Representation of U: application by trustee for directions concerning disclosure of…

Representation of U: application by trustee for directions concerning disclosure of confidential information

Introduction
Representation of U [2011] JRC 131 is a Jersey trust case in which the trustee of a Jersey law trust sought directions as to whether it should disclose confidential  financial information to a person designated as an excluded person ("B")) under the terms of the trust. The beneficiaries of the trust included B's children. B sought the requested financial information to assist the English court with English law divorce proceedings between B and his wife. The Royal Court of Jersey held that it was in the interests of the beneficiaries for the English court to have accurate information and for the divorce proceedings to be resolved without further delay. Accordingly, disclosure was ordered.

Facts
B's father settled a discretionary trust, which was at the relevant time governed by Jersey law. The beneficiaries of the trust included B's children and their issue (among others). B and his wife were excluded persons.

B and his wife were engaged in divorce proceedings before the Family Division of the High Court of England and Wales. The Family Division ordered B to use his "best endeavours" to obtain copies of the accounts of the trust for the last three years.  The determination of the nature and quantum of the financial provision for the children was an issue in the divorce proceedings, so it was therefore in the best interests of the children for B to be given access to the trust accounts.

The Family Division made it clear that if B did not disclose the trust accounts, the Family Division may draw adverse inferences against him and in any event, he would be ordered to sign an affidavit setting out to the best of his knowledge a full account of the trust assets and their value.

Two beneficiaries objected to the disclosure of this financial information to B. The trustee of the trust considered that it should only disclose to B that there had been no transfers to or distributions from the trust since its establishment because making any further disclosure may prejudice the interests of the beneficiaries of the trust.

In light of the above conundrum, the trustee sought the directions of the Royal Court to ascertain what disclosure, if any, it should make following the order of the Family Division and the letter it had received from B regarding the disclosure of information to B.

Held
The Royal Court held that the disclosure should be made by the trustee.

The issue was not whether B could require disclosure but whether the trustee, in the exercise of its powers should make the disclosure. Lewin on Trusts, 18th edition at paragraph 23-20 states that trustees must have the power to decide whether, what and how disclosure of confidential information should be made. It is accepted that trustees regularly make such decisions when dealing with lawyers, bankers and investment advisors. Article 24(2) of the Trusts (Jersey) Law 1984 (the "Law") states that a "trustee shall exercise the trustee's powers only in the interests of the beneficiaries and in accordance with the terms of the trust". As an excluded person, B was of no relevance to the trustee's decision as to whether it was in the interests of the beneficiaries for the trust accounts to be provided to B.

The Royal Court had to weigh B's request for the disclosure of confidential information in respect of the trust against the interests of the beneficiaries. If the trustee did not disclose the information, the wife's contentions in the English divorce proceedings would be made on the basis of inaccurate information. In addition, non-disclosure may lengthen the divorce proceedings still further. However, two of the beneficiaries opposed the disclosure and both B and his wife were excluded persons. The Royal Court acknowledged the trustee's difficult position and confirmed that it was appropriate for the trustee to have sought directions in these circumstances.

The Royal Court ordered disclosure because it was in the interests of the children of B that the divorce proceedings be determined fairly and on the basis of accurate financial information and so as to avoid further delay in the divorce proceedings.

"Interests" and "benefits" under the Law were to be widely construed. In Re Osias Settlements [1987-88] JLR at 412 the court noted that "in exercising its discretion the function of the court is to protect those who cannot protect themselves. We must do what is truly for their benefit". There is no requirement for financial benefit, nor is a financial benefit in itself sufficient, although non-disclosure in this case may have had an adverse financial impact on the children.

Comment
The decision by the Royal Court confirms the approach that a trustee should disclose confidential information about the trust when to do so is in the interests or for the benefit of the beneficiaries. Whether or not an excluded person under the terms of a trust should or should not be given access to such confidential information was not relevant. The question was one of interest and benefit, not of access.

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