Representation of U

JurisdictionJersey
CourtRoyal Court
JudgeJ. A. Clyde-Smith, Esq,Jurats,Morgan,Nicolle,Clyde-Smith, Commr. and Jurats Morgan and Nicolle
Judgment Date06 July 2011
Neutral Citation[2011] JRC 131
Date06 July 2011

[2011] JRC 131

ROYAL COURT

(Samedi)

Before:

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Morgan and Nicolle.

Between
U Limited
Representor
and
B
First Respondent
C, both on her behalf and on behalf of her brother A together with their unborn issue and their future husbands, wives, widowers of both of themselves and their unborn issue
Second Respondent
D, both on her own behalf and on behalf of her unborn issue and her and their heirs, future husbands, wives or widowers
Third Respondent
E, both on her own behalf and on behalf of her issue and her and their spouses, widows or widowers
Fourth Respondent
J, both on her own behalf and on behalf of her issue and her and their spouses, widows or widowers
Fifth Respondent
M, both on her own behalf and on behalf of all other persons beneficially interested under the settlement
Sixth Respondent
V
Seventh Respondent

Advocate R MacRae for the Representor. B, the first respondent, was present.

THE COMMISSIONER:

1

On 1 st March, 2011, we gave directions to U Limited (“the trustee”) to disclose the accounts of the W Settlement (“the settlement”) to the first respondent, B, and we now set out our reasons.

2

The settlement is a discretionary settlement established by B on 13 th March, 1989, with assets derived in substantial part from wealth created by his late father, P.

3

The settlement is now governed by Jersey law and whilst the beneficial class is very widely drawn, the trustee regards the second to sixth respondents as the persons principally interested under the settlement, namely B's three children, C, D and A and their respective issue and his three sisters, E, J and M and their respective issue.

4

It is clear that the settlement is one of a number of settlements created for the benefit of B and his three sisters and their respective children and remoter issue. The trustee's understanding is that the settlement was and is intended to be generational and dynastic and indeed no distributions have been made from it.

5

B and any wife of his are excluded from benefiting from the settlement; specifically under clause 30(1) of the settlement no discretion or power can be exercised in such manner as shall cause any part of the income or capital of the trust fund to be paid or lent or otherwise applied for the benefit of B or any wife of his. The consent of B during his lifetime and after his death the consent of his widow is required before the trustee can exercise its power of addition to or exclusion from the class of beneficiaries.

6

B and his wife Q have been engaged in divorce proceedings before the Family Division of the High Court of England and Wales for some [3] years. Her accountant, W FCA, wrote on 8 th December, 2010, saying that whilst some disclosure had been made (he had the settlement deed for example) he was severely hampered by the non-production by B and his advisers of copies of the accounts of the settlement. He expressed the view that the settlement was absolutely central to the T Trust structures, their operation and, as far as he could tell, owned assets whose value greatly exceeds the value of all of the other assets in the trusts which have been disclosed. On the face of it, the trustee could decide that the settlement had sufficient funds to meet the needs of all of the potential beneficiaries of all of the trusts save for B and Q, leaving the other trusts to make reasonable provision for them. Although it was a matter for the English court, it was essential, in W's view, that the financial history and financial position of the settlement be investigated to ensure that the English court is presented with a full picture of the family finances.

He could not see how the English court could make an informed judgment in the proceedings without disclosure of the accounts for at least the last three years of the settlement, whose gross assets he estimated at some £250M based on publicly available information.

7

On 2 nd February, 2011, the English court ordered B to use his best endeavours to obtain copies of the accounts of the settlement for the last three years. “Best endeavours” was to include his writing personally to the trustee, stating that he wished the accounts to be provided to him and that he considered it to be in the best interests of his children as beneficiaries of the settlement for those accounts to be provided, given that the nature and quantum of the financial provision for them is an issue in the proceedings. The English court recorded that in default of disclosure of the accounts, B may be at risk of adverse inferences being drawn against him by the court. In default of disclosure B was ordered to set out in an affidavit a full account of the assets held in the settlement and their value as far as is within his knowledge.

8

B wrote to the trustee on 4 th February, 2011, and quoting from his letter:-

“I really cannot overstate how important it is to the fair resolution of the outstanding financial proceedings for these accounts to be made available to my wife's legal team. If they are not made available, there is a risk of a significant misunderstanding occurring as to the nature and/or value of the trust. They are also important to give her the reassurance necessary to negotiate a settlement with me. Moreover, if the accounts are not produced, there is a risk of the court drawing the inference that I have tried to conceal the true nature and value of the trust or have something to hide in respect of it. As you know this is not the case.

Therefore, to assist the court, and also for my own personal best interests I do exhort the trustees to give completely fresh consideration to providing these documents to me. I can stress that I am advised that this will not constitute any submission to the jurisdiction of the English Court. Further, any provision of this material will be treated in the strictest confidence by my wife's legal team and my own.

To underline the great importance of my being able to produce these documents, I enclose an order made yesterday by Coleridge J of the English High Court to which I submitted. Please consider the preamble very carefully. I do stress that it is my wish for the accounts to be produced.”

9

The trustee took the view that it should disclose very limited information to B, namely that there had been no distributions made from the settlement and that no transfers had been made to the settlement since the date the settlement was established but that to give further information to B and through him to Q, who are both excluded persons, could potentially prejudice the interests of the beneficiaries of the settlement and could result in their interests as beneficiaries of the other T Trusts being compromised. However, it applied to this Court for directions as to the steps it should take in the light of the English proceedings by way of disclosure of information to B.

The law
10

Mr MacRae referred us to the Court of Appeal decision in Re Internine Trust [2004] JLR 325 as authority for the proposition that the Court could only direct disclosure to B as an excluded person if the matter could be regarded as exceptional. That case involved hostile litigation in which the trustee played a neutral role and in which certain parties were seeking orders from the Court requiring the trustee to disclose information in relation to a trust in which their status as beneficiaries was in doubt. The issue before the Court was whether disclosure should be ordered before the issue of the applicants’ status as beneficiaries was conclusively resolved. The Court of Appeal held that on the facts of that case and in reliance on the principles laid down in the Privy Council decision in Schmidt v Rosewood Trust Limited (2003) 2 AC 709, the Courts in Jersey did, exceptionally, have power to exercise supervisory power in favour of the applicants.

11

However in the case before us, B was not seeking to invoke the supervisory jurisdiction of the Court for an order requiring the trustee to make disclosure to him. There are circumstances in which a settlor may be entitled to invoke that jurisdiction as summarised in Lewin on Trusts 18 th Edition at paragraph 23–103 namely where the settlor has a beneficial interest, where he has functions under the trust to perform particularly fiduciary functions, where he wants information to express his informed wishes as to the exercise of the powers and discretions conferred on the trustee and where he needs the information for the purpose of complying with some fiscal or other obligation imposed upon him by law.

12

B has no beneficial interest in the settlement (indeed he is excluded from benefit) and although he has an on-going function under the settlement in relation to the trustee's power to add or remove beneficiaries, he is not seeking disclosure for that purpose or for the purpose of expressing his wishes as settlor. The obligation that has been imposed upon him by the English Court did not arise out of his status as settlor but as a respondent in matrimonial proceedings and in any event it was not contended that he was entitled to disclosure on that basis.

13

It is the trustee that has invoked the supervisory jurisdiction of the Court by seeking directions as to whether it should, in the exercise of its own powers, accede to B's written request. The issue therefore is not whether B can require disclosure but whether the trustee, in the exercise of its powers, should make disclosure.

14

In the discharge of their duties to manage the affairs of a trust, trustees must have the power to decide whether, what and how disclosure of...

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