Trustee Implications in Family Proceedings

1. DISCLOSURE IN FAMILY PROCEEDINGS:IMPLICATIONS FOR TRUSTEES IN 20165 Stone BuildingsJanuary 2016 Miranda Allardice

2. Disclosure matters In the recent case of Gohill v Gohill[2015] UKSC 61 Lord Wilson [para 22] held: “..the spouse has a duty to the court to make full and frank disclosure of his resources, (see the Livesey case), without which the court is disabled from discharging its duty under section 25(2) of the MCA 1973 and any order, by consent or otherwise, which it makes in such circumstances is flawed. One spouse cannot exonerate the other from complying with his duty to the court.”

3. Consequences my dear boy! In Gohillthe H (a solicitor later convicted of money laundering) was found to failed to have made full and frank disclosure for the Consent Order in 2004. After an arduous journey through the courts, W secured an order setting aside the 2004 Order: Lord Wilson [32]: Ladd v Marshall principles did not apply to an application to set aside a financial order on the ground of material non-disclosure. Family Proceedings of a different nature to general civil litigation.

4. Fraud or inadvertent omission Livesey v Jenkins [1985] AC 425 • If negligent non-disclosure then W has to s Non-disclosure + that a different order would have been made if proper disclosure had been given BUT • If intentional non-disclsoure then it is deemed to be material & there is a presumption that a different order would have been made. Sharland v Sharland [2015] UKSC 60.

5. Sharlandshare sale H told the court that no prospect of sale of shares for 3-7 years. But also instructing bankers to prepare for sale!. Dishonest evidence. Lady Hale: • Liveseyprovides that in matrimonial cases innocent non-disclosure will only be relevant where it is of a material fact, then a vitiating factor. BUT where dishonesty: • “a party who has practiced deception with a view to a particular end, cannot be allowed to deny its materiality”.

6. Party FPR 2010 PD21a The starting point Orders between parties PD21A Para 2.2.-2.4 • Stage 1 Form E served • Stage 2 parties requesting disclosure before 1st Appt • Specific Disclosure Court order so party must • Disclose docs specified in order • Carry out a search to extent in order • Disclose any docs located

7. Non-parties FPR Rule 21.2 The Court has power to order disclosure against a non-party. Under 21.2(2). An application can be made: • May be made without notice • Must be supported by evidence. BUT under 21.2(3) The court may make an order under this rule only where disclosure is necessary in order to dispose fairly of the proceedings or to save costs. FPR 21.2(6) provides that an order must not compel a person to produce a document that they would not be compelled to produce at any final hearing.

8. Summons FPR Rule 24.1 A person may be required to attend to give evidence or produce a document 24.3(3) the court may set aside or vary a witness summons issued under this rule. Court will police the extent of the enquiry. See M v M [2006] 2 FLR 1253, where the girlfriend had received some of the H’s liquid funds. Disclosure of a 3rd party’s means should not be ordered unless it was both necessary and proportionate. Ts in the jurisdiction will be in the sights of the spouse.

9. Disclosure inCharman Charman v Charman[2005] EWCA Civ 1606 H’s Accountant in England under old 1991 rule 2.62(7) 1st instance order Coleridge J “any documents.. Containing evidence of any advice given to, discussions with or communications from, [H] relating to the past, present, and future treatment of the trust funds or which bear upon the conception, creation and possible ultimate dissolution of [Dragon]. Wilson LJ S25(2)(a) Issue was Dragon a resource of H? W’s requests were not fishing expeditions, she had already raised the allegation. Nor did W need to show whether the documents she sought did exist . The quasi inquisitorial role of the Family Division justified a wider interpretation.

10. Letters of Request FPR 24.12 If Ts are offshore and have not submitted to the jurisdiction then the High Court can issue a Letter of Request to the judicial authorities of the country in which the T is. The court will be asked to enforce for disclosure or the production of evidence eg taking a disposition. The success of the response will depend upon the foreign court. ? Is there a bilateral convention with the country or ? Is the country a signatory to the Hague Convention In Charman v Charman[2007] the Letter of Request to the T in Bermuda was savagely edited by the Bermudian authorities.

11. Charman & Request W also sought from the Bermudian Ts additional information & documents: • Trust accounts for the last 2 years • Trust deeds, written resolutions & letters of wishes • Was it the practice of the trustee to consult the H re investments etc and give details & docs • Had there been discussions re “collapse” of the trust. [Para 29] Wilson LJ endorses that principles for incoming & outgoing requests should be the same. BUT the Family Division exercises a jurisdiction wider that that in civil litigation, under Evidence (Proceedings in Other Jurisdictions) Act 1975. Request rebuffed by Court of Bermuda when request received!.

12. Trustees seeking help! Where the Ts are outside the jurisdiction & have not submitted to the jurisdiction then if: • A disclosure request has been made of them OR • They are going to make voluntary disclosure Then they wish to will seek directions of their “home court”. Where the beneficiaries do not speak with one voice this is a prudent course. Then there can be no subsequent criticism of them, or assertion of submission. • The home court will be the court which the trust instrument specifies has jurisdiction.

