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IN THE MATTER OF THE RABAIOTTI 1989 SETTLEMENT PDF Print E-mail
Thursday, 17 June 2010 09:55
[2000 JLR 173]
IN THE MATTER OF THE RABAIOTTI 1989 SETTLEMENT
ROYAL COURT (Birt, Deputy Bailiff and Jurats Myles and Georgelin): May 30th, 2000
Trusts—powers and duties of trustees—duty to give information to beneficiaries—beneficiary entitled to inspect accounting documents of trust, subject to discretion of court to refuse disclosure if not in best interests of all beneficiaries
Trusts—powers and duties of trustees—duty to give information to beneficiaries—not normally entitled to see letter of wishes, but court may allow disclosure if good reason to do so
Trusts—powers and duties of trustees—duty to give information to beneficiaries—presumption that may withhold letter of wishes as confidential if in interests of all beneficiaries—discretion to disclose under Trusts (Jersey) Law 1984, art. 25 (b) and (c)
Trusts—powers and duties of trustees—legal proceedings—generally inappropriate for trustees to become involved in litigation between beneficiaries and third parties, e.g. dispute as to financial provision for beneficiary’s spouse
Trustees sought the directions of the court under art. 47 of the Trusts (Jersey) Law 1984 as to whether they should disclose to one of the beneficiaries documents relating to the settlements and whether they should intervene in the matrimonial proceedings of that beneficiary.
The trustees were the trustees of four settlements by related settlors. Two were governed by the law of the British Virgin Islands, but were administered in Jersey and therefore subject to the jurisdiction of the Jersey courts, and the other two were governed by Jersey law. The beneficiaries of all four settlements were the son of the settlor (involved in the current proceedings), and the daughter, grandchildren and remote issue of the settlor.
One of the beneficiaries was involved in divorce proceedings in England. In a dispute as to the extent of the financial provision he should make for his wife, the High Court made an order that he should disclose copies of the “accounting documents” of the settlements as well as all letters of wishes relating to them. It also gave leave for the trustees of the three settlements involving the beneficiary to intervene in the divorce proceedings.
2000 JLR 174
The trustees therefore sought the directions of the court as to whether they should disclose the documents relating to the settlements and whether they should intervene in the matrimonial proceedings, submitting that (a) there was good reason for the court to refuse disclosure of both the accounting documents and the letter of wishes as it was not on the request of a beneficiary made of his own free will but rather as a result of an order of an English court; (b) they were concerned that making the documents available would make it more likely that the English assets of the settlement might be attacked in some way, or that the English court would exercise its jurisdiction to vary the terms of the trusts; (c) a letter of wishes was a document which need not be disclosed, to safeguard the confidentiality of the deliberations of the trustees and their reasons for the exercise of discretionary powers; and (d) it was in the best interests of the beneficiaries as a whole for the trustees not to prejudice their freedom of action by submitting to the jurisdiction of the English court.
The beneficiary submitted in reply that (a) a beneficiary should be entitled to know the reasons for a trustee’s decision; (b) in particular, there were strong reasons for disclosure in this case as otherwise the English court might misunderstand the extent of his beneficial interest under the various settlements; and (c) a letter of wishes came within art. 25(b) and (c) of the 1984 Law and the court had therefore a discretion to order disclosure of such a document.
Held, ordering disclosure of both sets of documents:
(1) There was a strong presumption that the beneficiary was entitled to see the trust documents, requiring good reason to refuse disclosure. As a matter of general equitable principle, the court nevertheless had an overriding discretion to withhold documents if it were satisfied that it was in the best interests of the beneficiaries as a whole, though in this case there were no good grounds for preventing disclosure (page 183, lines 7–13; lines 31–37; page 192, lines 15–16; page 192, line 28 – page 193, line 2; page 194, lines 9–14).
(2) There was a strong presumption against the disclosure of a letter of wishes because it was a document which was confidential to the trustees, and the court would not allow the inspection of a letter of wishes unless a clear case was made for its disclosure. In this case disclosure would be permitted, as the English court might otherwise proceed on an erroneous basis, having regard to information essentially different from that contained in the letter of wishes, and this was clearly not in the best interests of the beneficiaries. In addition, the only other child of the settlor supported full disclosure (page 188, line 39 – page 190, line 19; page 191, lines 37–45; page 193, lines 5–8; page 193, line 41 – page 194, line 8; page 195, lines 15–19).
(3) These decisions could be taken for all four settlements using general equitable principles. In the case of the two governed by Jersey
2000 JLR 175
law, however, the court could also take into account art. 25(b) and (c) of the Trusts (Jersey) Law 1984, which, although phrased as to allow the trustees to withhold a letter of wishes from a beneficiary, gave the court a discretion to permit disclosure (page 190, lines 20–40).
(4) Following the making of the orders of disclosure, the English court would now be aware of the beneficiary’s interests under the settlements. It was, however, unlikely that a foreign court would so exceed the bounds of comity as to purport to vary a settlement which had no connection with its country other than that some of the beneficiaries resided there, and as a matter of general principle it was inappropriate for trustees to become involved in litigation between beneficiaries and third parties. The court did not therefore believe it to be in the best interests of the beneficiaries as a whole for the trustees to intervene in the matrimonial proceedings (page 194, line 36 – page 195, line 3; page 195, lines 25–27).
Cases cited:
(1)    Bhander v. Barclays Private Bank & Trust Co. Ltd., Royal Ct., April 7th, 1997, unreported.
(2)    Butt v. Kelson, [1952] Ch. 197; [1952] 1 All E.R. 167.
(3)    Chaine-Nickson v. Bank of Ireland, [1976] I.R. 393, followed.
(4)    Cowin, In re, Cowin v. Gravett (1886), 33 Ch. D. 179; 56 L.J. Ch. 78, considered.
(5)    Hartigan Nominees Pty. Ltd. v. Rydge (1992), 29 N.S.W.L.R. 405; 67 A.L.J. 703, followed.
(6)    Lemos Trust Settlement, In re, 1992-93 CILR 26, considered.
(7)    Londonderry’s Settlement, In re, Peat v. Walsh, [1965] Ch. 918; [1964] 3 All E.R. 855; (1964), 108 Sol. Jo. 896, considered.
(8)    Murphy v. Murphy, [1999] 1 W.L.R. 282; [1999] 3 All E.R. 1, followed.
(9)    Ojjeh Trust, In re, 1992-93 CILR 348, considered.
(10)    O’Rourke v. Darbishire, [1920] A.C. 581; [1920] All E.R. Rep. 1; (1920), 123 L.T. 68; 36 T.L.R. 350; 89 L.J. Ch. 162; 64 Sol. Jo. 322, not followed.
(11)    Rouse v. I00F Australia Trustees Ltd. (1999), 73 S.A.S.R. 484; [1999] S.A.S.R. 181; 2 ITELR 289, followed.
(12)    Settlement, In re a, 1994 JLR 139, considered.
(13)    West v. Lazard Bros. & Co. (Jersey) Ltd., 1987-88 JLR 414, followed.
