E Trust Company Ltd v Mrs B and C and D

JurisdictionJersey
CourtRoyal Court
JudgeJ. A. Clyde-Smith,Jurats Fisher,Marett-Crosby
Judgment Date28 January 2014
Neutral Citation[2014] JRC 27
Date28 January 2014

[2014] JRC 27

ROYAL COURT

(Samedi)

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

Advocate E. C. P. Mackereth for the Representor.

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.

Trust — refusal of disclosure by the representor to the first respondent.

THE COMMISSIONER:
1

On 9 th 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 17 th 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 6 th September, 2011, again with the protector's consent.

4

The catalyst for this application was a letter dated 29 th 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 20 th 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 30 th 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 5 th 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 6 th September, 2013. The Court convened Mrs B, the Settlor and the protector. Hogan Lovells responded on 27 th 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 30 th 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 9 th 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...

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