Trust - refusal of disclosure by the representor to the first
respondent.
[2014]JRC027
Royal Court
(Samedi)
28 January 2014
|
Before :
|
J. A. Clyde-Smith, Esq, Commissioner, and
Jurats Fisher and Marett-Crosby.
|
|
Between
|
E Trust Company Limited
|
Representor
|
|
And
|
Mrs B
|
First Respondent
|
|
And
|
C
|
Second Respondent
|
|
And
|
D
|
Third Respondent
|
IN THE MATTER OF THE REPRESENTATION OF E
TRUST COMPANY LIMITED
AND IN THE MATTER OF THE Y TRUST
AND IN THE MATTER OF ARTICLES 51 AND 53
OF THE TRUSTS (JERSEY) LAW 1984 AS AMENDED
Advocate E. C. P. Mackereth for the
Representor.
judgment
the commissioner:
1.
On 9th
December, 2013, following a short hearing the Court blessed the decision of the
representor ("the Trustee") in its capacity as trustee of the Y
Trust ("the Trust") to refuse disclosure of information concerning
the Trust to the first respondent ("Mrs B") in her capacity as
former beneficiary of the Trust.
The application raised the issue of the function of the Court, namely
whether the Court was exercising its own discretion in supervising, and where
necessary, intervening in the administration of a trust, or, on the facts of
this case, giving its blessing to the proposed exercise of the trustee's
discretion.
2.
The Trust
is a discretionary trust, the assets of which were settled by the second
respondent ("the Settlor").
The assets of the Trust comprise commercial property and residential
property for trading and commercial investment purposes.
3.
The Settlor
was acquainted with the husband of Mrs B, namely Mr B ("Mr B") who,
the Trustee understood, assisted the Settlor in the acquisition of real
property held by the Trust. The Trustee
is not aware of the precise scope of the arrangements between them, save that
Mr B was to be remunerated for his advisory services. The Settlor requested that this
remuneration be made through the Trust by way of distributions to Mrs B. The Trustee acceded to this request and
accordingly, Mrs B was made a beneficiary on 17th March, 2010, with
the consent of the third respondent as protector of the Trust. Substantial distributions were made to
her and at the Settlor's request she ceased to be a beneficiary on 6th
September, 2011, again with the protector's consent.
4.
The catalyst
for this application was a letter dated 29th July, 2013, received by
the Trustee from the English firm of solicitors Hogan Lovells, stating that
they were acting for Mr and Mrs B and seeking information in relation to the
Trust. The letter explained that if
the Trustee did not assist there would inevitably be a dispute and Mr and Mrs B
reserved their rights to join the Trustee as a party to any legal proceedings
against the Settlor which might then ensue.
5.
By letter
dated 20th August, 2013, Hogan Lovells sent the Trustee a copy of
its letter before action on behalf of Mr B (and another) against the Settlor,
reiterating that its clients may have a connected cause of action against the
Trust.
6.
By letter
dated 30th August, 2013, Ogier, on behalf of theTrustee, responded
to Hogan Lovells confirming that there would be no disclosure of Trust
information to Mr B, who had never been a beneficiary of the Trust. The letter acknowledged, however, that
there was a rebuttable presumption that Mrs B, as a former beneficiary, would
be entitled to certain Trust information for the period of time that she was a
beneficiary. It was clear, however,
that information was requested by her not for the purpose of holding the Trustee
to account for the period that she was a beneficiary, but rather for the
collateral purpose of assisting her husband's claim against the
Settlor. The letter ended in this
way:-
"Whilst my client is
content that the decision it has reached is proper and correct, it acknowledges
that its analysis may be questioned by your clients. My client is prepared to take the
prudent approach and seek the approval of the Royal Court of Jersey of its
decision to refuse to provide Mrs B with any Trust information or
documentation. If your client does,
however, accept our client's position from a Jersey trust law
perspective, please confirm this to be the case by close of business on
Thursday 5th September, 2013.
If we do not hear from you by that date we will presume that there is no
consensus of opinion and we reserve our client's right to bring this
matter before the Royal Court without further notice."
7.
Not receiving
that confirmation, the Trustee brought the matter before the Court by its
representation dated 6th September, 2013. The Court convened Mrs B, the Settlor
and the protector. Hogan Lovells
responded on 27th September, 2013, to the date fix appointment in
this way:-
"The representation was
presented unilaterally by your client, for your client's own
reasons. We reserve our
client's right to be represented at the substantive hearing, but (without
meaning any offence to the Court) our client does not intend to incur the cost
of making representations at the 30th September, 2013, appointment.