Additional case cited by counsel:
T v. T, [1996] 2 FLR 357.
Legislation construed:
Trusts (Jersey) Law 1984, art. 25: The relevant terms of this article are set out at page 183, line 40 – page 184, line 2.
art. 47:
“(1) A trustee may apply to the court for direction concerning the manner in which he may or should act in connection with any matter
2000 JLR 176
concerning the trust and the court may make such order, if any, as it thinks fit.
(2) The court may, if it thinks fit—
(a) make an order concerning—
(i) the execution or the administration of any trust ...”
Texts cited:
Jersey Law Commission Consultation Paper No. 1, The rights of beneficiaries to information regarding a trust, paras. 4.2.19–4.2.26 (1998).
Moore & Allport, Disposals, Discretion & Deception, 3 Jersey Law Review 306 (1999).
Snell’s Equity, 30th ed., at 264 (2000).
Underhill & Hayton, Law of Trusts & Trustees, 15th ed., at 657–660 (1995).
D.J. Benest for the trustees;
J.D. Kelleher for the beneficiary.
BIRT, DEPUTY BAILIFF: This application raises interesting issues
as to the duties and powers of trustees in relation to disclosure to bene-
20 ficiaries of (i) trust documents, such as trust deeds, accounts, etc. and (ii)
a letter of wishes given by the settlor to trustees in connection with a
discretionary settlement. We announced our decision at the time of the
hearing and now give the reasons for that decision.
25 The factual background
The court is concerned with four settlements.
The 1989 Settlement
This is a discretionary settlement, established on July 13th, 1989 by
Guiseppe Rabaiotti (the settlor). The trustee is Latour Trust Co. Ltd. The
30 settlement is governed by the law of the British Virgin Islands. However,
it is administered in Jersey by Latour Trust Ltd. on behalf of the trustee,
and is therefore, pursuant to art. 5 of the Trusts (Jersey) Law 1984,
subject to the jurisdiction of this court. The beneficiaries of the 1989
Settlement are John Rabaiotti (son of the settlor), Louisa Punturieri
35 (daughter of the settlor) and the grandchildren and remoter issue of the
settlor.
The Grezzo Settlement
This is a discretionary settlement established on July 22nd, 1994 by the
settlor. The trustee is Latour Trustees (Jersey) Ltd. The settlement is
40 governed by Jersey law. The beneficiaries are the same as in the 1989
Settlement.
The Catikina Trust
This is a discretionary settlement established on January 19th, 1998 by
the settlor. The trustee is Latour Trust Co. Ltd. The settlement is governed
45 by Jersey law. The beneficiaries are the same as in the 1989 Settlement.
2000 JLR 177
The Luisa Punturieri Trust
This is a discretionary settlement established on October 13th, 1989 by
Louisa Punturieri. The trustee is Latour Trust Co. Ltd. The settlement is
governed by the law of the British Virgin Islands. However, as in the case
5 of the 1989 Settlement, it is administered in Jersey by Latour Trust Ltd.
on behalf of the trustee and is therefore subject to the jurisdiction of this
court. The beneficiaries are the same as in the 1989 Settlement.
In summary, two of the settlements are governed by Jersey law,
whereas two are governed by the law of the British Virgin Islands, but are
10 administered in Jersey. The class of beneficiaries is broadly similar
although adopted descendants of the settlor are included in the Louisa
Punturieri Trust but are excluded from the other three settlements. There
is, however, a power to add beneficiaries in all four settlements. The
living beneficiaries of the 1989 Settlement, the Grezzo Settlement and
15 the Catikina Trust comprise John Rabaiotti, Louisa Punturieri and the
four children of John Rabaiotti. The living beneficiaries of the Louisa
Punturieri Trust include the foregoing together with the two adopted
children of Louisa Punturieri.
John Rabaiotti and his wife have separated and divorce proceedings are
20 taking place before the High Court in England. There is a dispute as to the
extent of the financial provision which John Rabaiotti should make for his
wife. The High Court has made an order that John Rabaiotti should
disclose copies of the following documents in relation to any trusts of
which he is a beneficiary:
25 (i) the trust deed together with all deeds of variation and appointment;
(ii) the accounts of the trust for the last three years;
(iii) in so far as the assets include equities, a current share portfolio
printout and valuation;
(iv) in so far as the assets include land, a current valuation of the land
30 unless the trustees confirm that the accounts provide actual values;
(v) a copy of the last three years’ tax returns (including all schedules
thereto) filed in any jurisdiction together with all tax assessments made in
any jurisdiction;
(vi) a schedule of distributions made in each of the last three account
35 years to John Rabaiotti, his wife, or any of his children; and
(vii) all letters of wishes current and past.
For ease of reference we will refer to the documents in the first six
categories above as “accounting documents.”
The High Court has also made an order giving leave for the trustees of
40 the 1989 Settlement, the Grezzo Settlement and the Catikina Trust to
intervene in the matrimonial proceedings. That order has been served on
the trustees.
John Rabaiotti has asked the trustees of the various settlements for the
documents referred to above. The trustees are not convinced that this is
45 in the interests of the beneficiaries as a whole. Latour Trust Co. Ltd. and
2000 JLR 178
Latour Trustees (Jersey) Ltd. (“the trustees”) have accordingly sought the
directions of the court under art. 47 of the Trusts (Jersey) Law 1984 (“the
1984 Law”) as to whether they should disclose all or any of the requested
documents to John Rabaiotti. In addition they have sought directions as to
5 whether they should intervene in the English matrimonial proceedings.
The issues
In relation to the accounting documents, the question arises as to
whether John Rabaiotti as a beneficiary of the trusts is entitled to see
10 these documents as a matter of right or whether there is a discretion to
withhold them. In relation to the letter of wishes the question arises as to
the right of a beneficiary to see such a letter. Is it to be regarded in the
same light as ordinary trust documents? Alternatively, is it something
which a beneficiary is not generally entitled to see? If so, does the court
15 have a discretion to order that it be disclosed?
It is important to recall that only the Grezzo Settlement and the
Catikina Trust are governed by Jersey law. The court therefore feels
considerable diffidence in giving directions in relation to the other two
settlements which are governed by the law of the British Virgin Islands.
20 Nevertheless, in view of the time scale involved and the fact that they are
administered in Jersey we concluded that it was appropriate for the court
to give directions in relation to those settlements as well. The court has
been shown advice from Messrs. Harney, Westwood & Riegels, BVI
lawyers, to the effect that the right to information of a beneficiary of a
25 trust governed by BVI law will be the same as under English law. We
propose to examine each of the issues as a matter of general principle
first. Having done so we will turn to the relevant Jersey statutory
provision as that clearly can affect only the two settlements governed by
Jersey law.
