In the matter of the M and Other Trusts: disclosure to foreign courts

In the matter of the M and Other Trusts: disclosure to foreign courts

In a previous hearing, the Royal Court of Jersey had addressed an issue which is cropping up more and more on the offshore trustee's radar: whether or not to disclose trust documentation to a beneficiary in the knowledge that it will be used in matrimonial proceedings, and whether or not to submit to those proceedings.

Some of the trusts' beneficiaries, having been joined to the previous hearing in Jersey and having received trust documentation as a result, subsequently found themselves in an awkward situation.  In order to intervene in the proceedings afoot in the Family Division of the High Court in London, they were obliged to provide the Family Division with an undertaking to produce the aforementioned documents if requested.  Since the Jersey hearing had been heard in private, to do so could leave the beneficiaries in contempt of the Royal Court.  The beneficiaries therefore sought the guidance of the Royal Court as to what they should do.

The facts

On 15 July 2011 the Royal Court of Jersey gave directions to the trustee of the M, R, T and O Trusts in connection with matrimonial proceedings taking place in England before the Family Division.  Although the trusts were governed by the law of the British Virgin Islands, in each case the trustee was a Jersey company resident in Jersey and the administration was carried out in Jersey, hence the Royal Court had jurisdiction to hear the matter under Article 5(b) and (d) of the Trusts (Jersey) Law 1984.

Neither husband nor wife were beneficiaries of the trusts, but the husband's children, remoter issue and parents were.  The wife had applied to join the trustee to the matrimonial proceedings in England, and this had prompted the trustee to apply to the Royal Court.

The result of this previous hearing was that the Royal Court approved the trustee's decision not to submit to the jurisdiction of the Family Division and to continue to disclose information about the trust to the husband's father, in the knowledge that this information would find its way into the hands of the Family Division and the wife via the husband.

Importantly, the adult beneficiaries had been joined to the previous hearing in Jersey and had received the various papers filed in support of the trustee's application.  They then sought leave to intervene in the matrimonial proceedings in England.  They did this so as to be able to make submissions concerning the trusts. 

As a preliminary stage (the application to intervene not yet having been dealt with) the beneficiaries were given leave to attend a Financial Dispute Resolution hearing which was to take place later on.  As a precondition of attending the hearing, the beneficiaries undertook to preserve and, if requested, to provide to the Family Division all those documents served on them in connection with the previous hearing in Jersey.

It was this undertaking that caused the beneficiaries difficulty.  The previous hearing in Jersey had been heard in private.  To produce them to the Family Division without the leave of the Royal Court might leave them in contempt of that court.  Similarly, to refuse to provide them to the Family Division would be in contempt of the Family Division.

THE JUDGEMENT

The ambit of contempt

In making its deliberations, the Royal Court considered the inherently private nature of applications for directions made by trustees under Article 51 of the Trusts (Jersey) Law 1984, on which statutory authority the previous hearing had been based.  In particular, it noted that:

"It is of vital importance that, if such applications are to serve the purposes for which they are intended, information and documents received by those who are convened as parties to such proceedings should be held in confidence.  The trustee is under a duty and must feel able to make full and frank disclosure in relation to the application."

The Royal Court cited with approval the judgment of William Bailhache DB in Deery v Continental Trust Company Limited [2010] JRC 001, which included the following comment:
 
"If trustees thought that such affidavits and applications might be provided to those with hostile eyes upon the trust or the trust fund, they would be less likely to be candid and the whole purpose underlying the Article 51 procedure would be liable to be frustrated."

Therefore the starting point was that material received as part of an Article 51 application should not be disclosed to others.  The Royal Court went on to say:

"In our judgment, given the clear public interest reasons for hearing such applications in private, it is a contempt of court for a party to publish information which he only receives as part of such an application."

The crucial word here is "only".  Simply having received documents as part of private proceedings would not, the Royal Court held, preclude anyone from disclosing them if in fact that person had already had access to those documents by other means.  Only if someone was not already in possession of those documents prior to the Article 51 proceedings would it be a contempt to disclose them to any other party.

Leave to disclose

The Royal Court then went on to consider whether, in respect of the particular documents covered by the undertaking, it should grant the beneficiaries leave to disclose them if requested.  The Royal Court held that the material sought to be disclosed fell into three categories, as set out below.

Privileged material

In Jersey, as in England and Wales, there is privilege for legal advice.  A party cannot be compelled to disclose legal advice in subsequent litigation.  The fact that the trustee placed its legal advice before the Royal Court and before the beneficiaries, with whom it had a common interest, did not mean that privilege was lost.

The Royal Court therefore held that it was not willing to consent to the disclosure of such material, and set out in a schedule to its judgment the documentation which fell into this category.

Sensitive material

The Royal Court noted that the trustee had requested that some material, while not privileged, be redacted because it showed the purpose of the previous hearing and the reasoning and decision making process of the trustee.

The Royal Court, while agreeing in principle, held that in this particular case there was no harm in disclosing simply the purpose of the previous hearing.  In relation to those documents which disclosed the trustee's reasoning, it agreed that normally it would be inappropriate to permit disclosure for the reasons previously mentioned above.  However, and again on the particular facts of this case only, it did not think the material listed by the trustee was particularly sensitive, and the beneficiaries were therefore given leave to disclose it if so requested.

Other material

Material that was neither privileged nor sensitive could be disclosed by the beneficiaries if requested.

Comment

While the Royal Court was prepared to permit disclosure in this case, the judgment reveals that had it not been for the particular difficulties in which the beneficiaries found themselves as a result of their undertaking, and had it not also been for the fact that the trustee did not resist their application, this would not necessarily have been the case.  Anxious trustees may also take comfort from the Court's sympathetic attitude, evidenced in the following warning shot fired across the bows of the Family Division:

"If this Court were to find that the Family Division began routinely to make orders requiring disclosure of applications by trustees brought in private, the Court would have to consider amending its procedures either so as to heavily redact any material served on English resident beneficiaries or to preclude material from being sent out of the jurisdiction and allowing only inspection within the jurisdiction.  This would seem to be in no-one's interests."

About Ogier

Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice