Isle of Man: Privacy In Trustee Applications In The Isle Of Man

Last Updated: 29 April 2014
Article by Kevin O'Loughlin

The Isle of Man High Court has confirmed that it will in appropriate cases make orders protecting the privacy of settlors, beneficiaries and trust affairs in relation to trustee applications to court.

An important procedure for trustees and beneficiaries is the ability to apply to court to determine questions of doubt, or to approve important decisions, which arise in the administration of a trust. The potential for publicity arising from the fundamental principle of open justice is, however, a disadvantage of such an application, in particular where the trust is family related rather than in a commercial context. Often there will be acceptable alternatives to an application to court, however the risk of publicity can discourage such applications leading in some cases to sub-optimal decisions. A recent important Isle of Man decision in the case of the Delphi Trust has clarified how the Isle of Man courts will balance principles relating to open justice and privacy in relation to such applications and confirmed that the court will where appropriate make orders protecting privacy.

In this case the trustee applied to the court for assistance under the court's inherent jurisdiction and/or section 61 Trustee Act 1961 (which section allows a trustee to apply to court for directions on questions concerning the management and administration of a trust). The trustee sought a declaration as to the validity of the trust, the class of beneficiaries, and the validity of certain transfers of assets to the trustee. The trustee further sought an order that the proceedings be held in private and judgments etc. anonymised as a major charitable beneficiary had expressed concerns that the publicity associated with the matter might have adverse consequences for the charity (e.g. that donations could drop).

The court referred to the well-known Public Trustee v Cooper1 categorisation of proceedings involving trustees, being (1) where the issue is whether a proposed action is within the trustees' powers (2) where a proposed course of action is within the trustees' powers but is a particularly momentous decision which the trustees consider it prudent to have approved by the court (3) where the trustees apply to court for a surrender of discretion and (4) hostile proceedings such as for breach of trust.

The court noted that the Isle of Man courts have come down firmly in favour of the fundamental principle of open justice, which the court noted is also a fundamental principle in other jurisdictions, for example the United Kingdom, Jersey and Guernsey. The European Convention on Human Rights, which the Isle of Man has enacted in the Human Rights Act 2001, provides that "in the determination of his civil rights and obligations ..., everyone is entitled to a fair and public hearing ..." On the other hand the ECHR provides that everyone "has the right to respect for his private and family life, his home and his correspondence". The court noted that it has jurisdiction to and does frequently make anonymity and privacy orders in for example, family and mental health cases. It is a question of the balance to be struck between the two principles.

The court discussed the meaning and implications of a case being heard in chambers as against in open court and noted that the use of the expression "in chambers" can lead to confusion as to whether the court is sitting in public or in private. A hearing in chambers is private in the sense that traditionally it meant a hearing in the judges room, which therefore the public could not attend without permission from the judge, but in general a judgment given in chambers is normally a public document. The court agreed with the Jersey Royal Court's view in Jersey Evening Post Limited v Al Thani2that the important distinction to be drawn is between cases heard in open court and cases heard in private and it would be best if the expressions "in chambers" and "in camera" were dropped.

The trustee in support of its case for privacy relied on Re Trusts of X Charity v Attorney General3. It had been held in that case that the court was entitled to pronounce its judgment in private in the context of an application by the trustees of a charity for directions in relation to certain pending proceedings. In relation to article 6(1) ECHR the English court in that case said that an application to the court by trustees for directions may well affect but does not normally determine the civil rights of anyone; it is designed to provide guidance to the fiduciary as to the proper exercise of his powers and only rarely could it be said to determine the rights of anyone. The Isle of Man court however was not persuaded by this authority and referred to Guardian Limited v Bermuda Trust Company Limited4in which the Supreme Court of Bermuda considered it artificial to characterise an application for directions designed in substance to confirm a beneficiary's entitlement to participate in trust assets as anything other than a proceeding for the determination of civil rights and obligations.

The Isle of Man court referred to the wide ranging relief sought by the trustee. Indeed given that the relief sought included a declaration as to the validity of the trust it is difficult to see that it did not involve the determination of rights within article 6(1) ECHR. The court decided that the interests of justice would be best served by the matter being heard in open court but with no references being made to the identity of the settlor, the trust, the beneficiary, the size of the fund or the amounts of the proposed distributions.

The court provided guidance as to how future trust applications to court should be dealt with. The court said that it is unwise to be too dogmatic as to when the court should sit in public and when it should sit in private to hear applications by trustees for directions. Normally the court would sit in private for cases within (2) and (3) of the Public Trustee v Cooper categories, for example to hear a Beddoe proceeding, or an application for surrender of discretion. However applications for rectification or construction of a trust deed, hostile actions to remove trustees and related applications for disclosure orders, and hostile proceedings for breach of trust etc., being within (1) and (4) of the of the Public Trustee v Cooper categories, would normally be heard in open court.

The court confirmed, however, that where a case is heard in open court the court has jurisdiction to make orders protecting the anonymity of the beneficiaries, the settlor, the trust and if necessary the amounts involved and any other confidential information where there is a reasonable expectation of privacy which requires protection and which overrides the fundamental principle of open justice. The court further confirmed that it accords great importance to the Isle of Man's vibrant trust industry and the need to respect the confidentiality of private trusts and the privacy concerns of settlors and beneficiaries in non-contentious matters and that such concerns can be dealt with by measures that are not as extreme as sitting in private where that is not necessary.

Trustees and beneficiaries can therefore be confident of the Isle of Man court's sensitivity to confidentiality of private information in future non-contentious applications to court relating to trusts.

Footnotes

1 Unreported December 20 1999.

2 2002 JLR 542.

3 [2003] EWHC 1462 (Ch).

4 Supreme Court of Bermuda judgment December 1 2009.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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