For the avoidance of doubt, our
client is not pursuing its request for disclosure any further at this
juncture. Nor are our clients
requesting or insisting on judicial determination of your client's right
to decline the disclosure request.
We reserve our client's position entirely, but she accepts no
responsibility whatsoever for your client's costs in connection with
these proceedings."
8.
At the
hearing of the representation on 9th December, 2013, Mrs B was not
represented. The Settlor and the
protector had written in supporting the Trustee's decision. Proceedings have now been commenced by
Mr B (and another) against the Settlor but to date there has been no
application to join the Trustee to those proceedings.
9.
The Trustee's
approach to the Court was made on the basis that it sought the Court's
blessing to its "momentous"
decision to refuse disclosure of information to Mrs B, applying the well-known
principles set out in the case of In re S [2001] JRC 154, by which the
Court has to address the following questions:-
(i)
Is the
Court satisfied that the trustee has in fact formed the opinion in good faith
that the circumstances of the case render it desirable and proper for it to
carry out the decision?
(ii) Is the Court satisfied that the opinion which
the trustee has formed is one at which a reasonable trustee properly instructed
could have arrived?
(iii) Is the Court satisfied that the opinion which
the trustee has arrived at has not been vitiated by any actual or potential
conflict of interest which has or might have affected its decision?
10. The Court was satisfied in relation to each of
those questions and indeed would have made the same decision as the Trustee if
exercising its own discretion. It
was clear that this information was being sought by Mrs B with a view to
proceedings which might involve an attack upon the assets of the Trust and it
was not in the interests of the beneficiaries as a whole that such a process be
facilitated.
11. As to the function of the Court in an
application of this kind, Advocate Mackereth drew its attention to the case
law, which he said was somewhat contradictory.
12. In U Limited v B and 6 others [2011] JLR 452, the trustee applied to the Court for directions as to whether information
in relation to the accounts of the settlement (which was one of a number of
family settlements) should be given to the settlor, who with his wife was
excluded from benefit, and this in connection with their English divorce
proceedings. The trustee did not
seek the Court's blessing or on the face of it surrender its discretion
but made the application on the basis that the Court would exercise its own
discretion, relying on this passage from Lewin on Trusts 18th edition,
at paragraph 23-20:-
"The role of the court and
the trustees
We consider that the court in
determining whether, what and how disclosure should be made under the
principles of Schmidt v Rosewood Trust Ltd to a beneficiary is exercising its
own discretion in supervising, and where necessary intervening in, the
administration of trusts. It is
not, in our view, the case that the function of the court (in the absence of a
surrender of discretion) is merely to review, on limited grounds, an exercise
of discretion by trustees or give its blessing to a proposed exercise of
discretion by the trustees, so that the court can and will intervene only if it
is proved that the trustees' decision or proposed decision on disclosure
is wrong or of a kind that no reasonable trustees could reach. But the fact
remains that disclosure will, in the first place, be sought by beneficiaries
from trustees. Normally
applications for disclosure will be dealt with by the trustees and the court
will not be involved. It cannot be
the case that trustees have no power to decide whether, what and how disclosure
should be made, and trustees need to have a discretion for exactly the same
reason as the court needs to have a discretion. Indeed in a leading Australian case it
was decided that the trustees did have a discretion to reach decisions on
disclosure of confidential information.
There may be cases, particularly where it is obvious that the
application for disclosure is being made in anticipation that disclosure, if
made, will be followed by a breach of trust claim against the trustees, in
which trustees are in a position of conflict or possible conflict between their
personal interest and their duty to consider the application for disclosure. But fear of a breach of trust claim
could never, we think, be a good reason for not making disclosure and so if
that was the only reason for declining or limiting disclosure, the duty of the
trustees would be clear. It is only
where other circumstances exist which militate against disclosure that fear of
a breach of trust claim might disable the trustees from reaching a decision, so
necessitating a determination by the court on the matter without any exercise
of discretion by trustees. Obtaining
information with a view to a breach of trust claim is not the only reason for
seeking disclosure, and in other cases there may be no real possibility of
conflict of personal interest and duty at all. In such cases, the trustees do, in our
view, have a discretion in deciding whether, what and how disclosure should be
made. But if the matter is taken
to the court, whether by a beneficiary whose application for disclosure has not
been met to his satisfaction, or by the trustees who may be well advised themselves
to take the initiative in seeking directions in some circumstances, the court
will exercise its own discretion.
