Re Rabaiotti 1989 Settlement

JurisdictionJersey
CourtRoyal Court
JudgeBirt, Deputy Bailiff and Jurats Myles and Georgelin:
Judgment Date30 May 2000
Date30 May 2000
ROYAL COURT
Birt, Deputy Bailiff and Jurats Myles and Georgelin:

D.J. Benest for the trustees;

J.D. Kelleher for the beneficiary.

Cases cited:

(1) Bhander v. Barclays Private Bank & Trust Co. Ltd., Royal Ct., April 7th, 1997, unreported.

(2) Butt v. Kelson, [1952] Ch. 197; [1952] 1 All E.R. 167.

(3) Chaine-Nickson v. Bank of Ireland, [1976] I.R. 393, followed.

(4) Cowin, In re, Cowin v. Gravett (1886), 33 Ch. D. 179; 56 L.J. Ch. 78, considered.

(5) Hartigan Nominees Pty. Ltd. v. Rydge (1992), 29 N.S.W.L.R. 405; 67 A.L.J. 703, followed.

(6) Lemos Trust Settlement, In re, 1992-93 CILR 26, considered.

(7) Londonderry's Settlement, In re, Peat v. Walsh, [1965] Ch. 918; [1964] 3 All E.R. 855; (1964), 108 Sol. Jo. 896, considered.

(8) Murphy v. Murphy, [1999] 1 W.L.R. 282; [1999] 3 All E.R. 1, followed.

(9) Ojjeh Trust, In re, 1992-93 CILR 348, considered.

(10) O'Rourke v. Darbishire, [1920] A.C. 581; [1920] All E.R. Rep. 1; (1920), 123 L.T. 68; 36 T.L.R. 350; 89 L.J. Ch. 162; 64 Sol. Jo. 322, not followed.

(11) Rouse v. I00F Australia Trustees Ltd. (1999), 73 S.A.S.R. 484; [1999] S.A.S.R. 181; 2 ITELR 289, followed.

(12) Settlement, In re a, 1994 JLR 139, considered.

(13) West v. Lazard Bros. & Co. (Jersey) Ltd., 1987-88 JLR 414, followed.

Additional case cited by counsel:

T v. T, [1996] 2 FLR 357.

Legislation construed:

Trusts (Jersey) Law 1984, art. 25: The relevant terms of this article are set out at page 183, line 40 - page 184, line 2.

art. 47:

"(1) A trustee may apply to the court for direction concerning the manner in which he may or should act in connection with any matter concerning the trust and the court may make such order, if any, as it thinks fit.

(2) The court may, if it thinks fit

(a) make an order concerning

(i) the execution or the administration of any trust ..."

Texts cited:

Jersey Law Commission Consultation Paper No. 1, The rights of beneficiaries to information regarding a trust, paras. 4.2.19-4.2.26 (1998).

Moore & Allport, Disposals, Discretion & Deception, 3 Jersey Law Review 306 (1999).

Snell's Equity, 30th ed., at 264 (2000).

Underhill & Hayton, Law of Trusts & Trustees, 15th ed., at 657-660 (1995).

Trustspowers and duties of trusteesduty to give information to beneficiariesbeneficiary entitled to inspect accounting documents of trust, subject to discretion of court to refuse disclosure if not in best interests of all beneficiaries

Trustspowers and duties of trusteesduty to give information to beneficiariesnot normally entitled to see letter of wishes, but court may allow disclosure if good reason to do so

Trustspowers and duties of trusteesduty to give information to beneficiariespresumption that may withhold letter of wishes as confidential if in interests of all beneficiariesdiscretion to disclose under Trusts (Jersey) Law 1984, art. 25 (b) and (c)

Trustspowers and duties of trusteeslegal proceedingsgenerally inappropriate for trustees to become involved in litigation between beneficiaries and third parties, e.g. dispute as to financial provision for beneficiary's spouse

Trustees sought the directions of the court under art. 47 of the Trusts (Jersey) Law 1984 as to whether they should disclose to one of the beneficiaries documents relating to the settlements and whether they should intervene in the matrimonial proceedings of that beneficiary.

The trustees were the trustees of four settlements by related settlors. Two were governed by the law of the British Virgin Islands, but were administered in Jersey and therefore subject to the jurisdiction of the Jersey courts, and the other two were governed by Jersey law. The beneficiaries of all four settlements were the son of the settlor (involved in the current proceedings), and the daughter, grandchildren and remote issue of the settlor.

One of the beneficiaries was involved in divorce proceedings in England. In a dispute as to the extent of the financial provision he should make for his wife, the High Court made an order that he should disclose copies of the "accounting documents" of the settlements as well as all letters of wishes relating to them. It also gave leave for the trustees of the three settlements involving the beneficiary to intervene in the divorce proceedings.

