23 April 2008

Re The Avalon Trust [2006] JRC 105a


Facts of the Case

The trustees of a discretionary trust established in Jersey sought directions of the Jersey Court in response to a request for disclosure of documents made by one of the beneficiaries who was involved in divorce proceedings, in England.  In the course of the divorce proceedings the Family Division had ordered the beneficiary to produce certain documents relating to the trust.  The beneficiary requested that the trustee provide:

  1. Documents such as the trust accounts, the trust deed and any supplemental deed of appointment and details of any distributions.
  2. Letters of wishes and any earlier drafts of letters of wishes.
  3. Copies of all correspondence between the beneficiary and other beneficiaries from the trustee relating to the trust and any correspondence relating to investment strategies between the beneficiary, his brothers and sisters and other members of the family and the trustee. 

The Decision

The court held that the trustees should disclose the documents in the first two categories.  It was in the interest of the beneficiary and the trust generally that the English Family Division should be made aware of the financial position of the trust and the extent to which the beneficiary had benefited from the trust in the past.

In respect of the category 2 documents, the court referred to Re the Rabaiotti 1989 Settlement and other settlements [2000] 2 ITELR 763 and started from the position that letters of wishes were confidential between the settlor and the trustee and that there needed to be a very good reason why it would be appropriate to disclose the letter of wishes to a beneficiary.  On the particular facts of this case there was a good reason to depart from the position that a letter of wishes is confidential because the beneficiary was already in possession of a draft letter of wishes.  It was better for the Family Division to see the final version of the letter of wishes so that it did not draw assumptions that were incorrect on the basis of a draft letter of wishes.

In respect of the third category of documents, the court held that it was entirely reasonable for the trustee to provide the beneficiary with any correspondence between him and the trustee, it did not agree that the trustee should disclose copies of correspondence between it and other beneficiaries.  This was because this went beyond what was required to give a full and fair picture of the trust assets to the English High Court.

Points of Interest

This case is a further example of the exception to the starting position as set out in Rabaiotti that letters of wishes are confidential between the trustee and settlor.

Category: Article