As trusts become more popular as part of estate planning an
adviser is likely to come across clients who may be beneficiaries
or/and trustees of existing trusts. Extraordinarily it is not
uncommon to find that trustees are not totally familiar with the
trusts they administer, let alone understand fully their duties and
responsibilities. However, more often one comes across an
individual who is a beneficiary of a trust but has little
information about the trust.
In some cases the relationship between trustees and
beneficiaries is not as amicable and open as the beneficiary might
like. It is not unknown for things to go wrong. Beneficiaries must
be able to hold trustees to account but it is hard, if not
impossible, to do this if the beneficiary has no information about
what the trustee is required to do and/or what the trustee actually
does, not to mention what exactly the beneficiary is entitled to
under the trust.
In some cases even a person who is not a beneficiary under a
trust may seek disclosure of trust information - this will
frequently be the case in matrimonial (divorce) proceedings where
one of the spouses has set up a trust which they prefer not to
disclose to the other. The situation is even more complicated where
the assets and trustees are offshore. As it happens we have two
recent decisions on this very point and we will consider these this
Can the Data Protection Act help?
In a recent case, the beneficiaries of an offshore trust used
the Data Protection Act 1998 (DPA), to get access to trust
The case was Dawson-Damer & Ors v Taylor Wessing LLP
EWCA Civ 4.
The case was brought by beneficiaries of certain offshore trusts
established in the Bahamas. The defendant, Taylor Wessing LLP (TW),
is a well-known firm of solicitors which advised the trustee of the
The beneficiaries first attempted to obtain certain documents
from the trustee in the Bahamas but were not successful. They then
made a "subject access request" (SAR), under the DPA, to TW.
Under the DPA, a data subject (here the beneficiaries) has a
right to be informed where personal data (of which he or she is the
data subject) is being processed by a data controller (here TW).
The data subject is then entitled to certain further information
and copies of the data. TW's initial response to the request was
that the information requested was subject to legal professional
privilege and therefore exempt from disclosure under the DPA.
The beneficiaries applied for a Court order that TW had failed
to comply with the SAR but, in 2015, the High Court agreed
with TW's position that (in summary) the legal professional
privilege exemption relied on by the firm applied where the
documents were not disclosable as between trustees and
beneficiaries as a matter of Bahamian law. There were some
other technical points as to whether the purpose of making the SAR
was proper or not, in particular TW argued that the real
purpose of obtaining information was to support the legal
proceedings against the trustee in the Bahamas, which was not a
'proper purpose' for making a SAR.
The Court of Appeal decided that the legal professional
privilege exemption applied only to documents that would be subject
to legal professional privilege as a matter of English law. A data
controller in the UK cannot therefore rely on more restrictive
foreign rules regarding privilege to avoid complying with a SAR. As
such, TW, relying on the fact that it considered the information
was covered by the legal professional privilege exemption, had
failed to satisfy the Court that complying with the SAR would
involve disproportionate effort on its part. Furthermore, there was
no limitation in the DPA on the purposes for which a SAR might be
made and no rule that a data controller could refuse to comply on
the grounds of the requester's 'true motive'.
This case may be seen as a way around the established
limitations on the ability of a beneficiary to compel the
production of trust documents from a trustee as of right. Obviously
the possibility of using the DPA for this purpose will only be
relevant where the trustees or their advisers are in the UK.
Disclosure of trust information in divorce
As a general rule, where a beneficiary of a trust is a party to
divorce proceedings, the Courts will have regard to the financial
resources of the beneficiary, and any interest under a trust or
settlement is regarded as a financial resource.
The basic principle is that a beneficiary's interest under a
trust can be relevant in divorce proceedings if either the
beneficiary has a vested right to trust assets and/or income, or
the trustees operate in any way consistent with the conclusion
that, as a matter of fact, they treat the trust assets as the
beneficiary's and use them for his or her benefit. This is true
regardless of the nature of the trust assets.
What if the divorcing party refuses to disclose the nature of
their interests under a trust?
Well, the Court has a power to demand information about trust
assets and if the trustees receive a Court order they have no
option but to comply. However, what happens if the trust is an
offshore trust? Will offshore trustees be obliged to submit to the
jurisdiction of UK Courts?