And the function of the trustees will be to persuade the court not to
intervene against their decision or to assist the court in reaching a decision
where the trustees make the application, the views of the trustees being no
more than a factor taken into account by the court in determining the
application." (our
emphasis)
13. Lewin cited Schmidt
v Rosewood Trust Limited [2003] 2 AC 709 and In re Rabaiotti (1989)
Settlement [2000] JLR 173 as authority for the highlighted proposition that
on applications for disclosure to beneficiaries the court will exercise its own
discretion. The Court in U
Limited v B accepted this role (there being no argument on the issue) even
though the settlor was not a beneficiary.
Whether it was right to do so may be open to question because it was not
concerned with disclosure to a beneficiary, but this passage from Lewin
was subsequently revised in the third supplement to the 18th edition to express
the view that if the issue of disclosure to a beneficiary was taken to the
Court, it would not exercise its own discretion (unless there was a
surrender):-
"23-20
The court does have an original
jurisdiction to intervene in the administration of the trust, but if a
trustee's refusal to make disclosure to a beneficiary cannot be
successfully challenged on those limited grounds, the court may not be
persuaded, merely because of the trustee's refusal to make disclosure, to
intervene at all in the administration of the trust under its supervisory
jurisdiction, so leaving the trustees' refusal to stand. The trustees therefore have a central
role in the decision making process on disclosure. Disclosure will, in the first place, be
sought by beneficiaries from trustees.
Normally applications for disclosure will be dealt with by trustees and
the court will not be involved. In
many circumstances, for example in relation to disclosure of trust instruments
and accounts to principal beneficiaries with vested interests, trustees have no
real choice to refuse disclosure save in special circumstances. But trustees need to have a discretion
for the same reasons as the court needs to have a discretion. And so in the context of disclosure of
confidential information the trustees have a discretion to determine whether,
what and how disclosure should be made and, unless they make an application to
the court seeking to surrender their discretion, the decision will be that of
the trustees and the decision will stand in the absence of a successful
challenge to the decision or successful invocation of the supervisory
jurisdiction."
14. The authority cited by Lewin for this
revised approach was the judgment of Briggs J in Breakspear v Ackland [2008] EWHC 220. That case concerned
disclosure of a letter of wishes.
After a very thorough review of the English and relevant common law case
law (including Rabaiotti), he concluded that trustees are not bound to
disclose a settlor's letter of wishes and may keep it confidential
unless, in their view, disclosure is in the interests of the sound
administration of the trust and the discharge of their powers and
discretions. Materially in relation
to the function of the court in an application by a beneficiary for disclosure,
he then went on to say this:-
"66. Before applying those principles to the facts of
the present case, I shall briefly summarise what I consider to be their
practical effect in relation to family discretionary trusts, separately in relation
to each of the three stages in which the issue may typically arise. First, trustees should in general regard
a wish letter (that is a document from the settlor the sole or predominant
purpose of which is or appears to be to assist them in the exercise of their
discretionary powers) as invested with a confidentiality designed to be
maintained, relaxed, or if necessary abandoned, as they judge best serves the
interests of the beneficiaries and the due administration of the trust. This discretion to maintain, relax or
abandon confidence arises regardless of a request for disclosure by a
beneficiary, and persists regardless of the incapacity, death or change of
heart on the part of the settlor.
67. Where
a beneficiary makes a request for disclosure, that in my judgment merely
triggers an occasion upon which the trustees need to exercise (or reconsider
the exercise) of that discretion, giving such weight to the making of and
reasons for that request as they think fit. Having made their decision the trustees
are not obliged to give reasons for it, any more than in relation to any other
exercise of their discretionary powers.
In a difficult case the trustees may, as always, seek the directions of
the court on the question whether to disclose but, bearing in mind the
inevitable cost associated with doing so, the trustees will need to think twice
before concluding that the difficulty of the question justifies the
expenditure. It is by no means a
matter for criticism (of the type levelled against the trustees in this case)
that trustees do not either give reasons or apply to the court for directions,
if minded not to accede to a beneficiary's request for disclosure.
