The G Trusts

• Jurisdiction: Bermuda
• Judgment Date: 15 November 2017
• Date: 15 November 2017
• Docket Number: Civil Jurisdiction 2017 No 371
• Court: Supreme Court (Bermuda)

[2017] Bda LR 124

In The Supreme Court of Bermuda

Civil Jurisdiction 2017 No 371

In The Matter Of The G Trusts

Mr D Brownbill QC and Mr D Kessaram for the Plaintiffs

The following cases were referred to in the judgment:

Re BCD Trust (Confidentiality Order) [2015] Bda LR 108

Breadner v Granville-Grossman [2006] WTLR 411

Public Trustee v Cooper [2001] WTLR 901

Re ABC Trusts [2014] Bda LR 117

Discretionary trusts — Change of governing law — Application for declaration that Children Act 1998 provisions abolishing distinctions between legitimate and illegitimate children do not affect settlements established under a foreign governing law — Application for order disapplying the perpetuity rule — Application for approval of amendments to trusts to confer the power to restrict beneficiaries' rights of access to information in defined circumstances — Confidentiality orders in trust cases

RULING of Kawaley CJ

Introductory

1. By an Originating Summonses issued on 16 October 2017, the Plaintiff trustees sought substantially the following relief:

• i. Declarations:

  • (a) that sections 18A to D of the Children Act 1998 (as amended by the Children Amendment Act 2002) (“the Children Act provisions”) will not apply to the Part I Trusts (as defined in the Originating Summons), if the governing law of these Trusts is changed to the law of Bermuda;

  • (b) that the Children Act provisions do not apply to the Part II and Part III Trusts (as defined in the Originating Summons) as a result of any exercise of any power under any of those Trusts before the date of the order; and

  • (c) that the Children Act provisions will not apply to the Part I, Part II or Part III Trusts as a result of any exercise of any power under any of those Trusts on or after the date of the order.

    (the “Children Act Applications”).

• ii. An order, under s 4(2) of the Perpetuities and Accumulations Act 2009 disapplying the rule against perpetuities to the Part I Trusts (subject to the declaration under paragraph (1) being granted) and Part II Trusts, and varying the Part I and Part II Trusts in the manner provided in the Originating Summons (the “Perpetuities Application”).

• iii. An order authorising the Trustees, in respect of each of the Trusts, to execute an appointment, on the terms of the draft deeds of appointment at (the “Restrictions Application”).

2. Following a half-day hearing, I granted the relief sought and now give reasons for that decision.

The anonymisation of the present proceedings and the related confidentiality orders

3. Prior to the formal issuance of the present proceedings, which essentially concern the internal administration of a related group of trusts, I made what has become a standard ‘Confidentiality Order’ for such applications, entailing (a) anonymising the title to the proceedings and (b) sealing the file from public inspection. In a short ex tempore judgment in a previous case, I explained briefly why such an Order was appropriate in Re BCD Trust (Confidentiality Order)[2015] Bda LR 108:

• “1. I should just say briefly that the application [for a confidentiality order sealing the file and anonymising the proceedings] seems to me to be well-grounded.

• 2. I bear in mind that the history of what is essentially Chambers hearings is that they were traditionally private hearings. The notion of a more open approach to Chambers hearings has developed in the public interest within a constitutional framework which specifically blesses the idea of the Court departing from the public hearing principle in the interests of privacy and other countervailing public interests1.

• 3. It seems to me that in this type of case it is inherently consistent with the public interest and the administration of justice generally that applications such as these should be anonymised and dealt with as private applications, where there is no obvious public interest in knowing about an internal trust administration matter.”

4. In provisions inspired by article 6 of the European Convention on Human Rights, section 6 (9) of the Bermuda Constitution proclaims the general principle that hearings should be in public while section 6(10) declares that exceptions to this general ‘open justice’ rule are permitted where it is desired to protect countervailing interests including, inter alia, “the welfare of persons under the age of eighteen years or the protection of the private lives of persons concerned in the proceedings”.

