MY VIEW ON THE LIABILITY OF A CURACAO TRUSTEE
The Reference Trustee
The trust originates from Anglo Saxon law. On designing the Curacao trust system the systems in other jurisdictions have obviously been studied. However, the Curacao trust is a civil law and not a common law trust. Therefore in answering the question of the (possible) extent of the liability as given shape in Book 3 Curacao Civil Code (‘CCC’), a connection should be sought with the law of Curacao (and elsewhere in the Kingdom) and not with foreign legal systems.
The fact that the Trustee has a position of trust, as laid down by law, does not, according to Curacao law, automatically mean that a heavier liability system applies to the Trustee than to a trust office which is a managing director of an offshore limited liability company (NV or BV). This managing director of an NV or BV obviously also has a position of trust. It applies in all cases that there should be an assessment of what the consequences are of that position of trust in the circumstances of a concrete case. In this connection the expectations created by the Trustee himself can also play a role, for instance with regard to the experience and expertise he has.
A major part of the duty of a Trustee has the character of an effort obligation: the Trustee must make efforts to carry out his duties properly. Neglecting his duties must in those cases be of a certain seriousness before a Trustee can be held liable for the loss suffered by the trust assets. In that sense a Trustee can be compared with a managing director of an NV or BV.
In an economic sense acting as a Trustee can also be compared with being a managing director of a client company. Would it then make any difference to the liability whether a foreign party places his securities portfolio in trust in Curacao (he would then be the settler of the trust) or in an NV or BV (in which he is usually the ultimate beneficial owner (UBO))? In my opinion not and therefore there are reasons in connection with the question of the Trustee’s liability to seek connection with the standards developed in connection with Book 2 CCC (the Corporate Code of Curacao).
In its judicial review the court will have to answer the question of whether a Trustee acting reasonably and in a reasonably competent manner, thus who is suited to his duties and who fulfills them conscientiously, could have done the same in the given circumstances. I call this the “reference Trustee“.
The reference Trustee is to a certain degree obviously an abstract concept but it is not completely independent from the Trustee whose behavior has been put to the court for assessment. The reference Trustee is considered to have at least those qualities which objectively considered are required in order to operate as a Trustee. The Trustee must himself have these qualities otherwise he runs an increased liability risk. But if in an actual case the Trustee has special qualities (or possession of these has been suggested and has thereby created expectations) these qualities will also be considered to be present in the reference Trustee and it boils down to the question of how this reference Trustee would have acted in the given case.
A Trustee should only be faced with a duty of care to be put into practice thus by the court if this concrete standard would have been normal and common for a (comparable and) reasonably acting and reasonably competent Trustee as a behavioral standard, and therefore already formed part of the generally prevailing opinion at the time of the challenged acts or omissions. After all, the fleshing out and coloring in too indiscriminate a manner by the court of the legal standard of due care, which is by its nature quite vague, should be avoided.
In order to assume liability it is necessary, as stated earlier, that the Trustee can be seriously blamed. For instance in the case of intention, conscious recklessness, serious neglect of his duties, acting contrary to the law and consciously acting outside the provisions in the trust deed this can quite quickly be considered as being seriously blameworthy.
If for instance the Trustee’s duties to keep accounts are involved, a violation of these duties will quickly be considered as seriously blameworthy. This also applies to the violation of the duty of keeping the trust assets separate from any other trust assets and from the assets of the Trustee which are not incorporated in a trust. With regard to these duties it can be said that they have more the character of a result obligation and that they are not merely an effort obligation. This is why the possibilities of invoking any exculpation are (more) limited, but not excluded.
A difference in liability between a Trustee on the one hand and a managing director of an offshore NV or BV on the other hand will become particularly manifest in the event of any violation which could quickly constitute serious blameworthiness since the same obligations do not apply to both categories. This difference is therefore not about a heavier or lighter liability system.
Karel Frielink
Attorney (Lawyer) / Partner
(15 November 2012)
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