The recent case,In the matter of the A Limited Furbs and the B
EBT 21/2017, decided in the Guernsey Royal Court, provides
helpful clarification on this matter.
The general approach in the Channel Islands so far has been that
trustees of a discretionary trust should normally resist submission
to the jurisdiction of a foreign court. In this case, however, the
Court decided that in certain circumstances (for example where the
trustee has limited discretion, such as in this case) submission
may be appropriate to assist the foreign Court although trustees
should be encouraged to apply to their "home" Court for directions
before deciding whether to submit to the jurisdiction of an
Accordingly, the judge sanctioned the trustee's submission to
the jurisdiction of the English Court in the underlying divorce
proceedings. The facts of the case are interesting as the
circumstances, involving funds accumulated in an offshore FURB, are
probably not unusual.
Background to the case
The case arose during the course of divorce proceedings in the
English Courts. The wife sought to join the trustee of a Guernsey
trust (the "FURBS") in the divorce proceedings in England for the
purposes of disclosure; she wanted to know what assets were held on
trust. She obtained a Court order from the High Court in England
against the trustee of the FURBS.
On receipt of the order, the trustee made an application to the
Guernsey (i.e. its "home") Court for directions on whether or not
to submit to the jurisdiction of the English Court. It did this
because Guernsey law contains so-called "firewall provisions" which
confer exclusive jurisdiction on the Royal Court in relation to
matters of Guernsey trusts under the Trusts (Guernsey) Law
The FURBS held substantial assets, including a number of
properties used by the divorcing couple. The whole of the trust
fund was held under the terms of the FURBS for the husband as the
sole member of the FURBS.
Relevant case law
The Guernsey Judge reviewed the relevant case law under Jersey
law as there had been no prior cases on this point in Guernsey.
In the caseIn the matter of the H Trust JRC 057, which
involved a discretionary trust, a couple divorcing in England were
among the beneficiaries and the wife obtained an order joining the
trustee to the English proceedings.
The trustee sought directions from the Jersey Royal Court which
decided that the roles of the two Courts (i.e. the English and the
Jersey Courts) are very different; the English Court being
concerned to do justice between the two spouses while the role of
the Jersey Court was to consider and approve decisions in the
interests of all the trust beneficiaries. Accordingly, the
Jersey Court decided against submission to English
The decision also indicated that if a trustee were to submit to
the jurisdiction of the foreign Court, it would lose the protection
of the firewall provisions under Jersey law. This happened in
another case,In the matter of the A and B Trusts2007 JLR 444, where
the trustee intervened in proceedings in the English High Court
without first seeking directions from the Jersey Court. It then
sought approval from the Jersey Court regarding its ongoing
participation in the matrimonial proceedings. The Jersey Court
refused to make the order sought. Submission to the jurisdiction of
the English Court meant that there was scope for full disclosure in
respect of the trusts concerned to be ordered in the proceedings
and the loss of the protection provided by the Jersey firewall
The Guernsey decision
Despite the Jersey cases pointing away from a trustee submitting
to the jurisdiction of an overseas Court, the Guernsey judge
considered that the nature of the FURBS was such that its trustee
was in a different position from the trustee of a discretionary
trust. Had the trust in question been a "standard" family
discretionary trust with a class of beneficiaries extending beyond
the divorcing couple, the judge said he would probably have
followed the reasoning inH Trustand concluded that it was best for
the trustee not to submit to the jurisdiction of the English
However, the judge found that, on reading of the FURBS trust
instrument, the trustee had no discretion to exercise - all it was
required to do is to make arrangements to pay a pension to the
husband or, if the husband so elected, to provide him with a lump
sum. The judge concluded that this was one of those
exceptional cases where submission to the jurisdiction of the
foreign Court was permissible and appropriate and therefore
sanctioned the trustee's submission to the jurisdiction of the
The nature of the trust clearly made all the difference.
We have covered the rules on what information a trust
beneficiary is entitled to see in PFS articles about two years ago
but we have also had a new case since then on this subject,
namely RNLI and others v Headley and McCole(2016). We will
cover this is a separate article.
The subject of offshore trusts is also timely, what with the
Client Notification Letters and the changes to non-domicile
taxation and so we will come back to this topic again. Meanwhile,
the issues outlined above should be borne in mind when advising
clients on trust issues which have an offshore aspect.