5. The release of the so-called ‘Paradise Papers’ occurred after I made the Confidentiality Order and shortly before the substantive hearing of the Originating Summons. In the course of the hearing I did very much have in mind whether the popular onshore attacks on offshore ‘secrecy’ undermined in any way the validity of this Court's previous practice in this regard. Writing the present judgment over the Remembrance Day weekend seems an appropriate occasion to revisit this issue.

6. Bermuda's offshore sector began in the mid-1930's and the concept of offshore companies and offshore trusts were commercially driven, at least in part, by anxieties on the part of far-sighted members of the European moneyed classes about a looming war and the risk the confiscation of their assets (or worse) by populist governments envious of their wealth in recessionary times. The confiscation of assets and worse did in fact occur, and Bermuda fought on the victorious side which introduced the notion of fundamental human rights designed to ensure that untrammelled democracy would not trample on personal and property rights again.

7. The Confidentiality Order made in the present case was, on reflection, not just informed by the privacy rights alluded to in section 6(10) of the Bermuda Constitution, but was also indirectly informed by related fundamental rights. Section 5 of the Constitution (“Protection of home and privacy of other property”) restricts the ability of public authorities (including representatives from all three branches of Government) from interfering with private premises and property, save to a proportionate extent in service of a qualifying countervailing public interest. Section 13 of the Constitution prohibits the confiscation of private property without due compensation, subject to an even more narrowly defined exception. This Court is also entitled to construe domestic law rules,

whether procedural or substantive, so far as possible so as to conform to Her Majesty's international obligations in respect of Bermuda. In this regard, the following provisions of the First Protocol to the European Convention on Human Rights articulates a broad principle which is also relevant to confidentiality orders in trust cases:

“ARTICLE 1

Protection of property

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” [emphasis added]

8. The most common grounds on which confidentiality orders are sought are the following:

• • if details of the wealth with which the beneficiaries are linked enters the public domain, the beneficiaries will potentially be subjected to unjustified public attention;

• • if minor beneficiaries become aware of the wealth with which they are contingently connected during their minority, their ability enjoy a healthy and normal childhood will likely be impaired;

• • (less commonly) if details of the wealth with which the beneficiaries are linked enters the public domain.

9. It is important to add that such orders are made on the implicit understanding that:

• • the applicant trustees as regulated persons are subject to an ongoing duty to ensure that the trust itself and, so far as the trustees can reasonably ascertain, the beneficiaries themselves, are compliant with any applicable onshore tax obligations as regards any distributions which they receive;

• • the applicant trustees as regulated persons are compliant with their own AML/ATF obligations with respect to any assets received by the trust(s);

• • the trust structure is a genuine one and is not on its face being operated in an artificial eye-brow raising manner; and

• • should the trustees, beneficiaries or any other persons linked with the trust become subject to foreign criminal, tax or other public investigative proceedings, any confidentiality order initially made will be liable to be set aside.

10. It is also important to note the generic context in which confidentiality orders are made:

• • apart from the fact that Court approval is required because of the legal mechanics of trust law to rearrange the basis on which the trust assets are administered, the subject-matter of the proceedings would in all other contexts be regarded as confidential, private and/or subject to legal privilege. The ordinary citizen who consults his solicitor about revising his will is not required to disclose the content of his will and his discussions with his solicitor to the general public;

• • the information sought to be kept confidential has not yet lost its confidentiality because it has, to some extent at least, entered the public domain. This is the sort of sharp tension which exists between privacy and open justice in questions where injunctive relief is sought to restrain the press from publishing private information (see e.g. JIH v Newsgroup Newspapers Ltd[2011] EWCA 42).

11. For the above reasons I had no reticence about tacitly confirming the Confidentiality Order I made at the beginning of the present case when the proceedings reached their conclusion. The present proceedings...