68. If
application is made to the court by trustees for directions whether to disclose
a wish letter, then it is a fundamental principle that full disclosure must be
made to the court. It will almost always be necessary to include the wish
letter itself in that disclosure to the court. Furthermore the court is unlikely to
determine the question of disclosure without joinder of at least the requesting
beneficiary, and the court would have to give anxious consideration to the
question whether, and if so to what extent, to restrict disclosure of the
relevant materials to that beneficiary or his legal advisers, for the purposes
of enabling submission to be made on his behalf, in the same way as occurs in
the context of Re Beddoe applications, where the opposite party to the
proposed or threatened litigation is a beneficiary of the trust.
69. At
the second stage (i.e. determination of the disclosure issue by the court in
proceedings brought solely for that purpose), the matter may be presented, at
least in theory, in four different ways.
In its simplest form the trustees may seek to surrender their discretion
to the court, in which case (if it permits the surrender, which it is not
obliged to do), the court is exercising its own discretion afresh, rather than
reviewing any negative exercise of discretion by the trustees. Alternatively, the trustees may, without
surrendering their discretion, invite the court in effect to bless their
refusal. Thirdly, the case may be
brought by the disappointed beneficiary by way of a challenge to the
trustees' negative exercise of their discretion to disclose. Finally, the beneficiary may seek simply
to invoke an original discretion in the court, as part of its jurisdiction in
the administration of trusts.
70. The
second and third of those types of application involve a review of the
trustees' negative exercise of their discretion to disclose. If the trustees themselves apply, then
it is in practice inevitable that they will have to disclose their
reasons. If the disappointed
beneficiary applies, then it seems to me that the Londonderry principle will
entitle the trustees, if they choose to do so, to decline to give reasons, and
to defend the challenge upon the basis that, if it be the case, the
disappointed beneficiary has disclosed no grounds for impugning either the
fairness or the honesty of their decision, their reasoning being off-limits for
that purpose.
71. Finally,
if the disappointed beneficiary seeks to invoke the court's
administrative jurisdiction, then it will be incumbent upon him to demonstrate,
by reference to whatever facts may be available to him, that an occasion has
arisen which calls for the interference of the court. A mere refusal to disclose a wish
letter, unaccompanied by reasons or evidence of mala fides or unfairness, would
not ordinarily justify such intervention.
Of course, if the trustees volunteer reasons for their refusal, the
court may investigate those reasons, and call for such factual material or
further explanation from the trustees as may be thought fit.
72. The
third stage, (where disclosure is sought from the court to facilitate the determination
of an issue to which the wish letter is alleged to be relevant),gives rise to
different considerations, governed by the law and practice as to disclosure in
civil proceedings. For those purposes, the relevance of the foregoing detailed
analysis of the status of a wish letter is that identified by Danckwerts LJ in Re
Londonderry at page 936G, namely that if the document in question does no
more than illuminate the trustees' reasons for the making of a
discretionary decision, it may be simply irrelevant, unless the trustees by a
partial disclosure of their reasons have put into play the issue as to their
rationality. Since the present case
is not an example of this third category, I say no more about how the questions
of that kind may in due course be decided."
15. Thus, Breakspear envisages that where
there is no surrender of discretion, and where the beneficiary is unable to
invoke the "original jurisdiction of the court" by
demonstrating that "an occasion has arisen which calls for the interference of the
court" then the Court will proceed on the basis of a blessing,
involving a review of the trustees' decision, as opposed to exercising
its own discretion. Briggs J held
that a refusal to disclose the letter of wishes without evidence of "mala
fides or unfairness" will not ordinarily justify
intervention. This, Advocate
Mackereth said, was the same test as is usually applied in approval hearings:
has the power been properly exercised?
16. Advocate Mackereth submitted that the approach
in U Limited v B, namely for the Court to exercise its own discretion,
gives rise to difficulties and is inconsistent with the approach in Re S,
where in the absence of something having clearly gone wrong, the Court will not
interpose its own decision for that of the trustee (described in Lewin
as "the
principle of non-intervention"). Should such an approach be followed in
every case in which the trustee brought a disclosure decision to Court, the
Court would, he said, be usurping the trustee's role, which the settlor
bestowed on the trustee, not the Court.
