"Knowledge is of two kinds. We know a subject ourselves, or we know where we can find information on it." – Samuel Johnson.
Notwithstanding that trustees are under a general duty to keep the affairs of the trust confidential, questions over the scope of that duty and how it may interact with the disclosure of trust information will inevitably arise in the professional life of a trustee. The agreed legal position fundamental to trusts is that one of the irreducible core obligations owed by trustees to beneficiaries is the duty of trustees to account to beneficiaries for the administration of the trust and the right of beneficiaries to trust documents enabling beneficiaries to enforce that duty to account.
Disclosure of trust information broadly falls within 5 categories:
1. Disclosure by trustees to beneficiaries (voluntarily or upon
2. Trustees' duty to notify beneficiaries of their interests;
3. Disclosure to other interested parties;
4. Disclosure in trust litigation; and
5. Disclosure by outgoing trustees to their successors.
We have previously looked at disclosure by outgoing trustees in our paper on Changing Trustees and we will cover disclosure in trust litigation during the final part of this series. This paper principally addresses disclosure to beneficiaries, which will be the issue most commonly faced by trustees as well as briefly considering disclosure to other parties with an interest (or, at least, purported interest) in a trust.
DISCLOSURE OF INFORMATION – THE STATUTORY POSITION
Article 29 of the Trusts (Jersey) Law 1984 (as amended) (Law) contains the statutory positions on disclosure of trust information and/or documentation. It was rewritten by the Trusts (Amendment No. 7) (Jersey) Law 2018 and reads as follows:
- Subject to any order of the court, the terms of a trust may:
(a) confer upon any person a right to request the disclosure of information or a document concerning the trust;
(b) determine the extent of the right of any person to information or a document concerning the trust; or
(c) impose a duty upon a trustee to disclose information.
2. Subject to the terms of the trust and to any order of the court -
(a) a beneficiary under the trust not being a charity;
(b) a charity which is referred to by name in the terms of the trust as a beneficiary under the trust; or
(c) an enforcer, may request disclosure by the trustee of documents which relate to or form part of the accounts of the trust.
3. Subject to any order of the court, a trustee may refuse to comply with -
(a) a request for disclosure of information or a document concerning the trust under paragraph (1)(a) or any document which relates to or forms part of the accounts of the trust under paragraph (2); or
(b) any other request for disclosure of information or a document concerning the trust, where the trustee in the exercise of its discretion is satisfied that it is in the interests of one or more of the beneficiaries, or the beneficiaries as a whole, to refuse the request.
4. Notwithstanding paragraphs (1), (2) and (3), subject to the terms of the trust and to any order of the court, a trustee shall not be required to disclose to any person information or a document which -
(a) discloses the trustee's deliberations as to the manner in which the trustee has exercised a power or discretion or performed a duty conferred or imposed upon the trustee;
(b) discloses the reason for any particular exercise of a power or discretion or performance of a duty referred to in sub-paragraph (a), or the material upon which such reason shall or might have been based; or
(c) relates to the exercise or proposed exercise of a power or discretion, or the performance or proposed performance of a duty, referred to in sub-paragraph (a).
5. Notwithstanding the terms of the trust, on the application of the trustee, an enforcer, a beneficiary or, with leave of the court any other person, the court may make such order as it thinks fit determining the extent to which any person may request or receive information or a document concerning the trust, whether generally or in any particular instance.
Consequently, the terms of the trust can expressly confer upon a person (e.g. a beneficiary, protector or enforcer) a right to request trust information or documents or can determine the extent of those rights (e.g. restrictions on disclosure) or otherwise oblige the trustee to disclose information (e.g. upon a beneficiary turning a certain age). The aforementioned provisions were introduced in 2018 and provide more flexibility to settlors and trustees in the drafting of disclosure provisions in trust instruments.
Article 29 entitles beneficiaries, named charities and enforcers to request information relating to or which form part of the accounts of the trust to show its financial position. This is in order that they may enforce the duty to account conferred upon them by law. However, this right is "subject to the terms of the trust" and, therefore, information rights are often expressly dealt with in the trust instrument. Hence the trust instrument might seek to include an absolute restriction on the disclosure of any information (including financial), but a trustee should only refuse to comply with a request for financial or other information and/or documentation if it is in the interests of one or more of the beneficiaries, or the beneficiaries as a whole, to do so. A beneficiary may apply to the Royal Court of Jersey to challenge the trustee's decision.
