The Royal Court in Jersey has recently provided guidance to trustees on their duty to disclose to their successors.

In the matter of The Bird Charitable Trust and the Bird Purpose Trust [2012] JRC006, the incoming trustee on reviewing the files of the trust believed that there was certain documentation missing, in particular, legal advice received by the retiring trustees in relation to previous litigation. The new trustee applied to Court to clarify what information and documentation it was entitled to receive from the outgoing trustee.

It was found that the starting point for the Court was that the successor trustee is stepping in to the shoes of the retiring trustee and, prima facie, is entitled to be placed in the same position as the retiring trustee as far as possible. A new trustee should be able to satisfy itself that the trusts had been properly administered. This meant that the disclosure of legal advice received by former trustees was required even if not relevant to the future administration of the trust.

In Ogier Trustee (Jersey) Limited v CI Law Trustees Limited [2006] JRC 158, it was held "on the transfer of a trusteeship the outgoing trustee is under a duty to co-operate fully and actively in the transfer by making all relevant documents and correspondence available promptly to the incoming trustee and by providing any explanation to questions reasonably raised by the incoming trustee."

It was further found that the Court retained a discretion in this area to provide for some element of control over the reasonableness of requests of new trustees. This is consistent with the findings in the well known Isle of Man case of Schmidt v Rosewood Trust Limited [2003] AC 709. However, the Court noted the distinction between disclosure of information to a beneficiary and new trustees. It was recognised that the interests of beneficiaries and those of trustees are different in nature and that cases concerning disclosure to a beneficiary were unlikely to be of any assistance.

Clause 6.69 of the Isle of Man Financial Services Rulebook 2011 places an obligation on a licensed fiduciary when retiring as trustee, protector or enforcer of a trust to ensure they take all necessary and appropriate steps to facilitate the transfer of the relevant role and to co-operate with the new fiduciary to ensure a smooth transition.

So whilst the Court has an inherent jurisdiction to hear questions on disclosure, retiring trustees should be expected to take such steps so as to put the incoming trustee in the same position with regard to information about the trust as the outgoing trustee is prior to its retirement.

The onus is on the outgoing trustee to show that it is unreasonable for certain information or documentation not to be disclosed to the incoming trustee. The incoming trustee is entitled to be put in the same position as the outgoing trustee in order to be able to fulfil his duties with confidence that the trust has been properly administered.

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.