4 New Square Chambers’ David Halpern KC has been involved in a landmark decision by the Singapore International Court of Appeal concerning trustees’ liabilities.

The Singapore International Court of Appeal handed down judgment on 8 July 2024 in an important case about the liabilities of trustees.  The claim was brought by Bidzina Ivanishvili, the former Prime Minister of Georgie, against Credit Suisse Trust Ltd (“CST”).  The trial judge awarded compensation of US$926m for breach of trust arising from frauds committed by a rogue employee named Lescaudron.

On appeal CST sought to argue that it was solely in breach of a duty of care to safeguard the trust assets, and that damages should be limited to loss falling within the scope of CST’s duty of care and should be reduced by contributory negligence.

The CA rejected this argument and gave a wide-ranging judgment about the nature of fiduciary duties.  It said that the claim was not for negligent investment, nor for negligent review of investment decisions, but for “abject failure to take any steps to act on the numerous red flags repeatedly brought to CST’s attention over a prolonged period of time, in breach of its duties” [29].

This was a breach of CST’s fiduciary duties, and “in the case of a breach of fiduciary duties, the rules of causation, foreseeability, and remoteness do not apply, and the defaulting fiduciary may only avoid liability if it can establish that the respondents would have incurred the same loss in any event, ie it can disprove the but for causation test” [28].

The CA emphasised that the core fiduciary duty is the duty of loyalty.  The various rules identified by Millett LJ in Bristol & West v Mothew [1998] Ch 1, such as the no-profit and no-conflict rules, are no more than aspects of that core duty [42].

It is sometimes said that fiduciary duties are proscriptive and not prescriptive, but this was rejected by the CA: “A fiduciary that does not actively place themself in a position of conflict may nevertheless subsequently discover the existence of such a conflict. In such a circumstance, the fiduciary will be duty-bound to make full disclosure of that conflict as soon as is practicable and take steps to extricate themselves from the position of conflict” [43].

CST knew that Lescaudron was carrying unauthorised transactions on a large scale but made a conscious decision to say nothing to Mr Ivanishvili so as not to rock the boat and risk losing him as a client.  This was a breach of CST’s duty of good faith, which required it to act positively in the interests of their principal [44, 47-48].

Having found that the relevant duty was fiduciary and not merely tortious, the CA had no difficulty in concluding that the Scope of Duty principle had no application [66], and nor did the doctrine of contributory negligence [68].

Under Singapore law the legal burden of proof is reversed in cases of breach of fiduciary duty, so that it is up to the fiduciary to show that the loss would have been suffered, even if there has been no breach [63].  (The position under English law is less clear-cut: see Swindle v Harrison [1997] 4 All ER 705 and Main v Giambrone [2018] PNLR 2.)

If CST had not breached its fiduciary duties, it would have told Mr Ivanishvili about the defalcations and he would immediately have moved the funds to a different trustee.  The trial judge awarded compensation based on a hypothetical whole-portfolio model of the investments that would have been made by a different trustee.  CST objected to the whole-portfolio model on the ground that it gave compensation for under-performance of investments which had nothing to do with Lescaudron’s frauds.  However, the CA upheld the judge’s basis, saying that it was impossible for the court to be sure which investments were wholly untainted by his fraud [91].

The CA emphasised that the exercise must be carried out “in the context of the particular factual matrix and the objective facts” [77].  For this reason, the CA tweaked the judge’s findings in a few specific respects where CST had been able to demonstrate that Mr Ivanishvili would in fact have chosen an investment that performed less well than the hypothetical model.

David Halpern KC , together with Sophie Holcombe and Jamie Randall, were instructed by Blake Morgan LLP (Sarah Rees, Conor Daly and Alex Lepretre) to work with Drew & Napier LLC in Singapore on behalf of Mr Ivanishvili.

Read the full judgment here