The Guernsey Court of Appeal has recently reviewed the general
duty of confidentiality that trustees owe to beneficiaries and
reminded us all that the duty of confidentiality is by no means
In Re B (2012) (Judgment 35/2012), the Court of Appeal
considered the use that a trustee may make of trust documents and
information to protect itself against criminal charges.
The trustee, a subsidiary of an international banking group, was
trustee of two Guernsey trusts, both of substantial value. The
widow of the settlor of both trusts had initiated a criminal
investigation in France into the trusts which was exploring a
variety of serious offences against various parties, including
possession of stolen goods, tax evasion and money laundering. The
trustee had received a summons from the French judiciary
responsible for the investigations to attend before the Court to
answer questions concerning the trusts.
Whilst the trustee was not suspected of involvement in the
criminal offences, the summons stated that if the trustee did not
answer the judge's questions in an open and transparent manner
there would be a real risk that the trustee would be charged with
The applicant, a beneficiary, brought proceedings in the
Guernsey Court to prevent the trustee from disclosing information
concerning the trusts to the French Court. At first instance, the
Guernsey Court held in favour of disclosure by the trustee and, as
such, the applicant appeared to the Guernsey Court of Appeal.
Duty of Confidentiality
The Court confirmed that trustees have a general duty to keep
the affairs of a trust confidential although there is no
irrefutable presumption that all documents held by the trustee are
confidential. The legitimacy of disclosure depends entirely on the
There was a lack of case law to assist the Court, however, the
Court confirmed that a trustee's duty of confidentiality is
similar to that owed by a bank to its customers, which is qualified
disclosure is required by law;
there is a duty to the public to disclosure;
the interests of the bank require disclosure; or
disclosure is made with the express or implied consent of the
In determining whether the trustee could disclose, the Court
balanced the nature, scope and effect of the French summons against
both the interests of the trustee and the beneficiaries.
When considering the interests of the trustee, the Court
focussed on the damage that would be caused to the reputation of
the trustee, and its parent company, if the trustee was charged
with the offences. There would be serious damage to the integrity
of the company charged with offences that involved dishonesty and
criminal intent, and client confidence, which was at the heart of
the company's business, would be shaken.
However, this was balanced against the effects disclosure would
have on the beneficiaries. Disclosure may lead to confidential
information concerning the trust being disclosed to those who had
instigated the criminal proceedings. This could lead to further
proceedings and even action being taken to seize the trust
The Guernsey Court felt that the damage that would be caused to
the trustee trumped all other considerations and ordered that the
trustee could disclose information as it reasonably considered
necessary or prudent to protect the interests of the beneficiaries,
to secure the preservation of the trust property and, most
importantly, to protect the interests of the trustee personally in
the context of the criminal investigation.
This case is as an important reminder of the limits on the
obligations on trustees to keep information concerning trusts
confidential, particularly where the inability to disclose would
cause the trustee serious harm.
Ultimately, if any trustee has concerns over whether or not it
should disclose information concerning a trust, it is imperative
that the trustee seeks legal advice as soon as possible in order
that any initial response by the trustee is in line with its duties
and the law.
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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Many people are baffled by trusts, the purpose of which they don't fully comprehend. Some even regard them with suspicion, as tools of of opaque tax evasion strategies of a type favoured by wealthy individuals.
We were recently instructed by a Bank in relation to a regulatory matter. The Bank had made a suspicious activity report to the Financial Investigation Unit ("FIU") due to their concerns about the potential source of funds in an account.
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