Re an Application for Information About a Trust

• Jurisdiction: Bermuda
• Judgment Date: 12 March 2013
• Date: 12 March 2013
• Docket Number: Civil Jurisdiction 2011 No 484
• Court: Supreme Court (Bermuda)

2013 Bda LR 16

In The Supreme Court of Bermuda

Civil Jurisdiction 2011 No 484

In the Matter of An Application for Information About A Trust

Mr N Hargun and Mr P Smith for the Plaintiff

Mr R Ham QC and Mr K Robinson for the 1^st Defendant

Mr D Alexander QC and Mr A Martin for the 2^nd Defendant

The following cases were referred to in the judgment:

Bathurst v Kleinwort Benson (Channel Islands) Trustees Ltd [2007] WTLR 959

Armitage v NurseELR [1998] Ch 241

AN v Barclays Private Bank & Trust (Cayman) Ltd [2007] WTLR 565

Hartigan Nominees v Rydge (1992) 29 NSWLR 405

Schmidt v Rosewood Trust LtdELR [2003] 2 AC 709

Tierney v KingUNK [1983] 2 Qd R 580

Re Rabaiotti's SettlementUNK [2000] 2 ITELR 763

Disclosure of information regarding trust to beneficiaries — Trust deed specifies non-disclosure without consent of Protector — Court's supervisory jurisdiction over trust — Court's discretion to order disclosure

JUDGMENT of Kawaley CJ

Introductory

1. By an Originating Summons issued on December 28, 2011, P (the Plaintiff) seeks disclosure of what he characterises as basic information about the Trust of which he is a beneficiary with an interest that cannot be described as remote or speculative. The Trust Deed prohibits the Trustees from disclosing any information without the consent of the Protector, the principal beneficiary of the Trust. This application raises the apparently novel question of the impact of an information control clause or mechanism on this Court's supervisory jurisdiction over a Bermudian trust.

2. The present application raises two broad questions of principle. Firstly, is the information control mechanism in the Trust Deed valid on its face or are its terms incompatible with the irreducible core obligations inherent in a valid trust? These core obligations were said to include the requirement that the supervising court should always be able to enforce a beneficiary's right to obtain sufficient information to ensure the due administration of the trust. Secondly, assuming the relevant clause to be valid on its face, what principles delineate the scope of the Court's jurisdiction to grant relief in circumstances which arguably entailed a departure from the strict terms of the governing instrument?

3. The present Judgment, delivered in anonymised form, addresses these two broad issues, firstly concluding that the relevant clause is valid on its face and, secondly, outlining the circumstances in which this Court can supplement the disclosure mechanism prescribed by the Trust and direct disclosure by the Trustees in the exercise of the Court's supervisory jurisdiction over the Trust. Why I have decided to exercise the Court's discretion in favour of directing disclosure is then set out in general terms. More detailed factual findings are supplied to the parties in the form of a Confidential Appendix to this Judgment1.

The information control mechanism in the Trust

4. The central clause for the purposes of the present application is the following:

‘9.2 Subject to the provisions of clause 24 below and except to the extent that the Trustees (with the prior written consent of the Protector) in their discretion otherwise determine no person or persons shall be provided with or have any claim right or entitlement during the Trust period to or in respect of accounts (whether audited or otherwise) or any information of any nature in relation to the Trust Fund or the income thereof or otherwise in relation to the Trust or the trusts powers or provisions thereof (and whether from the Trustees or otherwise).’

5. The Trustees are given the discretion to release information with the Protector's prior written consent. Clause 24 provides as follows:

‘The Protector shall have power to request information and accounts from the Trustees (which information and accounts shall forthwith be supplied to the Protector.)’