30
Accounting documents
One starts with the proposition that a beneficiary of a trust is entitled to
inspect trust documents. The general principle is well set out in Snell’s
Equity, 30th ed., at 264 (2000):
35 “Another duty of a trustee is to keep accounts and produce them
to any beneficiary when required. Trustees must also when required
give any beneficiary all reasonable information as to the manner in
which the trust estate has been dealt with and as to the investments
representing it ... Further, in the absence of special circumstances,
40 they must allow a beneficiary to inspect all title deeds and other
documents relating to the trust estate. In this context a beneficiary
includes a contingent beneficiary or an object of a discretionary
trust, save that trustees who exercise discretionary powers (e.g. under
a discretionary trust) need not disclose why they have exercised
45 their discretion in a particular way, and so they may refuse to allow a
2000 JLR 179
beneficiary to inspect documents which will reveal such information,
such as minutes of their meetings.”
The principle is applicable to a beneficiary of a discretionary trust (see
Chaine-Nickson v. Bank of Ireland (3) and Murphy v. Murphy (8)). In the
5 latter case Neuburger, J. said ([1999] 1 W.L.R. at 290):
“Further, Mr. McDonnell said that, as a discretionary object of the
defendant’s 1965 settlement, the plaintiff is entitled to ask the
trustees for information as to the nature and value of the trust
property, the trust income, and as to how the trustees have been
10 investing and distributing it. Although there is no English authority
on this point, this submission appears to be supported by the Irish
case Chaine-Nickson v. Bank of Ireland, and it is treated as being the
law of England in the two leading text books on the topic, namely
Snell’s Equity, 29th ed. (1990), pp. 231–232 and Underhill and
15 Hayton’s Law of Trusts & Trustees, 15th ed. (1995), p.657. On
behalf of the defendant, Mr. Blackett-Ord, quite rightly in my view,
accepts that the plaintiff does, as a matter of principle, have these
rights in relation to the defendant’s 1965 settlement.”
Although Neuburger, J. may have been technically correct in saying that
20 there was no binding English authority, the leading case of In re
Londonderry’s Settlement, Peat v. Walsh (7) concerned a settlement with
discretionary powers. The decision itself was concerned with documents
relating to the reasons for the exercise of a discretionary power but all the
judges of the Court of Appeal accepted the general principle that a
25 beneficiary has a right to see trust documents and did not suggest that
a beneficiary of a discretionary trust was in any lesser position.
This principle has been accepted as a matter of Jersey law: see for
example West v. Lazard Bros. & Co. (Jersey) Ltd. (13).
There has been some discussion over the years as to what is included
30 within trust documents which a beneficiary is entitled to see (excluding
the question of documents relating to reasons for a trustee’s exercise
of a discretionary power). In Lazard Bros. a very wide view was
taken, although the point appears not to have been argued. Conversely, in
Londonderry itself, Danckwerts, L.J. said ([1965] Ch. at 935) that a
35 suggestion that trust documents included everything in the trustees’ hands
as such was not helpful. An issue may arise some day as to the extent to
which documents in relation to underlying companies are to be regarded
as trust documents (see Butt v. Kelson (2), which does not appear to have
been referred to in Lazard Bros.).
40 Fortunately, these issues do not arise in this case. All the documents
defined above as accounting documents are clearly trust documents which
a beneficiary is normally entitled to see in accordance with the principles
described above.
The question which does arise is whether the right of a beneficiary to
45 see trust documents is an absolute right or whether the court has a
2000 JLR 180
discretion to refuse a beneficiary permission to inspect trust documents in
some circumstances.
The dicta of Lord Wrenbury in O’Rourke v. Darbishire (10) might be
said to suggest an absolute right on the part of the beneficiary. Lord
5 Wrenbury said ([1920] A.C. at 626):
“If the plaintiff is right in saying that he is a beneficiary, and if the
documents are documents belonging to the executors as executors,
he has a right to access to the documents which he desires to inspect
upon what has been called in the judgments in this case a proprietary
10 right. The beneficiary is entitled to see all trust documents because
they are trust documents and because he is a beneficiary. They are in
this sense his own. Action or no action, he is entitled to access to
them. This has nothing to do with discovery. The right to discovery
is a right to see someone else’s documents. The proprietary right is a
15 right to access to documents which are your own.”
There have, however, been a number of cases which suggest that this
right is not absolute. In In re Cowin, Cowin v. Gravett (4) North, J. said
(33 Ch. D. at 186): “It seems to me, therefore, that the plaintiff is entitled
to see the deeds, subject to this, that there might be circumstances which
20 would justify the trustees in withholding them from him.” And (ibid., at
187): “I do not say that he is entitled as of right, but only that he is
entitled under the circumstances, because there might be a state of
circumstances under which the right to production would not exist.”
Although Londonderry was concerned with documents relating to the
25 reasons for the exercise of discretionary powers, Danckwerts, L.J. spoke
in general terms when he said ([1965] Ch. at 936):
“For these reasons, therefore, it seems to me that there must be a
very restricted application of the observation that beneficiaries are
entitled to see all trust documents. The matter must be one which is
30 subject to special circumstances and the right to disclosure cannot
apply to all trust documents.”
In In re Lemos Trust Settlement (6) the beneficiaries had instituted an
action before the Greek courts to set aside a Cayman Island trust. The
beneficiaries applied to the court in the Cayman Islands for an order that
35 the trustees of the trust should disclose documents concerning the
accounts of the trust to the beneficiaries. The trustees contended that to do
so might assist the beneficiaries in their action in Greece and would
therefore not be in the interests of the trust and of the beneficiaries of the
trust as a whole. The Cayman Court of Appeal, founding itself on Cowin
40 and Londonderry, held that there were circumstances in which a trustee
could withhold trust documents such as accounting documents from a
beneficiary, and that this was such a case.
In In re Ojjeh Trust (9), a beneficiary sought detailed financial informa-
tion concerning the underlying companies of a trust. The Grand Court of
45 the Cayman Islands held that Cayman law was the same as English law in
2000 JLR 181
this respect. The court’s finding was summarized in the headnote to the
case in The Cayman Islands Law Reports as follows (1992-93 CILR
at 351):
“The principles governing the disclosure of information to benefi-
5 ciaries (including a parent or guardian or guardian ad litem of a
minor beneficiary) were in summary (a) a beneficiary would
normally be permitted to inspect and take copies of essential trust
documents, on the basis of the proprietary right he held over them;
this was not the same as having a right to discovery, which was the
10 right to see someone else’s documents; (b) that normal right did not
extend to detailed information about the affairs of the companies
owned by the trust and to obtain information of that kind the
beneficiary must make out a special case; (c) in so doing, he must
specify the document that he wished to see; (d) there must be no
15 valid objection by the trustees or directors or (in special circum-
stances) the beneficiaries whom the trustees considered should
properly be consulted upon the matter; and (e) the beneficiary
seeking disclosure must give proper assurances that he would not
disclose the documents to anybody but his own legal or other
20 advisers and would not make copies save as might properly be
advised by them.”
Although the documents related to the business of underlying companies
rather than the trust itself—and it is clear that under English law a
beneficiary does not have an absolute right to some types of information
25 about an underlying company, even if wholly owned by the trustees (see
Butt v. Kelson (2))—the decision supports the existence of a discretion on
the part of the court to determine whether, in a particular case, such
information should be supplied.
