The trust (the Trust) was established by deed dated 17 February 1989. The Trust was a standard discretionary trust with three principal beneficiaries. The principal beneficiaries were brothers (the Brothers). Trustcorp had been the trustee of the Trust from settlement, albeit under different names.
A dispute emerged between the Brothers. The trustee took the view that due to the dispute, proposed tax changes and the difficulty in obtaining information regarding the underlying assets they would appoint the assets equally between the Brothers, taking into account previous distributions. They were unable to reach an agreed solution, so on 13 February 2009 (the Hearing) the trustees brought an application to the Royal Court seeking approval for the proposed appointments. The appointments were made, save for one brother (the Claimant Brother) and his share remained in the Trust. The class of beneficiaries was amended and restricted to the Claimant Brother's family and he was appointed Protector. On 5 February 2010 Volaw were appointed as the new trustees. The Claimant Brother put Volaw on notice that he did not feel that the Court was given the full information at the Hearing which resulted in a lack of equality in the distributions between the Brothers. He therefore requested that Volaw consider bringing an action for breach of trust against Trustcorp.
At the time of the creation of the Trust the main asset was a Liberian company called Chalais Holdings Limited (Chalais) which in turn owned a company called Elkay Finance Limited (Elkay Finance). Outside the family trust structure was a further holding company (the Hotel Company) which owned a hotel in Canada (the Hotel).
The Hotel Company borrowed money from BCCI Canada (BCCI) and from Chalais, both loans were secured against the Hotel. Chalais also had a deposit with BCCI. In 1993 BCCI went into liquidation and the terms of the loans and deposit were renegotiated. A separate entity known as Kansu Corporation Limited (Kansu) was established to buy the mortgage owed by the Hotel Company from BCCI on preferable terms as the 'designee' of Elkay Finance. The precise ownership of Kansu is unclear. However because Kansu was not owned by the Trust the amount of the mortgage and the interest paid thereon, by an additional subsidiary of Elkay Finance, was not shown as an asset of any of the companies within the trust structure. Moreover there was a letter from Credit Suisse obtained after the Hearing that showed that the monies used by Kansu to purchase the mortgage from BCCI were in fact provided by Chalais.
The Claimant Brother therefore alleged that there may have been a breach of trust against Trustcorp as these facts were not disclosed at the Hearing and as such a fair and equitable distribution was not made. Trustcorp's position was that the Claimant Brother was aware of the facts and in any event it was the fault of the Brothers that Trustcorp did not have the full facts. Trustcorp had been attempting to establish the precise financial position of the various subsidiary companies for some time and the required information had not been forthcoming from the Brothers.
The Royal Court pointed out that the judgment was only to explain why they made the order regarding the disclosure of information rather than comment on the Claimant Brother's allegations.
The Royal Court reiterated the position regarding the nature of an outgoing trustee's responsibility to provide documents and information to an incoming trustee. With reference to the Equity Trust (Bahamas) Limited v Basel Trust Corporation (Channel Islands) Limited  JRC 006 it explained that an outgoing trustee will normally be under a duty to hand over to an incoming trustee all documents and information which relate to the administration of the trust so as to enable the incoming trustee to fulfil his duties. However the Court has discretion to direct that documents or information not be supplied where satisfied, in its supervisory role, that this is the appropriate course. The onus lies on the outgoing trustee to show why the normal rule should not be followed.
Volaw sought all documents in the possession of Trustcorp relating to the Trust structure and underlying entities, together with all correspondence, legal advice and file notes.
A letter from Mourant Ozannes dated 29 May 2012 set out the family concerns and certain considerations arguing against the disclosure:
- It was not in the interests of any of the members of the family to reopen the matter at this late stage. The result would only be expensive and bitter litigation.
- The family companies were no longer assets of the Trust and it would be wrong to order disclosure about the affairs of a company which was no longer a trust asset.
- The circumstances surrounding the alleged Kansu loan were placed before the court at the Hearing to the extent that they were known about by Trustcorp. The Royal Court was made aware of the lack of information and documentation.
The Royal Court dismissed the first point as a reason not to permit disclosure. The lack of information may have resulted in an inequality in distribution and the risk of further dispute was not sufficient reason to refuse an order for disclosure.
On the second point the Royal Court noted that whilst the companies are now held by the family it did not remove the obligation of Trustcorp to account for its trusteeship and therefore to provide the information on the companies during the period they were owned by the Trust. Trustcorp was under an obligation to keep such records. The order was therefore confined to the period prior to the appointment out of the companies.
On the third point, if it turned out that the Claimant Brother was aware of the position regarding Kansu prior to the decision at the Hearing in 2009, that may affect the validity of his claim but it was not the Royal Court's role at this stage to pre-judge that position.
The Royal Court noted that if a possible breach had come to the notice of Volaw as the new trustee it should be investigated. The Claimant Brother was a beneficiary and protector of the Trust and had brought to the attention of Volaw reasonable grounds for believing that a full disclosure was not made at the Hearing. It is therefore reasonable that Volaw should seek the necessary information to establish whether the claims were ill-founded or not.
Conclusions and Comment
It is interesting to note that whilst the order for disclosure was made there were significant restrictions imposed:
- Volaw was required to enter into a non-disclosure agreement in favour of Trustcorp for the purposes of maintaining client privacy with respect to misfiled documents and unconnected third parties.
- Volaw was ordered to enter into a written undertaking not to disclose directly or indirectly to the Claimant Brother or any other current, former or future beneficiary of the Trust without the consent of the Royal Court or Trustcorp confidential material and exhibits relating to proceedings instituted in 2008 by Trustcorp.
It is worth noting also that the Court made the point that if information comes to the attention of a new trustee that a former trustee has committed a possible breach of trust, that it should be investigated.