The principle of non-intervention has been recognised in this
jurisdiction in S and L and E v Bedell Cristin Trustees [2005] JRC 109,
where at paragraph 22, Birt, then Deputy Bailiff, said this:-
"A settlor does not choose
the court as a trustee; he chooses his appointed trustee. It is that trustee upon whom the various
discretions conferred by the trust deed have been conferred. If Mr Sinel's argument were to be
accepted, the effect would be to constitute the Court as a trustee. That is not the Court's role. The Court's role is a supervisory
one and it is simply to ensure that decisions taken by trustees are reasonable
and lawful. The Court does not
simply substitute its own discretion for that of the trustee unless the trustee
surrenders its discretion to the Court and the Court agrees to accept such
surrender (which it is not obliged to do)."
17. There is some support for the suggestion that
the Court in Jersey has approached applications in relation to disclosure under
the principles set out in Re S, namely in the case of Re M [2012] JRC 127, where Sir Michael Birt, Bailiff, referred at paragraph 13 to the
trustees having previously obtained approval to two "momentous"
decisions, one of which related to disclosing information to a beneficiary in
the knowledge that he was likely to pass it on to a non-beneficiary.
18. Advocate Mackereth submitted that the approach
in Re M should be preferred to that in U Limited v B because:-
(i)
In U
Limited v B a trustee appears to have been seeking guidance as to how to
exercise its discretion rather than seeking approval of the exercise of its
discretion;
(ii) The scenario of a trustee seeking directions as
to how to exercise its discretion should be properly categorised as a type of
surrender of discretion by the trustee consistent with the Re S
approach; and
(iii) The effect of transfers of responsibility to
the Court of trustees' decisions regarding disclosure runs counter to the
fundamental proposition of Trust Law, that the discretion of a trustee is
conferred upon the trustee and not on the Court.
19. Advocate Mackereth further submitted that if
disclosure to beneficiaries is so fundamental as to require a recalibration of
the Re S principles in any way, the preferable approach would be to hold
that applications for a blessing of a disclosure decision can still be advanced
on Re S principles, but on the basis that the Court should treat the
band of reasonableness within which the trustees' decision has to fall as
being as narrow as the Court feels it needs to be. Such an approach he said may avoid the
need for the Court to make its own decision in every case concerning disclosure
to beneficiaries whilst preserving the Court's ability to ensure that
beneficiaries have access to the requisite information needed in order to hold
the trustees to account.
20. As we said above, in the case before us the
Court was content to bless the Trustee's decision as requested because it
would have reached the same decision if exercising its own discretion. On the face of it the unopposed
submissions on behalf of the Trustee as to the function of the Court were
attractive but having reflected on them we think that there are substantive
contrary arguments that could be put on behalf of beneficiaries and we wish to
leave expressly open the question of whether this jurisdiction should follow
the decision in Breakspear to a future case where full argument can be
heard.
21. The starting point as stated in Rabaiotti
at page 177 (in relation to disclosure of trust documents) is the duty of
trustees to account to their beneficiaries in accordance with the general
principles set out in Snell's Equity 30th edition at 264:-
"Another duty of a trustee is
to keep accounts and produce them to any beneficiary when required. Trustees must also when required give
any beneficiary all reasonable information as to the manner in which the trust
estate has been dealt with and as to the investments representing it... Further,
in the absence of special circumstances, they must allow a beneficiary to
inspect all title deeds and other documents relating to the trust estate. In this context a beneficiary includes a
contingent beneficiary or an object of a discretionary trust, save that
trustees who exercise discretionary powers (e.g. under a discretionary trust)
need not disclose why they have exercised their discretion in a particular way,
and so they may refuse to allow a beneficiary to inspect documents which will
reveal such information, such as minutes of their meetings."
22. This duty was emphasised in Schmidt v
Rosewood, which was of course decided after Rabaiotti, where the
Privy Council approved the judgment of Powell J in Spellson v George
[1987] NSWLR 300 at pages 315-316, the whole of which it said merited
study. The Privy Council quoted
this passage:-
"At the risk of being
regarded as overly simplistic, it is as well to start with the fundamental
proposition that one of the essential elements of a private trust, be it a
discretionary trust or some other form of trust, is that the Trustee is subject
to a personal obligation to hold, and to deal with, the trust property for the
benefit of some identified, or identifiable, person or groups of
persons."