On the facts, the court held that the demand for information was
30 unreasonable as it would require the disclosure of just about every type of
information on the affairs of the trust companies, some of which, if
indiscriminately disclosed or used, could prove detrimental to those
companies given the highly competitive nature of some of their
enterprises.
35 In In re a Settlement (12), in the context of an application for directions
under art. 47 of the 1984 Law, this court rejected a submission that
beneficiaries had a right to see all trust documents. Although the court
was concerned principally with documents of the type considered in
Londonderry (referring to reasons for the exercise of a discretionary
40 power), the court suggested that, in the context of an application for
directions, it had a discretion as to which documents should be disclosed
to beneficiaries.
Finally, in Rouse v. I00F Australia Trustees Ltd. (11), the Supreme
Court of South Australia had to consider whether a beneficiary’s right to
45 inspect trust documents was unrestricted. In that case, the trust was part
2000 JLR 182
of a managed investment scheme which involved 20,000 investors, who
became beneficiaries of a trust as part of the scheme. The scheme also
involved a forest company and a milling company. The trustee became
involved in a management dispute against the forest company and the
5 milling company. Certain beneficiaries sought an order that they be
permitted to inspect and copy documents in the possession of the trustee,
including witness statements, expert reports and legal advice forming part
of the trustee’s brief to counsel in the management dispute. Doyle, C.J., in
a judgment agreed with by the other members of the court, had this to say
10 (73 S.A.S.R. at paras. 100–102):
“100. There must be various situations in which a trustee, partic-
ularly a trustee conducting a business, would be put in an impossible
position if the beneficiary of the trust could, as a matter of right,
claim to inspect documents in the possession of the trustee and
15 relevant to the conduct of the business. It is readily conceivable that
there will be situations in which an undertaking of confidentiality is
not sufficient protection. The fact that the trust is one in which
numerous beneficiaries have an interest, and the further fact that
those beneficiaries may have differing views about the wisdom of
20 the course of action being pursued by the trustee, only serve to
emphasize, in my opinion, the need for the law to recognize some
scope for a trustee to refuse to disclose information on the grounds
that it is confidential and on the further ground that the disclosure is
not in the interests of the beneficiaries as a whole. I make that
25 observation on the basis and on the assumption that the ultimate
right of the beneficiaries will be to have the trustee removed if they
are dissatisfied with the approach of the trustee.
101. Ultimately, I would rest the existence of the relevant
discretion upon the need to reconcile the undoubted duty of a trustee
30 to make disclosure to beneficiaries of information about the trust,
and the undoubted duty to permit the inspection of trust accounts
and trust documents, with the equally fundamental obligation of a
trustee to conduct the affairs of a trust, and particularly a trust which
involves the conduct or management of a business, in the interests of
35 the beneficiaries as a whole. I consider that on occasions the
reconciliation of these interests may entitle a trustee to decline to
provide information to particular beneficiaries, when the trustee has
reasonable grounds for considering that to do so will not be in the
interests of the beneficiaries as a whole, and will be prejudicial to
40 the ability of the trustee to discharge its obligations under the trust.
It may be that the ultimate foundation of the discretion is the
obligation of the trustee to discharge its duties to manage the affairs
of the trust in the interests of the beneficiaries.
102. I wish to make it clear that the discretion that I envisage is a
45 limited one, and must always be limited by the general duty of
2000 JLR 183
disclosure by a trustee to which I have referred. The existence of
the discretion cannot be used as an excuse for paternalism or to
disregard the interests of beneficiaries. Its existence depends upon
the need to protect the trustee’s ability to discharge its obligations.
5 The availability of the discretion will depend very much upon the
circumstances of the particular case.”
In our judgment, the court does have a discretion to refuse to order
disclosure of trust documents that a beneficiary is normally entitled to
see. Clearly, the general principle is that a beneficiary is entitled to see
10 trust documents which show the financial position of the trust, what assets
are in the trust, how the trustee has dealt with those assets, etc. This is an
essential part of the mechanism whereby the trustee can be held
accountable for his trusteeship to a beneficiary.
But the need for an individual beneficiary to obtain trust documents
15 has to be weighed against the interests of the beneficiaries as a whole.
The trustee has a duty to the beneficiaries as a class. If, as in some of the
cases referred to above, the trustee forms the view in good faith that
disclosure of documents to which a beneficiary would normally be
entitled would be prejudicial to the interests of the beneficiaries as a
20 whole, it may refuse to make that disclosure and seek the directions of the
court. Should the trustee fail to seek the directions of the court, it is open
to any beneficiary to bring the matter before the court for resolution. To
that extent, the court thinks the position is simpler than is suggested at the
end of para. 100 of Doyle, C.J.’s judgment in Rouse. The remedy of a
25 dissatisfied beneficiary is not to seek to have the trustee removed but to
seek the directions of the court as to whether the particular trust document
should or should not be disclosed. The court will then have to balance the
competing considerations and decide what is best for the beneficiaries as
a whole. In short, the court agrees with the way in which Doyle, C.J. puts
30 the matter at para. 101 of the judgment in Rouse.
The court does not wish to encourage trustees to refuse disclosure on
weak grounds. One starts with a strong presumption that a beneficiary is
entitled to see trust documents of the nature described. There would have
to be good reason to refuse disclosure of such documents. But the court is
35 satisfied that, as a matter of general equitable principle, the court has an
overriding discretion to withhold documents where it is satisfied that this
is in the best interests of the beneficiaries as a whole.
For those trusts governed by Jersey law, the court must also consider
art. 25 of the 1984 Law. This reads:
40 “Trustee may refuse to make disclosure.
Subject to the terms of the trust and subject to any order of the
court, a trustee shall not be required to disclose to any person any
document which—
...
45 (d) relates to or forms part of the accounts of the trust,
2000 JLR 184
unless, in a case to which sub-paragraph (d) applies, that person is a
beneficiary under the trust ...”
As the Jersey Law Commission states in its helpful and thought-
provoking Consultation Paper No. 1 entitled The rights of beneficiaries to
5 information regarding a trust, the provision is not as easy to interpret as it
might be because of the use of the double negative. In our judgment, the
relevant wording in effect confers a positive right on a beneficiary to see
documents which relate to the accounts of the trust. Thus, “... a trustee
shall not be required to disclose to any person any document which
10 relates to or forms part of the accounts of the trust unless that person is a
beneficiary” means that, where that person is a beneficiary, the trustee is
required to disclose such documents. However, that right is expressed to
be “subject to any order of the court.” In our judgment, therefore, the
position under art. 25 is that, just as we have found that under general
15 equitable principles a beneficiary’s right to inspect trust documents is
subject to the discretion of the court, the right conferred by art. 25 is also
subject to any order of the court, which may, in an appropriate case,
exercise a discretion to refuse to order disclosure.
