19 September 2019 - Podcast
This case (in which Diane Parker and Sue Medder acted for the trustees) addressed the vexed issue of disclosure of Jersey trust documentation to a non-beneficiary settlor involved in English divorce proceedings.
On 6 July 2011, the Jersey Royal Court ordered the production of trust and company accounts of companies underlying a trust of which the husband was the settlor and he and his wife were both excluded from the beneficial class. The husband and the wife had been engaged in divorce proceedings before the English High Court for some three years. This firm was advising the Jersey trustee which brought the application for directions following a request by the wife's solicitors for the trust and company accounts.
The settlement is a discretionary settlement established by the husband on 13 March 1989 with assets derived in substantial part from wealth created by the husband's late father. The settlement is governed by Jersey law and the principal beneficiaries are the husband and the wife's three children and their respective issue and the husband's three sisters and their respective issue.
The husband and the wife are excluded from benefiting from the settlement; there is provision in the settlement that 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 the husband and the wife.
The husband was in court and was given permission to address the court. He submitted that since he was the director of the companies underlying the trust, he had been compelled by the English court to give evidence on the information contained in the trust and company accounts. In addition, disclosure would assist with achieving a speedy resolution to the divorce proceedings (the lack of disclosure being a stumbling block to negotiations), which was in the interests of all the children and wider family who were beneficiaries of the trust. In particular, the husband had informed the trustee that if the accounts were not made available there was a ‘risk of a significant misunderstanding occurring as to the nature and/or value of the trust'.
The court noted that the trustee was in a difficult position as the husband and the wife could never be added as beneficiaries to the trust and two of the husband's three siblings (who were beneficiaries) opposed disclosure. Accordingly, this was an appropriate case for the trustee to seek directions.
The court concluded that withholding this information would impede the family proceedings in England and could lead to adverse inferences being drawn against the husband, particularly as there was information in the public domain which indicated that there were assets of some £250 million in the trust. The confidentiality of the information in the accounts was not an issue due to the husband's extensive knowledge of the companies underlying the trust which he would be required to produce to the English court in any event. The divorce proceedings were 'distracting and impacting upon the business owned by the settlement which was in turn damaging the value of those assets.'
Accordingly, the Jersey Royal Court ordered disclosure of the trust and company accounts as well as payment of the trustee's costs from the trust.
Although the decision may be surprising to trust practitioners, it was a pragmatic decision based very much on the facts of the case. The court cited Re H Trust  JLR 280, where it was held that it was important that the Family Division had the fullest information of the financial affairs of the Trust to allow it to reach an informed decision.