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Beneficiaries’ request for trust information: In the Matter of the Representation of First Island Trustees Limited and In the Matter of the Avalon Trust (25th July 2006)

First Island Trustees Limited, as trustee of the Avalon Trust (a Jersey discretionary trust), recently made an application to the Royal Court for directions under articles 51 and 53 of the Trusts (Jersey) Law 1984.

The trust was established on 3rd April 1995 by O.K. as settlor. The class of beneficiaries comprised the settlor herself, her son D.I.; D’s wife M.I.; D’s three children M, T and B and any other issue of D and M.I. The trust assets were initially provided by the settlor and the only distributions out were in the sums of £30,000 to D and his wife in 1996 and £50,000 to T in March 2000.

M is involved in divorce proceedings in England and as part of those proceedings the Family Division of the High Court made an order requiring him to produce documents in relation to the trust. M, having no documents, requested that the trustee provide him with the documents to enable him to comply with the order.

The trustee was minded to comply with M’s request in part; however it sought the approval of the Royal Court to the course of action which it proposed to take.

The Court stated that the documents requested could be considered under three categories:

Documents such as the accounts of the trust, the trust deed and any supplemental deeds of appointment and details of distributions which have been made. The Court stated that these are documents which in accordance with the decision in Rabaiotti (2001) a beneficiary is normally to be provided with unless there is good reason not to do so. The Court went on to state that far from there being a good reason not to provide M with such documents, there was every reason to do so.

The Court went on to state that even accepting that M had only asked for the documents so that he could provide them to his wife (who is not a beneficiary of the trust) it seemed to be in his interests and the interests of justice generally that the English Court should be made aware of the financial position of the trust and the extent, if any, to which M has benefited from it in the past.
The second category of document related to the letter of wishes and any early drafts of the letter of wishes.

The Court again referred to the decision in Rabaiotti stating that the starting point in relation to a letter of wishes is that they are confidential between the settlor and the trustee and a particular reason is accordingly required as to why, in a particular case, it is appropriate to disclose the letter of wishes to a beneficiary. The Court held that in this case there was good reason to disclose the letter of wishes. This was much for the same reason as in Rabaiotti itself in that M’s wife was in possession of an early draft of the letter of wishes. The Court did not want the English Court to proceed on the basis of an inaccurate document particularly due to the risk that the English Court would draw or make assumptions which were incorrect.

The Court added that one had to bear in mind that a letter of wishes is just that.
M had also requested a number of other documents from the trustee. These included copies of all correspondence between himself and/or other beneficiaries and the trustee relating to the trust, and any correspondence relating to investment strategies discussed between M, his brothers and sister and other members of the family and trustee.

The Court stated that it was reasonable to provide M with any correspondence between him and the trustee and the Court made such an order; however, the Court stated that disclosure of correspondence with other beneficiaries goes beyond what is required to give a full and fair picture of the trust’s assets and the benefits which may accrue to M in due course. M is simply one of a number of beneficiaries of the trust and the other beneficiaries, although resting on the wisdom of the Court in this case, had in the past indicated in correspondence that they were not happy for trust information to be disclosed to M simply so that he could pass it on to his wife. The Court emphasised that beneficiaries expect a certain confidentiality from their trustee in relation to their trust affairs and would not expect information about their trust to be disclosed to non-beneficiaries unless there was good reason for doing so.

THIS ARTICLE IS FOR INFORMATION PURPOSES ONLY AND NOT BY WAY OF LEGAL ADVICE. PROFESSIONAL LEGAL ADVICE SHOULD BE SOUGHT BEFORE ANY ACTION IS TAKEN.