We appreciate that by construing art. 25 in this manner, we are opening
20 up the argument that the words “subject to any terms of the trust” also
govern the right of a beneficiary to documents relating to trust accounts,
so that the contention can be made that the settlor, by the terms of the
trust, may restrict the right of a beneficiary to inspect documents relating
to the accounts. However, for the reasons set out in paras. 4.2.19 to 4.2.24
25 of the Jersey Law Commission Consultation Paper, we think that there
are a number of arguments which could be raised against or used to limit
such a contention. That matter is not before the court. All we need say is
that our interpretation of art. 25 in relation to the power of the court to
restrict the provision of documents relating to trust accounts to a
30 beneficiary does not necessarily mean that the settlor can do likewise or
the court could not intervene where a settlor purported to do so.
An additional issue raised in the Consultation Paper (see paras.
4.2.24–4.2.26) is whether the right of a beneficiary to inspect trust
documents is a proprietary right. There is no doubt that O’Rourke v.
35 Darbishire (10) asserts a proprietary right on the part of a beneficiary (see
the dictum of Lord Wrenbury cited above). This was followed in
Londonderry. Conversely, a majority of judges in the Court of Appeal of
New South Wales in Hartigan Nominees Pty. Ltd. v. Rydge (5) appeared
to be of the view that a better basis was the trustee’s fiduciary duty to
40 account to the beneficiary. In particular, Kirby, P. cited with approval (29
N.S.W.L.R. at 422) an extract from Ford & Lee, Principles of the Law of
Trusts, 2nd ed., at 425 (1990):
“... The legal title and rights to possession are in the trustees: all
the beneficiary has are equitable rights against the trustees ... The
45 beneficiary’s rights to inspect trust documents are founded therefore
2000 JLR 185
not upon any equitable proprietary right which he or she may have
in respect of those documents but upon the trustee’s fiduciary duty
to keep the beneficiary informed and to render accounts. It is the
extent of that duty that is in issue. The equation of the right to
5 inspect trust documents with the beneficiary’s equitable proprietary
rights gives rise to unnecessary and undesirable consequences. It
results in the drawing of virtually incomprehensible distinctions
between documents which are trust documents and those which are
not; it casts doubts upon the rights of beneficiaries who cannot claim
10 to have an equitable proprietary interest in the trust assets, such as
the beneficiaries of discretionary trusts; and it may give trustees too
great a degree of protection in the case of documents, artificially
classified as not being trust documents, and beneficiaries too great a
right to inspect the activities of trustees in the case of documents
15 which are, equally artificially, classified as trust documents.”
In In re a Settlement (12) the Royal Court did not find it necessary to
determine whether the beneficiaries of a trust have a proprietary interest
in trust documents. It is similarly not necessary for us to resolve the issue
definitively for the purposes of this case, but, as at present advised, the
20 court is of the view that the opinions in Hartigan referred to above are
persuasive and the court would concur with the view of the Jersey Law
Commission (ibid., at para. 4.2.26) when it said:
“In principle, whilst it can be seen that beneficiaries can assert
proprietary rights to the trust property (thus being able to join
25 together and demand an outright transfer to themselves if they are
all absolutely entitled), it is less clear why such rights should extend
over the trust documents, which are in the trustees’ hands so that
effective management can be carried out. In short, we would agree
with Professor Hayton when he says: ‘The beneficiaries’ rights to
30 inspect trust documents are now seen to be better based not on
equitable proprietary rights but on the beneficiaries’ rights to make
the trustees account for their trusteeship.’”
The letter of wishes
35 We turn now to consider whether a letter of wishes is a document
which a beneficiary is entitled to see. In referring to a letter of wishes, we
mean a document addressed by a settlor to trustees which is not binding
upon the trustees, but which indicates the settlor’s thoughts and wishes as
to how the trustees might exercise their discretionary powers.
40 In Londonderry, the Court of Appeal endorsed earlier authority to the
effect that trustees exercising a discretionary power are not bound to
disclose the reasons for their decision. The court then had to reconcile
that principle with the rule that a beneficiary is entitled to see documents
concerning the administration of the trust. The court resolved this conflict
45 by holding that the general entitlement to see trust documents did not
2000 JLR 186
apply to documents which would or might disclose the reasons for a
discretionary decision. This included the agenda for a trustees’ meeting,
correspondence between trustees, correspondence between trustees and
individual beneficiaries and, most importantly, minutes of meetings of the
5 trustees and other documents disclosing the deliberations of the trustees
as to the manner in which they should exercise the discretionary power,
or disclosing the reason for any particular exercise of such power or the
material upon which such reasons were or might have been based.
However, the position of a letter of wishes did not arise for consideration
10 in that case.
Londonderry was quoted with approval by this court in In re a
Settlement (12), when it was said that the propositions contained in
Londonderry offered general guidance as to the documents which need
not be disclosed (1994 JLR at 148). The principles underlying the
15 decision in Londonderry were also supported by the court when it said
(ibid., at 146):
“Those paragraphs make it clear that, subject to the terms of the
trust and to any order of the Court, trustees are entitled to refuse to
disclose matters touching upon the exercise of a power or discretion
20 or the performance of a duty imposed on them. In the context of
discretionary trusts, it seems to us eminently sensible and reasonable
that trustees should be able to weigh conflicting considerations as
between different beneficiaries and to judge the merits and de-merits
of particular courses of action without being exposed to minute
25 examination as to their motives and processes of reasoning at the
instance of disaffected beneficiaries. Trustees of such a trust have
been entrusted with a confidential role and should, in general, be
permitted to exercise their functions away from the glare of
publicity. of course, if they are not acting in good faith, that is an
30 entirely different matter.”
In Bhander v. Barclays Private Bank & Trust Co. Ltd. (1) a letter of
wishes was disclosed voluntarily by the trustees and the court did not
therefore address the issue. Counsel’s researches have unearthed only one
case where the position of a letter of wishes has been considered. That
35 case is Hartigan Nominees Pty. Ltd. v. Rydge (5), a decision of the Court
of Appeal of New South Wales, Australia. The Court of Appeal subjected
Londonderry to detailed scrutiny. The court held by a majority that the
letter of wishes in that case did not have to be disclosed to a beneficiary.
However, the reasoning differed on a number of issues.
40 Kirby, P. believed that Londonderry was based on old-fashioned
principles which were no longer appropriate. A beneficiary should be
entitled to know the reasons for the exercise of a discretionary power. The
rule that documents disclosing reasons for the exercise of a discretionary
power by trustees need not be disclosed was therefore wrong. Even if,
45 contrary to his views, Londonderry was still good law, he held that
2000 JLR 187
because trustees were likely to have regard to a letter of wishes when
considering their powers under a trust deed, the letter of wishes should be
regarded as a document which was ancillary to the trust deed and
therefore a “trust document,” so that it was disclosable on Londonderry
5 principles. Whilst reserving his position in a case where a settlor imposed
an express provision of confidentiality in a letter of wishes, he declined to
imply any duty of confidentiality in relation to letters of wishes generally
and he would therefore have ordered that the letter be disclosed to the
beneficiary (29 N.S.W.L.R. at 418–419, 420).