The judgment of Powell J goes on to say:-
"It is, so it seems to me, a
necessary corollary of the existence of that obligation that the Trustee is
liable to account to the person, or group of persons for whose benefit he holds
the trust property ... and, that being so, the Trustee is obliged not only
to keep proper accounts and allow a cestui que trust to inspect them, but he
must also, on demand, give a cestui que trust information and explanations as
to the investment of, and dealings with, the trust property."
23. This obligation on the part of trustees has
been described as an essential ingredient of trusteeship, which affords the
beneficiaries a correlative right to have the Court enforce the trustees'
fundamental obligations to account.
24. Returning to Rabaiotti, from that
starting point Birt, Deputy Bailiff, posed this question at page 178:-
"The question which does
arise is whether the right of a beneficiary to see trust documents is an
absolute right or whether the court has a discretion to refuse a beneficiary
permission to inspect trust documents in some circumstances."
25. It is noteworthy that here and indeed
throughout the judgment in Rabaiotti, the Deputy Bailiff, talks in terms
of the Court, not the trustee, having a discretion to refuse disclosure. Having considered the relevant case law,
the Deputy Bailiff at page 181 approved this extract from the judgment of Doyle
C.J. in Rouse v 100F Australia Trustees Ltd [1999] 73S.A.S.R. 484 a
decision of the Supreme Court of South Australia:-
"100. There must be various situations in which a trustee,
particularly a trustee conducting a business, would be put in an impossible
position if the beneficiary of the trust could, as a matter of right, claim to
inspect documents in the possession of the trustee and relevant to the conduct
of the business. It is readily
conceivable that there will be situations in which an undertaking of
confidentiality is not sufficient protection. The fact that the trust is one in which
numerous beneficiaries have an interest, and the further fact that those beneficiaries
may have differing views about the wisdom of the course of action being pursued
by the trustee, only serve to emphasize, in my opinion, the need for the law to
recognize some scope for a trustee to refuse to disclose information on the
grounds that it is confidential and on the further ground that the disclosure
is not in the interests of the beneficiaries as a whole. I make that observation on the basis and
on the assumption that the ultimate right of the beneficiaries will be to have
the trustee removed if they are dissatisfied with the approach of the trustee.
101. Ultimately, I would rest the existence of the
relevant discretion upon the need to reconcile the undoubted duty of a trustee
to make disclosure to beneficiaries of information about the trust, and the
undoubted duty to permit the inspection of trust accounts and trust documents,
with the equally fundamental obligation of a trustee to conduct the affairs of
a trust, and particularly a trust which involves the conduct or management of a
business, in the interests of the beneficiaries as a whole. I consider that on occasions the
reconciliation of these interests may entitle a trustee to decline to provide
information to particular beneficiaries, when the trustee has reasonable grounds
for considering that to do so will not be in the interests of the beneficiaries
as a whole, and will be prejudicial to the ability of the trustee to discharge
of its obligations under the trust.
It may be that the ultimate foundation of the discretion is the
obligation of the trustee to discharge its duties to manage the affairs of the
trust in the interests of the beneficiaries.
102. I wish to make it clear that the discretion that I
envisage is a limited one, and must always be limited by the general duty of
disclosure by a trustee to which I have referred. The existence of the discretion cannot
be used as an excuse for paternalism or to disregard the interests of
beneficiaries. Its existence
depends upon the need to protect the trustee's ability to discharge its
obligations. The availability of
the discretion will depend very much upon the circumstances of the particular
case."
26. Doyle CJ does refer to the trustee having a
discretion to decline disclosure to beneficiaries but having quoted this
passage with approval, the Deputy Bailiff in Rabaiotti went on to say
this:-
"In our judgment, the
court does have a discretion to refuse to order disclosure of trust
documents that a beneficiary is normally entitled to see. Clearly, the general principle is that a
beneficiary is entitled to see trust documents which show the financial
position of the trust, what assets are in the trust, how the trustee has dealt
with those assets etc. This is an
essential part of the mechanism whereby the trustee can be held accountable for
his trusteeship to a beneficiary.
But the need for an individual
beneficiary to obtain trust documents has to be weighed against the interests
of the beneficiaries as a whole.