Notwithstanding any person's right to request disclosure, a trustee is not obliged by Article 29 to disclose information or a document which relates to a trustee's deliberations, reasoning or the exercise of a discretion or power. Hence a trustee's minutes and related documents are protected from disclosure. However, this protection is subject to an order of the court. If a trustee is not willing to disclose a trust document to an interested person (like a beneficiary), because, for example, it is too closely related to the decision-making process, then an interested party may apply to the Royal Court of Jersey for an order authorising or requiring a trustee to provide restricted information. It was held by the Royal Court of Jersey In the matter of the Rabaiotti 1989 Settlement  JLR 173 that the court has the power to order the disclosure of such documents where it was satisfied that it is essential to do so. However, the burden lies with the interested person requesting the disclosure to demonstrate that there are good grounds for ordering disclosure in a particular case. Therefore, the matter is entirely circumstantial.
DISCLOSURE OF INFORMATION TO BENEFICIARIES, SETTLORS AND TRUST OFFICIALS – IN PRACTICE
Requests for information from a trustee
Whilst the Law recognises the ability to place restrictions upon the flow of trust information, there is considerable scope for applications to be brought before the courts where a trustee seeks to restrict access to information. The decision of the Privy Council in Schmidt and Rosewood2 also signaled a shift towards judicial discretion and the promotion of greater transparency in trustees' dealings with beneficiaries. Again, this may give rise to a greater potential for a frustrated beneficiary to seek a court order compelling the release of trust information.
Trustees will often be keen to avoid the costs associated with applications for the disclosure of trust documentation and will need to consider very carefully whether they are entitled to use trust funds to oppose any such application. In determining whether or not to comply with an information request from a beneficiary, settlor or trust official, a trustee may wish to consider the approach that the court may take to an application.
Whilst the outcome of any matter before the court will be dependent upon the individual facts of the case, the court will start from the premise that a beneficiary has:
- the right to ask the court (in the exercise of its inherent jurisdiction to supervise trusts) to order the disclosure of trust information or documentation, and
- subject to the terms of the trust, an entitlement as of right to receive information as to the state and amount of the trust property pursuant to Article 29 of the Law.
As mentioned above, the court has discretion to order the provision of trust information. Whilst Article 29 of the Law provides that a trustee is not required to disclose details of its deliberations, the court also has discretion to order disclosure.
This is not to suggest that trustees should adopt a position of compliance in the face of all information requests. There will undoubtedly be examples of requests from parties whose interests are, at best, theoretical and the court should have little difficulty in determining that disclosure will not be granted in such circumstances. There will also be circumstances where the courts may refuse the provision of trust information on the basis that the applicant is seeking to attack the validity of the trust and trustees should always carefully consider the basis upon which a request is made.
Trustees should also have regard to the following when considering disclosure: whether there are issues of personal or commercial confidentiality; the nature of the interests of the beneficiaries seeking access to information; the impact that disclosure would have on the trustees, the other beneficiaries and third parties; whether some or all of the documents should be disclosed in redacted form; whether safeguards could be imposed on the use of the trust information disclosed; and whether, in the case of a family trust, disclosure would be likely to embitter feelings and relationships between the trustees and beneficiaries to the detriment of the beneficiaries as a whole.4 Confidentiality may not be a good reason to withhold disclosure altogether, but it might be a sound basis for limiting disclosure and/or imposing safeguards with respect to who may have access to any disclosed information.
Where trust information is provided upon a beneficiary's demand, the expense of copying any documents will rest with the beneficiary.
What information should be provided?
As touched upon above, compliance with the duty under the Law to provide full and accurate information on the state and amount of the trust property may require the provision of existing and/or new documents or information. A trustee should not, therefore, consider that its responsibility is inherently limited to the "state and amount of the trust property" at the time of the request.
The court will have discretion over the specific documents to be disclosed in respect of any application and it is difficult to offer advice in the abstract on documents that may fall for disclosure. Any disclosure will be determined with reference to the grounds upon which the information is sought and the nature of a particular applicant's interests; although as a general rule the following classes of information will often fall to be disclosed:
- the trust instrument;
- trust accounts;
- statements of trust investments;
- supplemental trust instruments, for example changes of trusteeship;
- Minutes of trustees' meetings (save for information contained therein that relates to the exercise of discretion); and
- Legal advice paid for out of trust assets.