10 Maloney, J.A. approved Londonderry. He declined to order disclosure
of the letter of wishes on three grounds. First, he held that a letter of
wishes was not a trust document, in the sense that it was not part of the
property of the trust. Secondly, he drew the inference that a letter of
wishes was given by a settlor on a confidential basis to the trustees and it
15 would be wrong to breach that confidentiality. Thirdly, he held that a
letter of wishes was a document which related to the reasons for the
exercise of a trustee’s discretionary power, disclosure of which would be
likely to lead to family difficulties, and was therefore a document which
fell within the category of documents which Londonderry said need not
20 be disclosed (29 N.S.W.L.R. at 437–438).
Sheller, J.A. also supported the principle laid down by Londonderry.
Documents which disclosed the reasons for the exercise of a trustee’s
discretion need not be disclosed to a beneficiary. However, he was of the
view that Londonderry went too far in including in that category material
25 upon which reasons were or might have been based, unless that material
would reveal the reasons themselves or the reasoning process.
Furthermore, he held that a letter of wishes was not a document which
would disclose the reasons for a trustee’s decision and therefore did not
fall within the category of documents which Londonderry held need not
30 be disclosed. However, he agreed with Mahoney, J.A. that it was to be
inferred that a letter of wishes written privately to trustees was intended
to remain confidential and that for that reason, it should not be disclosed
to beneficiaries (29 N.S.W.L.R. at 442, 445-447).
In short, a majority (Mahoney and Sheller, JJ.A.) held that a trustee
35 was not required to disclose a letter of wishes on the grounds of
confidentiality. A different majority (Kirby, P. and Sheller, J.A.) held
that a letter of wishes was not a document which fell within the
category of documents which Londonderry held need not be disclosed
because they might disclose the reasons for the exercise of a discretionary
40 power.
Mr. Kelleher argued that the court should follow the approach of Kirby,
P. to the effect that the reasoning in Londonderry is out of date. A
beneficiary should be entitled to know the reasons for a trustee’s decision.
We do not agree. We think that the arguments for confidentiality in
45 relation to the reasons for trustees’ decisions given in Londonderry
2000 JLR 188
remain as valid today as they were then. Salmon, L.J. summarized these
([1965] Ch. at 936) as follows:
“The settlement gave the absolute discretion to appoint to the
trustees and not to the courts. So long as the trustees exercise this
5 power ... bona fide with no improper motive, their exercise of the
power cannot be challenged in the courts—and their reasons for
acting as they did are, accordingly, immaterial. This is one of the
grounds for the rule that trustees are not obliged to disclose to
beneficiaries their reasons for exercising a discretionary power.
10 Another ground for this rule is that it would not be for the good of
the beneficiaries as a whole, and yet another that it might make the
lives of trustees intolerable should such an obligation rest upon them
... Nothing would be more likely to embitter family feelings and
the relationship between the trustees and members of the family,
15 were trustees obliged to state their reasons for the exercise of the
powers entrusted to them. It might indeed well be difficult to
persuade any persons to act as trustees were a duty to disclose their
reasons, with all the embarrassment, arguments and quarrels that
might ensue added to their present not inconsiderable burdens.”
20 It seems to us important that discussion should be uninhibited by fear of
publication. In order to fulfil their duties properly the trustees may need
to consider weaknesses of character of a beneficiary, the relationship
between different beneficiaries and many other sensitive matters. One can
readily understand that, should such personal information about benefi-
25 ciaries be freely available to any individual beneficiary who asks for it, it
may lead to difficulty. Furthermore, the fact that the views and reasoning
of trustees on such sensitive matters could be made available to any
disaffected beneficiary would, the court believes, inhibit full and free
discussion, and be likely to lead to ill feeling and to fruitless litigation.
30 The court cannot improve on the language of Bailhache, Bailiff, in In re a
Settlement (12) set out above and fully endorses it.
Mr. Benest, on behalf of the trustees, argued that Mahoney, J.A. was
correct to hold that a letter of wishes is a document which falls within the
category of documents which Londonderry held need not be disclosed,
35 because it was a document which might disclose the deliberation of the
trustees or the reasons for any particular exercise of the discretionary
power or constitute material upon which such reasons were or might have
been based.
Although the exact wording used in the order drawn up in
40 Londonderry did not have a letter of wishes in mind, we are satisfied that
such a letter is covered by the principle which governed the decision in
Londonderry. A letter of wishes will usually set out in some detail how
the settlor would like the trustees to exercise their discretionary powers of
distribution and, perhaps, of management of the trust fund. When trustees
45 come to consider the exercise of a discretionary power, they will
2000 JLR 189
normally have the letter of wishes before them. The letter is, of course,
not binding. If trustees slavishly follow a letter of wishes, their decision
can be quashed on the grounds that it is not, in truth, the decision of the
trustees. The trustees must make up their own minds as to how they
5 should exercise their discretion in the best interests of one or more of the
beneficiaries. However, discussion is almost certain to involve references
to the contents of the letter of wishes, such as whether the settlor’s wishes
remain appropriate; whether there are reasons to depart from his wishes;
and, if so, what those reasons are and how they might impact on the
10 wishes expressed by the settlor. Circumstances will of course vary and the
weight given to the letter of wishes will vary from case to case.
Nevertheless, in general terms, the contents of the letter of wishes will
undoubtedly form an important part of the trustees’ consideration of the
exercise of their powers. We are quite satisfied that a letter of wishes is a
15 document which is closely related to the decision-making process and to
the reasons for a decision, even where the trustees decide to depart from
the letter. However, we disagree with Kirby, P. in Hartigan (29
N.S.W.L.R. at 419) that it is therefore a document which is to be treated
as being ancillary to the trust deed. It is an informal document which the
20 trustees are free to ignore. It is merely an expression of the settlor’s
wishes.
Nevertheless, it may in many cases be a document which discloses the
reasons for a decision and is, in almost all cases, likely to be material
upon which such reasons were or might have been based, even in cases
25 where the trustee chooses to depart from it. We note the criticism of this
last category of documents referred to in Londonderry by Sheller, J.A. in
Hartigan (29 N.S.W.L.R. at 444–445) and we can envisage a case in
which material upon which reasons were or might have been based
should nevertheless be disclosed. However, in general we think it
30 reasonable that such material should be covered by the protection given
to the reasons themselves as they will often be so closely inter-linked that
the protection given to the reasons will not be achieved unless the
material upon which those reasons were based is also protected.
We are conscious that the wording used to describe the relevant
35 categories of documents in Londonderry should not be construed as a
statute. The wording is simply taken from an order made in a particular
case. Although we hold that the letter of wishes is covered by the wording
in Londonderry, that is not necessary to our decision. We would rest our
decision additionally upon the general principle that a trustee does not
40 have to disclose the reasons for the exercise of a discretion and upon the
justification for that principle as given in Londonderry (7) and in In re a
Settlement (12). We hold that to require disclosure of a letter of wishes
would be likely in practice to undermine the immunity from the provision
of reasons and to lead to just the sort of problems which the immunity
45 was designed to avoid.
