The Y Trust

CourtRoyal Court
JudgeClyde-Smith, Commr. and Jurats Fisher and Marett-Crosby
Judgment Date28 January 2014
Date28 January 2014
Clyde-Smith, Commr. and Jurats Fisher and Marett-Crosby

E.C.P. Mackereth for the representor.

Cases cited:

(1) Breakspear v. Ackland, [2009] Ch. 32; [2008] 3 W.L.R. 698; [2008] 2 All E.R. (Comm) 62; [2008] EWHC 220 (Ch), considered.

(2) Londonderry's Settlement, In re, [1965] Ch. 918; [1965] 2 W.L.R. 229; [1964] 3 All E.R. 855, considered.

(3) M Trust, In re, 2012 (2) JLR 51, considered.

(4) Public Trustee v. Cooper, [2001] W.T.L.R. 901, referred to.

(5) Rabaiotti 1989 Settlement, In re, 2000 JLR 173, considered.

(6) Rouse v. 100F Australia Trustees Ltd. (1999), 73 S.A.S.R. 484; 2 ITELR 289, considered.

(7) S v. L, 2005 JLR N [34]; [2005]JRC109, considered.

(8) S Settlement, In re, 2001 JLR N [37]; UJ No. 2001/154, considered.

(9) Schmidt v. Rosewood Trust Ltd., [2003] 2 A.C. 709; [2003] 2 W.L.R. 1442; [2003] 3 All E.R. 76; 2001 03 MLR 511; [2003] UKPC 26, considered.

(10) Spellson v. George(1987), 11 NSWLR 300, considered.

(11) U Ltd. v. B, 2011 JLR 452, considered.

Texts cited:

Lewin on Trusts, 18th ed., para. 23 20, at 798 799; para. 29 01, at 981 982; 3rd Supp., para. 23 20, at 148 149 (2008).

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

Trusts — powers and duties of trustees — exercise of discretion — sanction of court — trustee's decision to refuse to disclose trust information to non-beneficiary (for purposes of claim against settlor) approved as (a) made in good faith; (b) reasonable; and (c) no conflict of interest; and court would have made same decision exercising own discretion — uncertain whether court's function on disclosure applications is to exercise own discretion or review trustee's decision — until issue resolved, court likely to exercise own discretion, in interests of beneficiaries

A trustee applied for the court's approval of its decision to refuse to disclose trust information.

The first respondent, who was a former beneficiary of a discretionary trust, sought the disclosure of information concerning the trust to assist a claim by her husband against the settlor. The trustee refused to disclose the information and applied for the court's approval of its decision.

The court considered the nature of its function on applications for disclosure of trust information, namely whether it was exercising its own discretion or merely reviewing the trustee's decision. The trustee submitted that, in accordance with a fundamental principle of trust law the discretion was conferred on the trustee and not the court, the court's function was to review the trustee's decision.

Held, approving the trustee's decision:

(1) The trustee's decision to refuse to disclose trust information to the first respondent would be approved. The court was satisfied that (i) the trustee had made the decision in good faith; (ii) the decision was one which a reasonable trustee, properly instructed, could have made; and (iii) the decision had not been vitiated by any actual or potential conflict of interest. The court would also have made the same decision itself, in the exercise of its own discretion. It was clear that the information was sought by the first respondent with a view to proceedings which might involve an attack upon the trust assets. It was not in the interests of the beneficiaries as a whole to facilitate such a process ( paras. 9 10).

(2) In the present case, it was unnecessary for the court to determine the nature of its function on applications concerning the disclosure of trust information - i.e. whether it should exercise its own discretion or merely review the trustee's proposed decision - as the trustee's application satisfied both tests, and the issue had not been the subject of full argument. Although it was well established that the court should not usurp the role of trustees, it was also important to ensure that trustees discharged their fundamental obligation to account to beneficiaries. Until full argument was heard, the court would be likely to reserve to itself the exercise of its own discretion in applications concerning disclosure, for the protection of beneficiaries ( paras. 20 36).

1 CLYDE-SMITH, COMMISSIONER: On December 9th, 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, 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 March 17th, 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 September 6th, 2011, again with the protector's consent.

4 The catalyst for this application was a letter dated July 29th, 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 August 20th, 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 August 30th, 2013, Ogier, on behalf of the trustee, 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 had been 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 September 5th, 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 September 6th, 2013. The court convened Mrs. B, the settlor and the protector. Hogan Lovells responded on September 27th, 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 December 9th, 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 Settlement (8), 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...

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1 firm's commentaries
  • Disclosure Of Trust Information To Beneficiaries ' A Practical Jersey Guide
    • Jersey
    • Mondaq Jersey
    • 17 July 2020
    ...Footnotes 1. Schmidt v Rosewood Trust Limited 2003. 2 AC 709, as followed and approved by the Royal Court of Jersey in Re Y Trust 2014. (1) JLR 199. 2. Article 29 was amended in its entirety by Trusts (Amendment No 7) (Jersey) Law 2018, which came into force on 8 June 2018. 3. In Re Rabaiot......

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