Equality is equity as privy council rules on insolvent trusts

In an article for eprivateclient, BDB Pitmans’ contentious probate partner, Lucinda Brown discusses the highly anticipated ‘Z Trusts’ judgement, which was handed down by the privy council on 11 October 2022.

The case was heard by a full privy council board of seven members in June 2021 and has clarified the nature and ranking of a former trustee’s equitable lien in so-called ‘insolvent trusts’.

Whilst ‘insolvent trust’ is technically a misnomer, given that a trust is not a separate legal entity and cannot, as a matter of law, be insolvent, there is no denying that a trust can properly be considered as an economic entity and understood to be insolvent where there are cashflow problems which prevent the trust being able to meet its liabilities as they fall due, or on a balance sheet basis where the assets of the trust are not sufficient to satisfy the value of claims enforceable against trust assets.

Subscribers can access the full article on the ePrivateClient website.