13. Offshore Advice Where the assets & Ts are offshore, then the home court may well be protective of the Ts freedom to act in the best interests of the Trusts. In Re H Trust [2006] JLR 280 rather than submit to the jurisdiction of the English Courts, this advice was given: “It is more likely to be in the interests of Jersey trust and beneficiaries thereunder to preserve the freedom of action of both the trustee and this court. In some cases eg where all the trust assets are in England, it may well be in the interests of a trustee to appear before the English Court in order to put forward its point of view because by reason of the location of the assets, that court will be able to enforce its order without regard to the trustee or this court”.

14. Disclosure from Offshore The Ts are bound to consider the beneficial class as a whole & issues of confidentiality to the whole gamut of beneficiaries. However Ts & foreign court will not always be hostile. See Jersey case of Representation of U Ltd [2011] JRC 131 where Tees asked for directions: • Held it was appropriate to give disclosure of Trust & Co Accs • To dispel inaccurate information of the value of the Trust grossly inflated. • Disclosure would curtail expensive & time consuming financial remedy proceedings.

15. Beneficiary request The H qua beneficiary may ask his Ts for information, which he can then disclose to W. Based on entitlement in respect of trust law limited information forthcoming. Schmidt v Rosewood [2003] UKPC 26 & Breakspear v Ackland[2008] EWHC 220 provide that a beneficiary cannot be said to have an absolute right to see trust documents. But there are some documents that which a beneficiary would normally be entitled to see: (i) trust deed (ii) trust accounts. More controversial would be the Letter of Wishes, which will accompany the discretionary trust & may have undergone a number of revisions.

16. Judicial Cat & Mouse In the case of Tchenguiz-Imerman[2013] EWHC 3627 & in Jersey as In the matter of the M & other Trusts [2012] JRC 127 we can see the jurisdictions circling each other. T applied to Jersey to approve: (i) no submission to the jurisdiction (ii) but some disclosure to H’s father. That approval was given under Art 51 Trusts (Jersey) Law 1984, the supervisory jurisdiction of trusts, seeking a blessing of a momentous decision by the Ts. Quasi Beddoetype applications. Ts divulge sensitive information & arguments for & against each course of action. .

17. Adult Beneficiaries The adult beneficiaries applied to be joined to English proceedings, FPR 9.26B. Moylan J directed that as a condition of their intervention, the beneficiaries were required to preserve any documents relating to the Beddoeproceedings (held in private) & produce them to the court on 24 hours notice!. Jersey Court view: “It is in the interests of justice that trustees should be able to come before the court in private confident in the knowledge that they may speak frankly to the court”. Refused consent for disclosure of any legally privileged material in the Beddoeapplication, CONTEMPT if so disclosed, despite undertaking given to English Court!.

18. Width of material sought Moylan J had secured an undertaking from the beneficiaries should be able to provide at the FDR: “any of the documents in relation to any & all applications” made by Ts in overseas courts. Invasive & all embracing!. • Jersey Court: “The internal thinking of the trustee as to what it considers to be in the best interests of the beneficiaries and the decision of the Court.. seem very different from the issue of what order should be made by the Family Division in relation to the financial position of the husband and the wife”. • 3 types Privileged, Sensitive & Other.

19. The response of Moylan J Jersey requested exclusion of sensitive material” containing the Ts’ reasoning & decision making process re the position of the minor & unborn. Moylan J in the face of the absence of the Ts in order to answer (i) S24(1)(c) a nuptial settlement ? (ii) S25(2)(a). Assets generated during the marriage. He required as much direct evidence as possible to arrive at the correct decision. Only disclosure by the Ts was to the mechanical structure of the trusts; the deeds & assets plus some history. No help on (i) & (ii) so ignored Jersey request.

20. The danger of silence Moylan J recognised that whilst beneficiaries may not be entitled to such an invasive degree of information under general trust principles, the Ts reasoning highly relevant for determination under S25(2)(a). Clear waning that silence leads to suspicion in the mind of the Family Division & room for adverse inference. See the case of RK v RK [2011] EWHC 3910, for measured witness evidence being effective. There the Trust had assets in England & English Ts. The T appeared and gave evidence of extent to which they could assist in advancing funds to house the W on the basis of a life tenancy etc…

21. Freezing Orders In the Pugachevlitigation [2015] EWCA Civ 139, the CA considered the jurisdiction to order disclosure relating to discretionary trusts against one of the discretionary beneficiaries. • It was held that the injunction caught P’s interests under the trusts • The court could make ancillary orders to the injunction to render the same effective. • Therefore the Bank could garner evidence to support or disprove its assertion that P was the effective owner of the assets. • Upheld order to provide details of trustees & assets, plus documents.