6. Related provisions which shed light on the wider role of the Protector under the Trust include the following:

‘12.1 In exercising all or any of the powers and discretions (whether fiduciary dispositive or administrative) conferred upon them by this Deed or by law or otherwise in relation to the Trust the Trustees shall be required to act in accordance with the written directions (if any) of the Protector given in the circumstances in which such directions are expressly provided for in and in accordance with the provisions of this Deed in so far is it lies within their power to do so (unless such directions conflict with any provisions of this Deed regarding the beneficial interests or entitlements with respect to assets forming part of the Trust Fund or the income thereof)…

17. The Trustees shall keep proper books of account and other records and shall draw up periodic financial statements in respect of the Trust Fund and their trusteeship in accordance with acceptable accounting principles and shall at the expense of the Trust Fund or the income thereof have them audited annually or so often as the protector may otherwise direct by a firm of professionally qualified independent accountants of high standing and repute internationally (acting for this purpose as auditors) selected by the Trustees…

25.2 The Protector may give directions to the Trustees regarding any action or omission to take action with respect to any asset from time to time forming part of the Trust Fund or otherwise subject to the control of the Trustees…and the Trustees shall comply or procure compliance with directions given pursuant to this sub-clause in so far as it lies within their power to do so (unless such directions conflict with any provisions of this Deed regarding the beneficial interests or entitlements with respect to assets forming part of the Trust Fund or the income thereof)…

28. The Protector shall not owe any fiduciary duty towards and shall not be accountable to any person or persons from time to time interested hereunder or to the Trustees for any act of omission or commission in relation to the powers given to the Protector by this Deed to the intent that the Protector (in the absence of fraud or dishonesty) shall be free from any liability whatsoever in relation to such powers…’

7. It is also noteworthy that the Protector is currently the Principal Beneficiary under the Trust while the Plaintiff, as the result of an Irrevocable Deed of Appointment, potentially has an absolute interest in 35% of the Trust the assets of which are believed to be worth in the region of US$1 billion.

8. The key elements of the information control mechanism may be summarised as follows:

• i. The Trustees are required to keep books and records of account which must be independently audited;

• ii. The Protector alone has an express right to receive financial information about the Trust from the Trustees;

• iii. Any other requesting person, including a beneficiary, can only obtain information about the Trust's finances from the Trustees with the Protector's consent;

• iv. The Protector's power to grant or withhold consent in respect of an information request is a non-fiduciary power and the acts or omissions on the part of the Protector in this regard cannot be legally impugned in the absence of fraud or dishonesty on the Protector's part.

9. As a matter of superficial and preliminary analysis, the information control mechanism does not appear to seek to oust the jurisdiction of the Court to entertain an application by a beneficiary to obtain information from the Trustees about the Trust. Rather, it appears designed to ensure that:

• i. the Protector has a right to control what information beneficiaries or strangers to the Trust are given by the Trustees;

• ii. the Protector is not required to explain or justify the exercise or non-exercise of his powers; and

• iii. the Protector is not liable for any loss flowing from a decision to accede to or refuse an information request unless his conduct was dishonest or fraudulent.

10. The position posited in (b) and (c) is not solely applicable to the information request context; it applies to all of the Protector's powers under the Trust.

Legal Findings: the validity of the information control mechanism in the Trust

The arguments of counsel

11. Mr Hargun made the following submissions in his Skeleton Argument:

‘9. It follows that a trustee's accountability and the Court's supervisory jurisdiction to ensure that it can be upheld cannot be excluded by the trust instrument. If the trust instrument, on its own terms, does not provide a beneficiary with the ability to hold a trustee to account, then the Court should intervene.

10. Thus, in the present case, the restriction in the Trust Deed which precludes a beneficiary's access to trust documents without the consent of the protector and the Trustee:

10.1 does not on its own provide sufficient means by which the Trustee may be held accountable; and

10.2 far from restricting, necessitates the Court's intervention to ensure that the Trustee's accountability can be made good.’

12. P's counsel conceded in oral argument that there was a very fine line between analysing the validity of the information control mechanism on its face and determining whether the application of those provisions to P on the facts of this case justified the intervention of the Court. The line between these two questions was blurred almost to the point of extinction by the way in which the validity argument was advanced. Mr Hargun's written submissions in my view confused the distinct questions of:

• i. whether the Trust Deed impermissibly restricted the beneficiary's right to hold the Trustees accountable; and

• ii. whether P's access to trust documents was being restricted to an impermissible extent on the facts of the present case so that the Court was required to intervene.

13. Only the first question is properly relevant to the question of the validity of the provisions in...