THE Jersey Appeal Court has allowed part of an appeal brought by Sheikh Fahad Ali Alhamrani, of Saudi Arabia, relating to the costs of a complex dispute between the beneficiaries of two Jersey trusts, the Internine Trust and the Intertraders Trust.

The appeal challenged previous decisions made by the Bailiff, Sir Philip Bailhache, in May 2006 and March this year, and another made by Commissioner Howard Page in January.

In making their decision, the Court of Appeal’s specially constituted panel of Geoffrey Vos, QC, Deputy Bailiff Michael Birt, QC, and Michael Beloff, QC, considered the differences between Jersey and English law and questioned a number of Royal Court practices which have been in place for more than 100 years.

The specific focus of the appeal was whether a beneficiary had the right to ask the court to assess the costs and expenses of a ‘neutral’ trustee, and the subsequent procedures the court should follow.

The earlier decision by the Bailiff had centred on five bills of costs totalling more than £48,000 which were reduced to around £11,000 after ‘taxation’ or assessment by the Greffier.

In his judgment, the Bailiff said that the general rule was that a trustee acting reasonably was entitled to a full indemnity out of the trust fund.

The matter was raised again before Commissioner Page, who concluded that this rule could only be overridden by the court in a separate and specific application.

But the Court of Appeal concluded last week that if proceedings were in progress a separate set of proceedings was not always necessary.

In his written judgment, Mr Vos said that although beneficiaries had no automatic right to ask the court to assess the costs of a trustee, they could question the reasonableness of such costs.

He said that at the end of similar litigation in England an assessment of the costs was often sought because of the provision of Order 62 Rule 14 RSC 1988, which has no equivalent in Jersey.

But it was still open to the parties to challenge the costs and expenses in the Jersey court.

In conclusion, the court dismissed Sheikh Fahad’s appeal to the effect that the costs of a neutral trustee should always be subject to a court assessment.

But they did order that there should be a provision that costs should be assessed by the court if there was disagreement, in accordance with the trustee’s statutory right of indemnity set out in article 26 (2) of the Jersey Trust Law.

The court also agreed that in this case the costs submitted by J P Morgan Trust Company should be assessed.

Advocate Timothy Hanson, for Sheikh Fahad, said: ‘Prior to this judgment, the Royal Court had, in part through policy, not wished to deter trustees from acting in Jersey through fear of unnecessary scrutiny of their regular expenses and the risk that they would not be able to recover them in full from the trust.

‘While not entirely mirroring the approach in other jurisdictions, the Jersey Court of Appeal judgment has gone a long way to achieving the right balance.