Rather than focusing upon whether any particular document should be properly regarded as a "trust document", the better approach may be for trustees to consider whether the court is likely to find that a beneficiary requires access to the information in order to establish whether the trust has been properly administered and/or to bring the trustee to account. If so, then there is a very good chance that the court would order disclosure and a trustee should think very carefully before attempting to withhold the requested information.
Such considerations should also take account of the potential for adverse costs consequences for a trustee if its opposition to an application cannot ultimately be funded from trust assets.
DISCLOSURE OF TRUST INFORMATION TO OTHER INTERESTED PARTIES
Information sought by an authority
In the matter of the C.A. Settlement  JLR312, the Royal
Court of Jersey found it had jurisdiction, under Article 29 of the
Law, to order the disclosure of any document held by a trustee to
any person, not just beneficiaries. However, it further held that
the presumption of confidentiality (as between trustees and
beneficiaries) attaching to trust information means that it is
unlikely a trustee would think it appropriate to disclose such
information to a stranger without a court order requiring it to do
so. Therefore, in response to
a court order or summons, a trustee may apply for directions to disclose such information.
The Court of Appeal of Guernsey in Re B (Judgment 35/212) held that there are exceptions to the general proposition as regards a trustee's duty of confidentiality: one such exception being where a trustee demonstrates that its silence in the face of the relevant order or summons would place it at a real risk of serious harm. A trustee, therefore, has some ability to disclose trust information against the wishes of a beneficiary when, and only to the extent reasonably necessary, it is for the protection of the trustee's interests.
Where such circumstances arise, a trustee will invariably be placed in a difficult position in which it is required to try and analyse the competing pressures of:
- an extant court order;
- the prejudice that the trustee will suffer if it does not disclose trust information; and
- the prejudice that the beneficiaries will suffer if the trustee discloses trust information.
Given the increasing prevalence of Tax Information Exchange Agreements (TIEAs) and Automatic Exchange of Information (AEOI), we can see the potential for a greater focus upon trusts and, therefore, a greater volume of requests or automatic disclosures being made in relation to trust information where trustees will not be able to apply to court for directions as to disclosure. Indeed, Jersey's Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008 (Regulations) are an example on point.
The Regulations were amended following the Jersey Court of Appeal case of Volaw Trust v Comptroller of Taxes  JCA239 so that disclosure of trust information by trustees (upon receiving a notice from the Comptroller of Taxes in Jersey to disclose such information to foreign tax authorities) is no longer conditional upon circumstances as to whether reasonable grounds exist and whether the Comptroller of Taxes can form a reasonable opinion that disclosure is relevant. Rather a trustee need only to determine if a notice to produce information (pursuant to a TIEA) is a "proper request" for information under the Regulations. This requires a trustee to look at the scope of a notice in the context of the relevant TIEA.
If a notice is a proper request, then a trustee is under a statutory obligation to produce to the Jersey Comptroller of Taxes the information requested within the timeframe specified in the notice unless it is subject to a suspicious transaction/activity report or legal professional privilege. In such circumstances, the ability for a trustee to apply to court for directions as to disclosure is, practically, non-existent: the time frame for making information available to the Jersey Comptroller of Taxes will likely be 15 days and too short to apply to court. Failure to provide the requested information will result in an offence punishable by fines or imprisonment.
Requests for information from a beneficiary by a trustee
The Court of Appeal of Guernsey In the matter of R and RA Trusts (Judgment 25/2014) confirmed that the Royal Court of Guernsey has the power under section 69 of the Trusts (Guernsey) Law, 2007 to order that a beneficiary should disclose information to a trustee. The Court of Appeal accepted that such a situation was likely to be extremely rare, but that an order for disclosure may be made where the court is satisfied that the provision of information is required to protect the interests of beneficiaries as a whole. The Royal Court of Jersey has the same or substantially the same power under Article 51 of the Law and a judgment of the Court of Appeal of Guernsey would be highly persuasive authority in Jersey. Consequently, it is reasonable to infer that the Royal of Court of Jersey could too order a beneficiary to disclose information to a trustee.
In order to make such an order the Court will need to be satisfied that there is a close correlation between the beneficiary's position as beneficiary and the information being sought. In considering that correlation the Court should look at "the realities of the situation" and, again, this will be an area where the specific factors in play will ultimately determine the outcome.
INFORMATION A TRUSTEE MAY UNILATERALLY PROVIDE TO BENEFICIARIES
Fixed and discretionary trusts
A beneficiary will need to be aware of their interest under a trust if they are to assert rights to, for example, obtain trust information or to hold trustees to account. There may also be a number of practical reasons (for example the need to complete tax returns in certain jurisdictions) that would necessitate a beneficiary being aware of an interest under a trust.