2000 JLR 190
We would also endorse, as an additional ground, the decision of the
majority in Hartigan that the letter of wishes need not be disclosed on the
ground of confidentiality. We agree that the fact that the settlor writes a
separate letter addressed privately to trustees raises a strong implication
5 that he intended the document to be confidential. In some cases he may
have stated expressly that it is confidential. We agree with the majority in
Hartigan (5) that the court should ordinarily respect that confidentiality.
The settlor will often wish to communicate to the trustees thoughts about
individual beneficiaries which would cause upset, distress and possibly
10 family strife if they became generally known. The settlor is always able
to make these thoughts known to his family if he wishes. But should he
prefer to keep them confidential, he should be entitled to do so. It will
often be in the interests of the family as a whole that such thoughts should
remain confidential. Where information is provided in confidence the law
15 will respect that confidence unless there are good grounds for it not do so.
For the reasons which we have set out above, we believe that, far from
there being good reason not to respect the confidentiality of the settlor’s
wishes in such cases, there are good grounds for saying that it should be
respected and that it would be damaging to ignore it.
20 As on the first issue, we have considered the matter first by reference to
general equitable principles, so as to be able to give a decision in respect
of the two trusts not governed by Jersey law. However, the position in
Jersey is also covered by art. 25 of the 1984 Law, the relevant parts of
which read:
25 “Subject to the terms of the trust and subject to any order of the
court, a trustee shall not be required to disclose to any person, any
document which—
(a) discloses his deliberations as to the manner in which he
has exercised a power or discretion or performed a duty
30 conferred or imposed upon him; or
(b) discloses the reason for any particular exercise of such
power or discretion or performance of duty or the material
upon which such reason shall or might have been based; or
(c) relates to the exercise or proposed exercise of such power
35 or discretion or the performance or proposed performance
of such duty ...”
For similar reasons to those which we have set out above, we hold that a
letter of wishes falls within paragraphs (b) and (c) of art. 25 so that,
subject to the terms of the trust or to any order of the court, the trustee is
40 not required to disclose a letter of wishes to an individual beneficiary.
Discretion of the court
Given our decision that a beneficiary is not entitled as of right to see a
letter of wishes, does the court have power to order disclosure in some
45 cases? Although the issue did not arise in Hartigan (5), there are dicta to
2000 JLR 191
suggest that the majority contemplated the existence of such a power.
Thus Mahoney, J.A. said (29 N.S.W.L.R. at 436):
“I would, for myself, see the matter of confidentiality as being of
particular significance in discretionary trusts of the present kind. In
5 deciding questions of disclosure, it is important in my opinion to
have regard to the essential nature of such discretionary trusts. Such
a trust is not a mere commercial document in which the public may
have an interest. It is a private transaction, a disposition by the
settlor of his own property, ordinarily voluntarily, in the manner in
10 which he is entitled to choose. Special cases apart, it is proper that
his wishes and his privacy be respected.” [Emphasis supplied.]
Sheller, J.A. said (ibid., at 447):
“The question is whether there is in this case some countervailing
circumstance which calls for the disclosure of a document given to
15 the trustees in confidence. Such a circumstance may spring from the
nature of the document itself, as, for example, the documents of title
of the trust, from want of good faith on the part of the trustees, or,
perhaps, from some overriding public interest; compare Castrol
Australia Pty Ltd. v. EmTech Associates Pty Ltd. (1980) 51 FLR 184
20 at 209–216. There is no allegation of bad faith. The document is
itself not of a nature that requires disclosure. Nor do I see any
specific or amorphous public interest which requires, in the circum-
stances of this case, the revelation of the wishes of Sir Norman
Rydge expressed privately and, I am satisfied, confidentially to his
25 trustees.”
The existence of a power to override the confidential nature of the letter
of wishes in particular circumstances would be consistent with the general
law of confidence which allows for disclosure in various circumstances.
Supported by those dicta, we would return to first principles. A court
30 of equity has a general supervisory jurisdiction over trusts. It is there,
amongst other reasons, to ensure that the trustees are accountable to the
beneficiaries on whose behalf they hold the assets. Indeed, trustees may
surrender their discretion to the court. In our judgment, it would be
inconsistent with the general position of the court if it did not have the
35 power to order disclosure of a letter of wishes or other document, which
did not have to be disclosed on Londonderry principles, where it was
satisfied that it was essential to do so. The position is similar to that
concerning trust documents, save that it is the reverse situation. One starts
with a strong presumption that a letter of wishes or other document
40 falling within the Londonderry exceptions, does not have to be disclosed
to a beneficiary. The burden lies on a beneficiary who requests the court
to order the disclosure of such a document against the wishes of the
trustees. Nevertheless, there is power in the court to do so if the court is
satisfied that there are good grounds for ordering disclosure in a particular
45 case.
2000 JLR 192
Under Jersey law, the position is even clearer, because art. 25 of the
1984 Law provides that the rule that a trustee is not required to disclose
documents falling within paragraphs (a) to (c) is “subject to any order of
the court.” It is clear, therefore, that the court has power to order
5 disclosure of documents which would otherwise not be disclosable.
For the avoidance of doubt, nothing in this judgment touches upon the
rules of discovery in adversarial litigation. In those circumstances the
ordinary rules of discovery will apply, and a letter of wishes or other
document which does not have to be disclosed to a beneficiary on
10 Londonderry principles will fall to be discovered in exactly the same way
as any other document.
Application to the facts
Accounting documents
15 As we have said previously, there is a strong presumption that a
beneficiary is entitled to see trust documents of this nature. There must
be good reason to refuse disclosure of such documents. What reasons
are relied upon in this case? Mr. Benest argues that it is not a request
from a beneficiary made of his own free will. John Rabaiotti has only
20 made the request because he has been ordered to do so by the English
court and he is worried that it will be taken against him if he cannot
produce the documents to that court. The trustees are concerned that
provision of the documents to Mr. Rabaiotti’s wife or to the English
court would make it more likely that the English assets of the settlement
25 might be attacked in some way, or that the English court would exercise
the jurisdiction, which it apparently may have, to vary the terms of the
various trusts.
In our judgment, these arguments do not justify withholding the
accounting documents from Mr. Rabaiotti. On the contrary, the court can
30 well understand the desire of the English matrimonial court to have full
knowledge of any assets to which Mr. Rabaiotti may be or become
entitled. The fact that one party to a marriage has an interest or
expectation under a trust may well be a material consideration when
deciding how the parties’ matrimonial assets are to be divided following
35 divorce. As a matter of comity, this court would not wish to place
impediments in the way of the English High Court undertaking its proper
role. Mr. Rabaiotti has called for the accounting documents. They are
documents to which any beneficiary is normally entitled and we see no
reason on the facts of this case to deny Mr. Rabaiotti that entitlement.