The trustee has a duty to the beneficiaries as a class. If, as in some of the cases referred to
above, the trustee forms the view in good faith that disclosure of documents to
which a beneficiary would normally be entitled would be prejudicial to the
interests of the beneficiaries as a whole, it may refuse to make that
disclosure and seek the directions of the court. Should the trustee fail to seek the
directions of the court it is open to any beneficiary to bring the matter
before the court for resolution. To
that extent, the court thinks the position is simpler than is suggested at the
end of para. 100 of Doyle, C.J.'s judgment in Rouse. The remedy of a dissatisfied beneficiary
is not to seek to have the trustee removed but to seek the directions of the
court as to whether the particular trust document should or should not be
disclosed. The court will
then have to balance the competing considerations and decide what is best for
the beneficiaries as a whole. In
short, the court agreed with the way in which Doyle, C.J. puts the matter at
para. 101 of the judgment in Rouse.
The court does not wish to
encourage trustees to refuse disclosure on weak grounds. One starts with a strong presumption
that a beneficiary is entitled to see trust documents of the nature
described. There would have to be
good reason to refuse disclosure of such documents. But the court is satisfied that, as a
matter of general equitable principle, the court has an overriding
discretion to withhold documents where it is satisfied that this is in the best
interests of the beneficiaries as a whole." (our emphasis)
27. Two observations arise from this extract. Firstly, that although the Court
contemplated trustees being able to refuse to make disclosure, this appeared to
be combined with an application to the Court for directions, which the
beneficiary may bring if the trustees fail to do so and secondly, the function
of the Court, whether the application is brought by the trustees or the
beneficiary, is not to review the decision of the trustees but to exercise its
own discretion.
28. The Deputy Bailiff in Rabaiotti then
went on from the general equitable principles to consider what is now Article
29 of the Trusts (Jersey) Law 1984 which has no equivalent under English
law and may well distinguish Jersey law from English law in this respect.
Article 29 is in the following terms:-
"29 Trustee may refuse to make disclosure
Subject to the terms of the trust
and subject to any order of the court, a trustee shall not be required to
disclose to any person, any document which -
(a) discloses
the trustee's deliberations as to the manner in which the trustee has
exercised a power or discretion or performed a duty conferred or imposed upon
him or her;
(b) discloses
the reason for any particular exercise of such power or discretion or
performance of duty or the material upon which such reason shall or might have
been based;
(c) relates
to the exercise or proposed exercise of such power or discretion or the
performance or proposed performance of such duty; or
(d) relates
to or forms part of the accounts of the trust,
unless, in a case to which
sub-paragraph (d) applies, that person is a beneficiary under the trust not
being a charity, or a charity which is referred to by name in the terms of the
trust as a beneficiary under the trust or the enforcer in relation to any
non-charitable purposes of the trust."
29. The Deputy Bailiff interpreted this Article in
this way:-
"As the Jersey Law Commission
states in its helpful and thought-provoking Consultation Paper No. 1 entitled The rights of beneficiaries to
information regarding a trust, the provision is not as easy to interpret as
it might be because of the use of the double negative. In our judgment, the relevant wording in
effect confers a positive right on a beneficiary to see documents which relate
to the accounts of the trust. Thus,
"... a trustee shall not be required to disclose to any person any
document which relates to or forms part of the accounts of the trust unless
that person is a beneficiary" means that, where that person is a
beneficiary, the trustee is required to disclose such documents. However, that right is expressed to be
"subject to any order of the court." In our judgment, therefore, the position
under art. [29] is that, just as we have found that under general equitable
principles a beneficiary's right to inspect trust documents is subject to
the discretion of the court, the right conferred by art. [29] is also subject
to any order of the court, which may, in an appropriate case, exercise a
discretion to refuse to order disclosure."
Again, the emphasis is on the discretion of
the Court to refuse disclosure, not that of the trustee.
30. It seems to us that the Privy Council in Schmidt
v Rosewood contemplated the Court exercising its own discretion on such an
application. Finding that a
beneficiary's right to seek disclosure of trust documents was best
approached as one aspect of the Court's inherent and fundamental
jurisdiction to supervise and if appropriate intervene in the administration of
a trust, Lord Walker said this at paragraph 67:-
"67. However, the recent cases also confirm (as had
been stated as long ago as In re Cowin 33 Ch 179 in 1886) that no beneficiary
(and least of all a discretionary object) has any entitlement as of right to
disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to
personal or commercial confidentiality, the court may have to balance the
competing interests of different beneficiaries, the trustees themselves, and
third parties. Disclosure may have
to be limited and safeguards may have to be put in place. Evaluation of the claims of a
beneficiary (and especially of a discretionary object) may be an important part
of the balancing exercise which the court has to perform on the materials
placed before it. In many cases the
court may have no difficulty in concluding that an applicant with no more than
a theoretical possibility of benefit ought not to be granted any relief."
