Guernsey: For Whose Eyes Only?

Last Updated: 20 February 2013
Article by Russell Clark

Most Read Contributor in Guernsey, September 2018

A recent Court of Appeal decision in Guernsey, Re B (2012) has highlighted the issue of trustees' duty of confidentiality when disclosure of confidential information may be in the best interests of the trustees. The case raises questions as to how to balance a trustee's duty of care to the beneficiaries and the right of a trustee to protect itself when facing serious harm? Russell Clark, partner at Carey Olsen discusses the law surrounding confidentiality and how the facts of this case, in particular, serve to remind trustees and beneficiaries that there are limits to trustees' to keep certain matters confidential.

It is well understood that the trustee-beneficiary relationship is one of confidence. The trustee is obliged to act in the best interests of the beneficiaries and, accordingly, to keep information about the beneficiaries and the trust confidential. The duty of confidentiality however, is not absolute; it does not apply to information that is generally accessible, is useless or trivial or where disclosure is of "far greater importance" (i.e. where the public interest in maintaining confidence is outweighed by the public interest in the information being disclosed). It is also accepted that a disclosure of trust information, made in accordance with obligations imposed by the law (such as to the competent tax authorities or anti-money laundering authorities), does not constitute a breach of the trustee's duty of confidence.

However, where a beneficiary insists on absolute confidentiality, to what extent is the trustee obliged to resist the disclosure of trust information to investigating authorities? Does that duty demand that a trustee uphold the confidentiality of trust information regardless of the consequences for the trustee personally?

In the case of Re B, the Guernsey Court of Appeal considered the limits on the trustee's duty of confidentiality and has provided some useful guidance on the disclosure of trust information when a trustee is stuck between a rock and a hard place. The case involved two Guernsey trusts administered by a professional trustee. The trusts have, since 2010, been the focus of litigation in France: firstly in civil proceedings brought by the widow of the settlor in connection with the parties' matrimonial property division and, secondly, in private criminal proceedings instigated by the widow.

Summons

In early 2012 the trustee received a French summons indicating that a French judge was contemplating putting the trustee under judicial investigation in France for criminal offences relating to money laundering and complicity in tax evasion; offences which carry severe penalties under French law. The summons made clear that it was the trustee's activity as trustee of the particular trusts which were of concern. The trustee was confident that the concerns of the French judge were wholly unfounded and wished to demonstrate to the French judge that it had not committed any criminal act. One of the beneficiaries ("A") issued proceedings in the Royal Court of Guernsey to prevent the trustee from disclosing any information relating to the trusts to the French judge in its defence.

"A" suggested that the French judge was trying to obtain information about the trusts for ancillary purposes connected with other investigations in relation to the family. The trustee made a cross-application for an order that it be at liberty to disclose trust information insofar as it was necessary to demonstrate that it had not committed any crime or to protect the interests of the beneficiaries or the trust property. The matter came before the Royal Court which made an order permitting the trustee to make this limited disclosure to the French law enforcement authorities.

"A" appealed the decision and obtained a stay of the order of the Royal Court preventing the trustee from disclosing trust information. The appeal came before the Court of Appeal in Guernsey in early July 2012.

Appeal

The Court of Appeal accepted that a trustee is under a duty to keep the affairs of a trust confidential, and likened the duty to that owed by a bank in relation to the affairs of a customer. While the court accepted that the duty owed by a trustee is not identical to that owed by a bank (as it does not arise as a matter of contract) it considered that the principles applicable to a bank's duty of confidence were equally applicable to the trustee in this case. The court referred to English authority which gave four exceptions to the duty of confidence:

  • where disclosure is under compulsion of law;
  • where there is a duty to the public to disclose;
  • where the interests of the bank require disclosure; and
  • where the disclosure is made by the express or implied consent of the customer trustee confidentiality

The Guernsey Court of Appeal accepted that the duty of confidentiality was subject to the qualification that the trustee had the right to disclose such information when, and to the extent to which it is reasonably necessary, for the protection of the trustee's interest. Having made that finding, the court then proceeded on the basis that the trustee's duty of confidentiality is not absolute and a balancing exercise, involving the interests of the parties appearing before it and regard for the broader public interest, should be applied to determine whether disclosure should be permitted.

The Court of Appeal then considered the interests of the beneficiaries, the risks of the dissemination of information between French authorities, the risk of seizure of trust assets and the risk of further civil proceedings. This was weighed against the interests of the trustee, the risks of one its directors ("X") being arrested and the trustee facing criminal charges likely to be seriously damaging to its reputation and business. The court concluded that the potential injustice to the trustee "trumps other considerations" such that the balance was firmly on the side of the trustee, and dismissed the appeal. In its final analysis, the court considered that to allow the appeal would: "deny the trustee and X (as its representative) the opportunity to defend themselves against serious criminal allegations.

To prevent them from availing themselves of that opportunity might result in charges being preferred against them and convictions being recorded in their absence. It is not for this Court to make any assessment of their chances of success in persuading the French Judge of the falsity of the allegations made against them. But, granted X's wish to take the opportunity on her own behalf and that of the trustee,it would be plainly wrong for this Court to inhibit it. In weighing the principle of confidentiality to which the beneficiaries are entitled and the principle that no court should connive an injustice, it is plain where the balance lies". Neither the Royal Court at first instance nor the Court of Appeal authorised the trustee to provide whatever information the French Judge might have wanted to ask in relation to the family – which could have been seen as an attempt to circumvent the established mechanisms to obtain evidence in Guernsey for use in criminal proceedings outside of the island.

Disclosure was limited to that information which was reasonably necessary or prudent to protect the trust assets, the beneficiaries or the trustee personally in light of the allegations being made. The ruling serves to prevent a flood of foreign law enforcement authorities seeking to obtain information regarding trusts in the Channel Islands by making spurious allegations against trustees personally.

The facts of this case are most unusual but they do serve as a reminder that there are limits to a trustee's obligation to keep the affairs of the trust confidential. A trustee will not be expected to remain silent, possibly suffering a miscarriage of justice, when appropriate and limited disclosure will serve to protect its interests. The confirmation that the English principles relating to bankers' duties of confidence apply equally to trustees, which was thought to have been the case, is also welcome.

Originally published in Private Client Practitioner, January 2013

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions