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Change of Trustees: Hand over or else
Briefing note written by David Dorgan
Ogier Trustee v C.I. Law Trustees and Others [2006]
The new trustees launched proceedings seeking documents and information due to the retiring trustee’s failure to comply with its duty to assist fully and promptly in the handover of the trusteeship. Quite properly the new trustees were, from the start of their trusteeship, concerned to establish exactly what the assets of the trust were and to transfer those assets under their control. In this instance the new trustees were particularly concerned about the ownership of an underlying company which they had been led to believe was 100% owned by the Trust.
Clearly an outgoing trustee is under a duty to co-operate fully and actively in the transfer of the trusteeship by making all relevant documents and correspondence promptly available to the new trustee and by providing explanations to questions reasonably raised by the new trustee. Whilst the retiring trustees had responded, it was not to the extent required and it was clear that the new trustees were not been given the full position. Therefore proceedings were issued, but this crossed with relevant information being provided and so the purpose of the proceedings had been served and no substantial relief was sought from the court.
The only issue before the court was one of costs. It was conceded by the retiring trustees that they were guilty of delay and that the new trustees had shown considerable patience in this matter. Counsel for the retiring trustee argued that (i) a dispute between the principal beneficiary and her mother affected the speed of disclosure; (ii) information about the trust was disclosed and thus it had discharged its duty as it was only information about the underlying company which it was slow to disclose and (iii) the retiring trustee faced a difficult time as a business having staff shortages and a key director suffering from serious illness.
Held:
The court rejected all of these arguments, stipulating that the new trustee had a duty to establish for itself what assets were owned and to obtain the necessary evidence to prove that ownership as well as gain control. It was therefore entirely proper and reasonable for the new trustee to demand the information it did. In addition so often the underlying valuable assets of a trust are held in companies owned by the trust and it would be nonsensical if a trustee could absolve itself of its responsibility to give or pass over full information by saying that it was not under any such duty in respect of underlying companies. Furthermore the court commented that any trust company should be in a position to produce information and documentation regarding trust assets and their ownership in the absence of a key director.
The Royal Court was in no doubt that proceedings were necessary only because of the retiring trustee’s failure to comply with its duty to assist fully and promptly in the handover of trusteeship. In such special or unusual circumstances the Deputy Bailiff stated the normal order should be for indemnity, rather than standard, costs to be awarded because it is very hard to see why costs incurred by a breach of a fiduciary duty owed by a trustee should fall on the beneficiaries. It would otherwise be unjust and unfair. It is very important to bring home to trustees their duty to comply fully when handing over a trusteeship.
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.