In the matter of M and other trusts  JRC127 28-Jun-12
In 2011 the trustee applied for directions from the Royal Court to approve two “momentous” decisions, namely (1) the disclosure of trust information to beneficiaries knowing that the beneficiary was likely to pass the information to a non-beneficiary (a spouse) and the Family Division of the English High Court (“Family Division”) in divorce proceedings; and (2) not to submit to the jurisdiction of the Family Division in a beneficiary’s divorce proceedings. These directions were held in private.
In 2012 a new application for directions was made to the Royal Court by the beneficiaries seeking leave of the Royal Court to disclose the information to the Family Division, if it requested the beneficiaries to do so. Leave of the Court was required for this purpose because the 2011 directions were held in private and to make a disclose without the Royal Court’s permission would place the beneficiaries in contempt of Court.
Directions in Private
Whether a trustee is surrendering its discretion to the Court or not, directions hearings are an important part of the supervisory jurisdiction of the Court and are invariably held in private. Privacy is required for the following reasons:
- directions often relate to legal or commercial sensitive administrative matters rather than adversarial matters;
- the trustee is under a duty, and must feel able, to make full and frank disclosure to the Court;
- the trustee must be able to summarise arguments for and against the proposed course of action, including any weakness or possible risks;
- information and documents received by those who are convened as parties to the directions hearing should be held in confidence; and
- it is essential that directions serve the purposes for which they are intended.
Consequently to disclose information received only as part of a directions hearing held in private will result in contempt of court. A party cannot be held in contempt of court if he was already in possession of the information beforehand (Westbond International Bank Limited v Cantrust (CI) Limited  JRC111).
Disclosure to the High Court
Previously the Royal Court has refused the Family Division’s request for disclosure of information made to the Royal Court pursuant to a directions application on the basis that the trustee must be able to apply to the Court to make a candid appraisal of its position and the problems which are to be addressed (Deery-v-Continental Trust Company Limited  JRC 001).
In this instance the Royal Court invited the Family Division to consider carefully whether it needed the disclosure relating to the 2011 directions. The Royal Court was concerned that if the Family Division began routinely to make orders for disclosure of directions applications held in private, the Royal Court would then have to reconsider its procedures and either:
- heavily redact any material disclosed to English residents subject to the jurisdiction of the Family Division; or
- preclude information being sent out of the jurisdiction and allowing inspection only in the Island.
Therefore the Royal Court hoped the Family Division would have regard to the different categories of material which should not be disclosed.
Categories of material not be disclosed
The Royal Court identified two categories of material which it was not willing to grant consent to disclose and hoped the Family Division would recognise that these two categories of material needed protection and, therefore, would not request their disclosure. The two categories are:
- legally privileged material;
- sensitive material which had been disclosed for and which sets out the trustee’s thinking in respect of the 2011 directions application.
The Royal Court held that the beneficiaries were correct to bring an application for permission to disclose information to the Family Division. In the circumstance of the case, the Royal Court acknowledged that the beneficiaries had given an undertaking to the Family Division (under whose jurisdiction they were subject) which required them to produce material within 24 hours, if required to do so, meaning that there may not be time to seek the leave of the Royal Court at that stage.
On the basis that the material to be disclosed to the Family Division was not particularly sensitive, the Royal Court granted leave for the beneficiaries to disclose the material to the Family Division if required to do so. However, the Court hoped the Family Division would respect the nature of the 2011 hearing and not order disclosure of the sensitive material.
This case is interesting because it highlights the potential conflict with orders made, or which might be made, by the Family Division. It is hoped that the Family Division will recognise the sanctity of directions hearings being held in private, and thus the confidentiality of material disclosed at such hearings, particularly legally privileged and sensitive material.
Furthermore any party to a directions hearing should remember that if they have come into possession of information and/ or documentation only by virtue of the directions hearing, any disclosure by them thereafter, without permission of the Court, will result in them being in contempt of court.