of the Indemnity. We appreciate that the attitude of the Manx courts may be rather different to that of English courts to such indemnities. Even so, we would respectfully suggest that on its true construction it does not extend to liability for breach of trust, especially a breach of trust being committed by entering into the deed itself. There is much learning on the scope of exemption clauses for breach of trust. Normally, these are construed most strictly by the court against the party seeking to rely on them. It is arguable that an indenmity of this type should be similarly construed. Such indemnities are routinely given in order to persuade a retiring trustee to give up his lien on the trust property and are meant to protect him from claims which might be made against him by third parties which do not depend in any way on his having acted improperly. In our view, the courts in England would require express words if the indemnity were alleged to cover a breach of trust and might even then hold the indemnity not to be legally binding in the case of a fraudulent, deliberate or other serious breach of trust. On this aspect, the question of public policy again comes into play.