In a recent interesting decision from the Guernsey Court of
Appeal, the Guernsey Court has confirmed that, in rare
circumstances, it is appropriate for trustees to demand information
from beneficiaries in order for the trustees to be able to
administer a trust in an equitable manner.
In the Matter of the R and RA Trusts (Judgment 25/2014)
concerned an application for an Order to be made against various
beneficiaries for disclosure of certain information connected to
By way of background, a trust structure comprising four trusts
("Trusts") had been established to benefit one branch of
a family. For various reasons, the trustee of the Trusts
("Trustee") had decided to establish a separate trust to
house the interests of one of the beneficiaries, a daughter of the
family, and the Trustee wished to appoint an appropriate share out
of the Trusts into her new trust.
In order to decide upon the sum to be appointed to the
daughter's trust in a just and equitable manner for all of the
beneficiaries, the Trustee had instructed an international advisory
firm to value the assets of the Trusts. The advisors needed further
information from the other beneficiaries in order to be able to
complete their valuation. However, the beneficiaries were reluctant
In particular, information was required to establish whether
funds transferred into the Trusts were by way of a loan or an
outright transfer and information was also required to explain a
significant drop in the value of a company owned by the Trusts.
Without this information, the advisors were somewhat hamstrung and
could only give an approximate range in which they believed the
value of the Trusts fell. The range spanned a $200 million
difference in value!
It was, therefore, extremely important to obtain the outstanding
information to ensure that the appointment to the daughter was just
and equitable to all of the beneficiaries in all of the
Both the Trustee and the daughter made an application for
disclosure of relevant information from the other beneficiaries
under Section 69(1)(a)(iii) of the Trusts (Guernsey) Law, 2007
("Law"), which allows the Guernsey Court to make an Order
in respect of any beneficiary as part of its supervisory
jurisdiction. However, at first instance, the Guernsey Royal Court
refused to order disclosure.
The daughter subsequently appealed to the Court of Appeal, who
reversed the first instance decision and ordered that the
beneficiaries provided the Trustee and the daughter with the
The Guernsey Court highlighted the flexibility of the rules in
place, following Schmidt v Rosewood, as to when a trustee should
provide disclosure and adopted a similarly common approach in this
The Court of Appeal concluded that an Order could be made
against a beneficiary, in accordance with its supervisory
jurisdiction to ensure the best interests of the beneficiaries are
met, if there is a sufficiently close connection between the
position of the beneficiary as a beneficiary of the trust whose
affairs are being supervised and the relief being sought to justify
the exercise of the Court's supervisory jurisdiction.
In this particular case, the beneficiaries were significantly
involved in the issues being determined in their capacity as
beneficiaries of the Trusts and not in some other capacity, such as
a director of an underlying company, and so the Court was satisfied
that disclosure was appropriate on this occasion.
Interestingly, the Trustee did not appeal the first instance
decision of the Guernsey Royal Court, nor did the Trustee provide
any active support to the daughter in her appeal. It appears that
the Trustee may have been advised that, on the basis of the Re
Londonderry principle, a Trustee is protected by a Court Order and
it is not for the trustee, but for beneficiaries, to challenge any
decision of the Court. However, the Guernsey Court considered this
and stated that, if a Trustee believes that an appeal against an
Order of the Court is in the best interests of the beneficiaries,
then it should appeal the decision.
This decision is also interesting as it is extremely rare for a
Court to make an Order against a beneficiary to provide information
to a trustee. However, the Court has an important supervisory
jurisdiction in Guernsey and it is clear that the Court is prepared
to utilise it pragmatically and to the full.
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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