The trustees therefore sought the directions of the court as to whether they should disclose the documents relating to the settlements and whether they should intervene in the matrimonial proceedings, submitting that (a) there was good reason for the court to refuse disclosure of both the accounting documents and the letter of wishes as it was not on the request of a beneficiary made of his own free will but rather as a result of an order of an English court; (b) they were concerned that making the documents available would make it more likely that the English assets of the settlement might be attacked in some way, or that the English court would exercise its jurisdiction to vary the terms of the trusts; (c) a letter of wishes was a document which need not be disclosed, to safeguard the confidentiality of the deliberations of the trustees and their reasons for the exercise of discretionary powers; and (d) it was in the best interests of the beneficiaries as a whole for the trustees not to prejudice their freedom of action by submitting to the jurisdiction of the English court.

The beneficiary submitted in reply that (a) a beneficiary should be entitled to know the reasons for a trustee's decision; (b) in particular, there were strong reasons for disclosure in this case as otherwise the English court might misunderstand the extent of his beneficial interest under the various settlements; and (c) a letter of wishes came within art. 25(b) and (c) of the 1984 Law and the court had therefore a discretion to order disclosure of such a document.

Held, ordering disclosure of both sets of documents:

(1) There was a strong presumption that the beneficiary was entitled to see the trust documents, requiring good reason to refuse disclosure. As a matter of general equitable principle, the court nevertheless had an overriding discretion to withhold documents if it were satisfied that it was in the best interests of the beneficiaries as a whole, though in this case there were no good grounds for preventing disclosure (page 183, lines 7-13; lines 31-37; page 192, lines 15-16; page 192, line 28 - page 193, line 2; page 194, lines 9-14).

(2) There was a strong presumption against the disclosure of a letter of wishes because it was a document which was confidential to the trustees, and the court would not allow the inspection of a letter of wishes unless a clear case was made for its disclosure. In this case disclosure would be permitted, as the English court might otherwise proceed on an erroneous basis, having regard to information essentially different from that contained in the letter of wishes, and this was clearly not in the best interests of the beneficiaries. In addition, the only other child of the settlor supported full disclosure (page 188, line 39 - page 190, line 19; page 191, lines 37-45; page 193, lines 5-8; page 193, line 41 - page 194, line 8; page 195, lines 15-19).

(3) These decisions could be taken for all four settlements using general equitable principles. In the case of the two governed by Jersey law, however, the court could also take into account art. 25(b) and (c) of the Trusts (Jersey) Law 1984, which, although phrased as to allow the trustees to withhold a letter of wishes from a beneficiary, gave the court a discretion to permit disclosure (page 190, lines 20-40).

(4) Following the making of the orders of disclosure, the English court would now be aware of the beneficiary's interests under the settlements. It was, however, unlikely that a foreign court would so exceed the bounds of comity as to purport to vary a settlement which had no connection with its country other than that some of the beneficiaries resided there, and as a matter of general principle it was inappropriate for trustees to become involved in litigation between beneficiaries and third parties. The court did not therefore believe it to be in the best interests of the beneficiaries as a whole for the trustees to intervene in the matrimonial proceedings (page 194, line 36 - page 195, line 3; page 195, lines 25-27).

BIRT, DEPUTY BAILIFF: This application raises interesting issues as to the duties and powers of trustees in relation to disclosure to beneficiaries of (i) trust documents, such as trust deeds, accounts, etc. and (ii) a letter of wishes given by the settlor to trustees in connection with a discretionary settlement. We announced our decision at the time of the hearing and now give the reasons for that decision.

The factual background The court is concerned with four settlements.

The 1989 Settlement This is a discretionary settlement, established on July 13th, 1989 by Guiseppe Rabaiotti (the settlor). The trustee is Latour Trust Co. Ltd. The settlement is governed by the law of the British Virgin Islands. However, it is administered in Jersey by Latour Trust Ltd. on behalf of the trustee, and is therefore, pursuant to art. 5 of the Trusts (Jersey) Law 1984, subject to the jurisdiction of this court. The beneficiaries of the 1989 Settlement are John Rabaiotti (son of the settlor), Louisa Punturieri (daughter of the settlor) and the grandchildren and remoter issue of the settlor.

The Grezzo Settlement This is a discretionary settlement established on July 22nd, 1994 by the settlor. The trustee is Latour Trustees (Jersey) Ltd. The settlement is governed by Jersey law. The beneficiaries are the same as in the 1989 Settlement.

The Catikina Trust This is a discretionary settlement established on January 19th, 1998 by the settlor. The trustee is Latour Trust Co. Ltd. The settlement is governed by Jersey law. The beneficiaries are the same as in the 1989 Settlement.

The Luisa Punturieri Trust This is a...

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