The Royal Court in Jersey has recently provided guidance to
trustees on their duty to disclose to their successors.
In the matter of The Bird Charitable Trust and the Bird Purpose
Trust [2012] JRC006, the incoming trustee on reviewing the
files of the trust believed that there was certain documentation
missing, in particular, legal advice received by the retiring
trustees in relation to previous litigation. The new trustee
applied to Court to clarify what information and documentation it
was entitled to receive from the outgoing trustee.
It was found that the starting point for the Court was that the
successor trustee is stepping in to the shoes of the retiring
trustee and, prima facie, is entitled to be placed in the same
position as the retiring trustee as far as possible. A new trustee
should be able to satisfy itself that the trusts had been properly
administered. This meant that the disclosure of legal advice
received by former trustees was required even if not relevant to
the future administration of the trust.
In Ogier Trustee (Jersey) Limited v CI Law Trustees
Limited [2006] JRC 158, it was held "on the transfer of a
trusteeship the outgoing trustee is under a duty to co-operate
fully and actively in the transfer by making all relevant documents
and correspondence available promptly to the incoming trustee and
by providing any explanation to questions reasonably raised by the
incoming trustee."
It was further found that the Court retained a discretion in this
area to provide for some element of control over the reasonableness
of requests of new trustees. This is consistent with the findings
in the well known Isle of Man case of Schmidt v Rosewood Trust
Limited [2003] AC 709. However, the Court noted the
distinction between disclosure of information to a beneficiary and
new trustees. It was recognised that the interests of beneficiaries
and those of trustees are different in nature and that cases
concerning disclosure to a beneficiary were unlikely to be of any
assistance.
Clause 6.69 of the Isle of Man Financial Services Rulebook 2011
places an obligation on a licensed fiduciary when retiring as
trustee, protector or enforcer of a trust to ensure they take all
necessary and appropriate steps to facilitate the transfer of the
relevant role and to co-operate with the new fiduciary to ensure a
smooth transition.
So whilst the Court has an inherent jurisdiction to hear questions
on disclosure, retiring trustees should be expected to take such
steps so as to put the incoming trustee in the same position with
regard to information about the trust as the outgoing trustee is
prior to its retirement.
The onus is on the outgoing trustee to show that it is
unreasonable for certain information or
documentation not to be disclosed to the incoming trustee. The
incoming trustee is entitled to be put in the same position as the
outgoing trustee in order to be able to fulfil his duties with
confidence that the trust has been properly administered.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.