As a general proposition, it is very likely under Jersey law
that a trustee's overriding duty to act in the best interests
of beneficiaries will include a duty to inform adult beneficiaries
that they have an interest under the trust. This much is clear
under English law with respect to fixed trusts. The position is
less clear with respect to discretionary trusts (and for those with
unvested future interests), and one can frequently point to
situations in which a beneficiary's
interest is so remote that it could not successfully pursue any purported rights to disclosure of trust information even if it was aware of the existence of the trust. The question of whether a trustee should inform a beneficiary of an interest in a trust is not, therefore, always straight forward.
Whilst a trustee's decision will be driven by the context in which it is operating, and whilst it may be necessary to seek legal advice before any disclosure is made, as a 'rule of thumb', a trustee should consider whether a beneficiary would have sufficient interest to obtain trust information if it knew of the existence of the trust. If an adult beneficiary does have such an interest then the trustee may be well-placed to take steps to inform the beneficiary of the existence of the trust and of the general interest under it.
There may be special circumstances that give rise to a genuine need for trustees to delay disclosure. It is unlikely, however, that the desire of a settlor to keep the existence of the settlement a secret will suffice and trustees should consider carefully the reasons for any withholding of disclosure.
Whilst the duty of disclosure may arise upon a beneficiary reaching majority, there could also be circumstances in which it is appropriate for a trustee to make a voluntary disclosure in relation to the interest of a minor beneficiary. The proper exercise of powers of maintenance and advancement may, for example, require communication with those responsible for a minor beneficiary. Clearly, such a situation could not occur without disclosure of the trust's existence and the minor's interest under it.
Minor beneficiaries will have rights to enforce the accountability of trustees (via a responsible adult). There is, therefore, an argument that the interests of minor beneficiaries should be disclosed to those with parental responsibility (assuming of course that they are not the settlor(s)); particularly in circumstances where a minor is a principal or sole beneficiary.
Again, it is perfectly conceivable that there will be special circumstances giving rise to a valid reason not to disclose and trustees will need to consider matters carefully before disclosing trust information.
What information should be provided?
Where a duty of disclosure does arise, trustees should inform beneficiaries of the existence of the trust and the beneficiary's interest under it. The prevailing academic view is that the general nature of the beneficiary's interest should be given, including conditions attached to the beneficiary's interest, but that the trustee is not generally required to offer any advice or explanations about the legal implications or effect of the beneficiary's interest.
Voluntary disclosure of trust information to a beneficiary
Whilst neither the trust instrument nor a trustee's duties may necessarily require consultation with beneficiaries or the settlor, it will be common for trustees to engage with beneficiaries with regards to the exercise of trustee functions and powers and to be guided by a settlor's wishes.
Voluntary disclosure by trustees will in many cases be in the best interests of the beneficiaries, but trustees should be aware of the need to protect confidential information that they hold on behalf of the trust and of the fact that trustees will not be able to demand the costs of voluntary disclosure from beneficiaries. Practically this means:
- Trustees should consider the potential for beneficiaries to disclose confidential information to third parties. Whilst formal undertakings may be unnecessary, trustees will want to press upon a recipient beneficiary the importance of maintaining confidentiality of any trust information that is disclosed; and
- As the costs of voluntary disclosure will fall upon the trust, trustees should incur costs only where it is reasonable to do so.
Further, voluntarily providing information to say, a discretionary beneficiary, may not be in their best interests, it may distract them from getting on with their daily life and discourage them for taking necessary steps to provide for themselves, instead causing them to adopt an unduly idle and financially reckless lifestyle and squander their opportunities.
Requests for trust information can emanate from beneficiaries, settlors, trust officers or authorities. There may also be circumstances in which trustees need to seek information from beneficiaries or where trustees are required to provide information to beneficiaries without a request having been made. Questions relevant to any party's rights to trust information may, consequently, take many forms and there is no 'one-size fits all' approach for trustees.
Allied to the individual nature of each request, trustees will need to be aware of the difficult balancing act that may exist between duties of confidentiality and the potential for litigation if a party does not receive what they believe they are entitled to receive. This is, therefore, an area in which the context behind any considerations will be critical and where trustees should seek early advice if they are in any doubt over a party's right to receive trust information.
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.