40 Accordingly, we ordered that the accounting documents should be
disclosed to Mr. Rabaiotti by the trustees. On a point of detail, we said
that there was no obligation upon the trustees to obtain a market valuation
of any real property (they are apparently at cost in the trustees’ books),
but that, if Mr. Rabaiotti were willing to pay the costs of obtaining a
45 market valuation, the trustees could, at their discretion, obtain such a
2000 JLR 193
valuation. Should they do so, these too should be disclosed to Mr.
Rabaiotti.
Letter of wishes
5 So far as the letter of wishes is concerned, the court starts in the
opposite position to that for the accounting documents. There is a strong
presumption against its disclosure. The court will not order inspection of
a letter of wishes unless a clear case is made for its disclosure.
Mr. Kelleher argues that there are strong reasons to order disclosure in
10 this case. He says that the evidence shows that Mr. Rabaiotti’s spouse and
the English court are likely to draw the conclusion that Mr. Rabaiotti has
easy access to both the capital and income of the various settlements on
the grounds that the trustees are likely to have regard to Mr. Rabaiotti’s
wishes. In fact, because of what his father made known to both children
15 before he died, and because of the fact that he has seen earlier letters of
wishes as referred to below, Mr. Rabaiotti believes that the letter of
wishes makes it clear that the settlor wished the trust fund to be preserved
for subsequent generations and has requested the trustees only to pay part
of the income of the various settlements to Mr. Rabaiotti. The scope for
20 misunderstanding of the true position on the part of the English court is
said to have been increased in this particular case because, following the
recent death of his father, Mr. Rabaiotti went through his father’s papers
and found earlier letters of wishes signed by his father, as settlor, in
relation to two of the settlements. These have been disclosed to his wife
25 pursuant to the order of the English court. He is concerned, therefore, that
the English court will proceed on an erroneous basis, in that it will have
regard to letters of wishes which have been replaced. The trustees, on the
other hand, repeat the arguments against disclosure which they raised in
respect of the accounting documents.
30 Mr. Rabaiotti is supported by his sister Louisa Punturieri. She has
written to the court to say that she does not oppose her brother’s
application. More significantly, she emphasizes that she wishes the court
to ensure that the English court obtains the fullest picture of the
settlements; in particular that, if the trustees act in accordance with the
35 letter of wishes, John Rabaiotti will only receive part of the income of
the settlements and will not receive any capital. She is concerned that a
failure to disclose the full position will result in prejudice to her side of
the family because the English court may conclude that John Rabaiotti
has a greater interest in the settlements than he is likely to have in
40 practice.
The court has had particular regard in this case to the fact that earlier
letters of wishes in respect of two of the settlements are already available
to John Rabaiotti’s wife and the English court. It would clearly not be in
the interests of John Rabaiotti as a beneficiary or any of the other benefi-
45 ciaries if the English court were to proceed on a basis which assumed that
2000 JLR 194
John Rabaiotti’s interest in the settlements was much greater than it was.
We note that the only other child of the settlor supports full disclosure
and, in the particular circumstances of this case, we think that the risk of
the English court drawing an erroneous inference as to the likely position
5 of John Rabaiotti as a beneficiary is such that we ought to order
disclosure of the letter of wishes to John Rabaiotti. We conclude that, on
the facts of this case, it is in the interests of the beneficiaries as a whole as
well as being in the interests of John Rabaiotti.
10 Intervention by the trustees in the English proceedings
The English court has made an order giving leave for the trustees to
intervene in the English matrimonial proceedings. That order has been
served on the trustees and they seek directions as to whether they should
intervene.
15 The court has been provided with an opinion of English counsel
experienced in matrimonial law who has set out the principles which will
be applied by the English court and the powers of the English court in
relation to ante-nuptial or post-nuptial settlements. The court has also
been referred to an article by Moore & Allport, Disposals, Discretion &
20 Deception, 3 Jersey Law Review 306 (1999). From these it is clear that
the English court has power, under English statute, to vary nuptial
settlements. The latter phrase has been interpreted very widely, although
it is not entirely clear whether it would be wide enough to cover the
settlements in this case.
25 The main concern of the trustees is that if they were to submit to the
jurisdiction of the English court and if that court were to purport to vary
any of the settlements under its statutory power, the trustees would find it
more difficult to contest any subsequent proceedings in Jersey brought to
enforce the order of the English court for variation. Conversely, if the
30 trustees had not submitted to the jurisdiction, they would be able to argue
strongly that this court should not enforce an order of an English court in
respect of a settlement governed by Jersey law or BVI law and
administered in Jersey. The trustees argue that it is in the best interests of
the beneficiaries as a whole that they should preserve their freedom of
35 action in this respect.
The court regards it as unlikely that an English court would so exceed
the normal bounds of comity as to purport to vary a settlement governed
by Jersey or BVI law, administered in Jersey by Jersey trustees, and
which had no connection with England save that some of the beneficiaries
40 resided there. However, they accept that the trustees are right to take a
cautious approach. Furthermore, it is hard to see any specific advantage
for the settlements in the trustees’ submitting to the jurisdiction. By
reason of the orders we have made in respect of disclosure, the English
court will be aware of the position in relation to the settlements without
45 the need for the trustees to appear. In any event, as a matter of general
2000 JLR 195
principle, it seems inappropriate for trustees to become involved in
litigation between a particular beneficiary and a third party to the
settlement (in this case, the spouse of a beneficiary).
Accordingly, the court was of the clear view that the trustees should
5 not intervene in the English matrimonial proceedings between Mr.
Rabaiotti and his wife.
Summary of conclusions
A beneficiary is normally entitled to inspect trust documents such as
10 the trust deed and documents which show the nature and value of the trust
property, the trust income and how the trustees have been investing and
distributing the trust property. However, there is a discretion in the court
to refuse disclosure to a beneficiary where it is satisfied that this would
not be in the best interests of the beneficiaries as a whole.
15 A beneficiary is not normally entitled to see a letter of wishes, both
because it is covered by the principles laid down in Londonderry and
because it is a document which is confidential to the trustees. However,
there is a discretion in the court to allow disclosure where it is satisfied
that there is good reason to do so in any particular case.
20 On the facts of this case, the court is satisfied that there are no good
grounds for holding that the trust documents should not be disclosed to
John Rabaiotti. However, it is satisfied that there are good grounds for
holding that, on the particular facts of this case, the letter of wishes in
relation to each settlement should be disclosed to Mr. Rabaiotti.
25 We do not think it would be in the best interests of the beneficiaries as
a whole for the trustees to intervene in the English matrimonial
proceedings.
As stated at the beginning of this judgment, we can only speak authori-
tatively on the law of Jersey, which is the proper law of two of the
30 settlements. However, doing the best we can, we believe that the general
principles which we have described above (excluding, of course, all
reference to art. 25 of the 1984 Law) also reflect the law of the British
Virgin Islands. For these reasons we have made the same order in relation
to the two settlements governed by the law of BVI, as we have in respect
35 of the two settlements governed by Jersey law.
 
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