Analysis
Beneficiaries of a number of offshore discretionary trusts were joined as parties on their application to contested financial remedy proceedings. The court had made an order that these beneficiaries should disclose copies of documents provided to them for the purposes of an application that had been made to the Royal Court of Jersey (RCtJ) by the trustee of some of those trusts. The RCtJ had given the beneficiaries permission to make such disclosure if they were ordered to do so but expressed concerns about and invited the court not to require such disclosure [2012] (2) JLR 51.
The RCtJ noted that it is common for trustees to apply to the court for directions in relation to the administration of trusts. It referred to difficulties that would ensue if the trustees felt inhibited when making such applications because of a risk that information might become available to those with ‘hostile eyes upon the trust’. It went on to say that permission would not normally be given for information disclosed for the purposes of such an application to be further disclosed to third parties on their applications: ‘trustees should be able to come to the court in private’. Citing the undertaking given by adult beneficiaries (broadly speaking) to obtain and preserve material documents in their control or possession and the fact the material was not especially sensitive, the RCtJ gave permission in the ‘very unusual circumstances’, subject to the court ordering disclosure. It added;
‘… we would hope that the Family Division would, in the interests of comity, take note of those concerns… The internal thinking of the trustee as to what it considers to be in the best interests of the beneficiaries seems very different from the issue of what order should be made by the Family Division in relation to the financial position of husband and the wife’.
Held
The legal context is the court’s power to vary nuptial settlements including offshore settlements under s24(1)c the Matrimonial Causes Act 1973. This requires a determination whether the settlement is post- or ante-nuptial. It then requires a determination whether the court should exercise discretionary powers to vary the trust. In doing so, it has to take into account the interests of the beneficiaries. The trustee is well-placed to assist the court. The court has a duty pursuant to s25(2)a to have regard to all the circumstances of the case including the financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future. Such resources, it is well-established, include resources held within discretionary trusts.
I have had to assess the likely relevance and the importance of the evidence, namely the sensitive and other material disclosed to the RCtJ, which expressed the view the material is highly unlikely to add to this court’s relevant knowledge. In a course approved by the RCtJ, the trustee is not participating and does not propose to file evidence. The trustee has provided very little information directed specifically to the two issues referred to above, including the critical question, namely whether the trustee is likely immediately or in the foreseeable future to exercise its powers in favour of or in some way for the benefit of the husband.
What the trustee considers to be in the best interests of the beneficiaries (and why) are essential elements of this factual determination because it is the trustee who controls the availability of this wealth through the exercise of its discretion. The trustee’s internal thinking is highly relevant to this determination.
On the current state of the evidence, it seems likely the court would be forced to rely on assumptions and inferences. This is not the optimum manner in which to achieve justice for the husband and wife or the beneficiaries. Counsel for the beneficiaries was in the difficult position as he could not assist the court as to the content of the material or why the issues would not be illuminated by what the trustee and others did and said in the Jersey proceedings.
Given the lack of evidence from the trustee as to its likely approach to the exercise of its powers, any evidence which appears to give the prospect of providing a window into this factual issue is relevant evidence of potentially considerable significance. The significance of this evidence is enhanced in the instant case as it appears that the bulk of the wealth accumulated as a result of the husband’s endeavours is held in the trusts. The outcome of the case at trial would have hinged considerably on whether the trusts were nuptial settlements and whether their resources were likely to be available to the husband. I therefore ordered disclosure because of the potential relevance and importance, notwithstanding the strong judgment of the RCtJ and the demands of comity.
Cooperation between the English court and the RCtJ and other courts, where similar trusts or vehicles are in issue, should not undermine legitimate wealth protection but would be in the interests of justice in the context of financial remedy proceedings.
JUDGMENT THE HON MR JUSTICE MOYLAN: [1] During the course of contested financial remedy proceedings adult beneficiaries of a number of offshore discretionary trusts were joined as parties on their application: see my judgment [2012] EWHC 4277 (Fam). Subsequently, I made an order that these beneficiaries, as parties, should disclose copies of documents which had …Continue reading "Tchenguiz-Imerman v Imerman [2013] EWHC 3627"