Jersey: Judgement Summary: Trusts - Handover Of Documents On Change Of Trustees

Last Updated: 2 August 2012
Article by Mason Birbeck and David Dorgan

In the matter of the Bird Charitable Trust and the Bird Purpose Trust [2012] JRC006 5 January 2012, Jersey

In this recent case the Royal Court of Jersey considered the application by the present trustee of two Jersey law trusts (Present Trustee) for an order requiring a former trustee (Former Trustee) to disclose legal advice in relation to the trusts obtained by Former Trustee during its trusteeship.

The Facts

The settlor of the two trusts (Settlor) was indicted in the U.S. for offences relating to provision of internet gambling services to U.S. residents. As a result, Former Trustee, being trustee of the two trusts at that time, limited its contact with Settlor to avoid "tipping off" offences under applicable proceeds of crime legislation. This lack of communication led to a breakdown in their relationship.

This appears to have prompted the decision to change the trustees of the trusts so that Former Trustee would be replaced by two corporate trustees. Subsequently Present Trustee was added as another trustee of the Trusts. The validity of certain of these changes of trustees was challenged and eventually determined in proceedings (Validity Proceedings) brought before the Jersey courts. Ultimately, Present Trustee became sole trustee of both the trusts.

Separate "saisie" proceedings (Saisie Proceedings) were also brought by Jersey's Attorney General which resulted in a freezing order extending to the Trusts' assets. The freezing order was, so far as it related to the Trusts' assets, later set aside.

Having taken delivery of the trust documents from the two corporate trustees it had replaced, Present Trustee concluded that a number of trust records were missing, including legal instructions and advice (Legal Advice) relating to the Validity Proceedings and the Saisie Proceedings.

Present Trustee applied to the Royal Court for an order requiring Former Trustee to disclose the Legal Advice.

The Law

The Court held that an outgoing trustee is normally under an obligation to hand over all documentation and information (including legal advice) concerning the administration of a trust to the new trustee. The onus is on the outgoing trustee to show why the normal rule should not apply.

The starting position was that a successor trustee steps into the shoes of a retiring trustee and assumes the same duties as the retiring trustee towards the beneficiaries. Therefore a successor trustee is entitled to be placed in the same position, as far as possible, as the retiring trustee and, consequently, if the retiring trustee has information or documents about the administration of a trust, it must normally make these available to the successor trustee.

This would include the delivery of all records, books and other papers belonging to the trust and entitle the successor trustee to inspect and copy other papers (not belonging to the trust) in the hands of the former trustees so far as they contain information relating to the trust; other papers may include minutes of trustee's meetings and the internal memoranda of a corporate trustee and correspondence files.

It would also mean that the successor trustee may request information and explanations from the retiring trustee which are not apparent from the trust papers and the retiring trustee is obligated to supply the information requested and take reasonable care that any information supplied is accurate.

However the Court identified that there was a need to control the reasonableness of requests made to a former trustee for information, and that the ability to adjudicate in that regard fell within the Court's inherent supervisory jurisdiction in the administration of trusts.

The Court did not accept the assertion that legal advice is "trust property", within the meaning of Article 34 of the Trusts (Jersey) Law 1984 (as amended), or therefore that this statutory provision (which imposes an obligation on an outgoing trustee to surrender trust property to its replacement trustee) removed the Court's inherent supervisory jurisdiction.

The decision

The Court held that the nature of the Legal Advice and the specific matters it addressed would not assist Present Trustee's future administration of the trusts so disclosure was not justified on that ground.

However, the Court ordered the Legal Advice disclosed to enable Present Trustee, in accordance with its duty as trustee, to satisfy itself that the significant costs of the legal advice had been reasonably and properly incurred.

Comments

This case is helpful in that it removes previous uncertainty as to the obligations of a former trustee to disclose trust information and documents to successor trustees. It also clarifies the powers of the court to adjudicate on the question of whether or not information and documents should be disclosed in any given case.

The position is clear that a former trustee should, in normal circumstances, disclosure all documentation and information (including legal advice) concerning the administration of a trust to the successor trustee so that the latter is placed in the same position, as far as possible, as the former trustee. The onus is on the former trustee to show why that normal rule should not apply.

The court's power to determine whether or not information and documents should be disclosed by a former trustee in any given case is an aspect of the Court's inherent supervisory jurisdiction in relation to administration of trusts.

Follow this link for the full judgement.

Please note that the judgement is available free to Jersey Legal Information Board members or can be downloaded for a small fee.

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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