Again it is the Court exercising its own
discretion not reviewing a decision of the trustees.
31. It would be very costly and administratively
burdensome to hold that in every case where trustees decide that it is not in
the interests of the beneficiaries as a whole to make disclosure of trust
documents to a particular beneficiary, they must seek the directions of the
Court and we do not think that is what Rabaiotti intended, but what does
seem clear from both Rabaiotti and Schmidt v Rosewood is that
once the issue of disclosure of trust documents to a beneficiary is before the
Court (whoever brings it), it will exercise its own discretion. Neither Briggs J in Breakspear nor
Lewin in the revised paragraph 23-20 make any reference to this aspect
of the decisions in Rabaiotti and Schmidt v Rosewood.
32. It may be open to question whether it is
appropriate to equate a decision to refuse disclosure to a beneficiary with the
exercise of powers vested in the trustees under the trust deed or by law of the
kind contemplated in Re S. Powers
are described in general terms in Lewin at paragraph 29-01 in this way:-
"A power is a legal authority
conferred on a person to dispose of property which is not his own. In connection with trusts, powers are
ordinarily either powers of appointment and other dispositive powers, which
enable the creation of beneficial interests in property, or administrative
powers, such as a trustee's powers of investment and sale...... There are
other powers often held by trustees which are not readily categorised as
dispositive or administrative, for example a power of appropriation and a power
to appoint new trustees."
33. In Re S the Court was being asked to
bless the trustee's decision to enter into various deeds by which it can
be assumed certain powers of appointment were being exercised. Public Trustee v Cooper, an
unreported decision of Hart J dated 20th December, 1999, upon which Re
S is based, was concerned with the sale by the trustees of shares in a
brewery.
34. We are concerned here not with the exercise of
such powers but with the discharge of the trustees' obligations. Whilst it is well established that the
Court should not usurp the role of trustees (as per S and L and E v Bedell
Cristin Trustees), its function may arguably be quite different when it
comes to the enforcement of the trustees' fundamental obligation to
account to beneficiaries, where the Court might be expected to be astute to
ensure that trustees discharge those obligations and not to distance itself
from that task. Intuitively it does
not seem right that as per Lewin in the revised paragraph 23 - 20
trustees can have "a central role in the decision making process" as
to how they discharge their own core obligations.
35. If Breakspear were to be followed in
this jurisdiction, then in an application by trustees to bless their decision
to refuse disclosure, the Court's role would be limited to one of review
as per Re S. If it were to
withhold its blessing, then, unless the circumstances were such as to call for
the Court's intervention, the trustees' decision to refuse
disclosure would still stand. If
the disaffected beneficiary seeking to hold the trustees to account applied to
the Court, then Breakspear contemplates the trustees being able, on Londonderry
principles, to withhold the reasons for their refusal from the beneficiaries
and indeed the Court, unless the beneficiaries can impugn the fairness or
honesty of the trustees' decision.
This approach could arguably represent a material dilution of the rights
of beneficiaries to have the Court enforce the trustees' fundamental
obligation to account.
36. It may therefore be argued on behalf of
beneficiaries that in relation to the discharge by trustees of such a core
obligation (as opposed to the exercise of powers vested in the trustees by the
trust deed or by law) the Court should in any application for disclosure before
it, for the proper protection of beneficiaries, reserve to itself the exercise
of its own discretion. These
observations have been made without the benefit of full argument but we would
anticipate that until the matter is the subject of full argument, the Court
will wish to do so.
Authorities
In
re S 2001/154.
U
Limited v B and 6 others [2011] JLR 452.
Lewin on Trusts 18th Edition.
Schmidt v Rosewood
Trust Limited [2003] 2 AC 709.
In
re Rabaiotti (1989) Settlement [2000] JLR 173.
Breakspear v
Ackland [2008] EWHC 220.
S
and L and E v Bedell Cristin Trustees [2005] JRC 109.
Re
M [2012] JRC 127.
Snell's Equity 30th edition.
Spellson v George [1987] NSWLR 300.
Rouse v 100F Australia Trustees Ltd
[1999] 73S.A.S.R. 484.
Trusts (Jersey) Law 1984.
Public Trustee v Cooper Unreported 20th
December, 1999.
