ROYAL COURT
(Samedi Division)
10 February 1998
Before BI Le Marquand Esq, Greffier Substitute
BETWEENDorothy Anna-Maria Stacho (also known as Dorika Stacho)PLAINTIFF
AND Barclays Private Bank and Trust LimitedFIRST DEFENDANT
AND Clive Anthony Lord SECOND DEFENDANT
Application by the Defendants to Strike out parts of the Order of Justice
Advocate SJ Young for the Defendants
Advocate CMB Thacker for the Plaintiff
GREFFIER SUBSTITUTE: On 20 January 1998, I heard the application of the defendants to strike out the Order of Justice in this action.
The original summons to strike out dated 23 December 1997, was amended by me on the application of the defendant from a summons seeking to strike out the whole of the action to a summons seeking to strike out sections a, b, c (i) and (iii) of paragraph 8 of the Order of Justice and paragraphs I (i), (ii) and (iii) (a) and (c) of the prayer to the Order of Justice.
The defendants are the trustees of a discretionary trust which is governed by English law and the plaintiff is a member of the class of discretionary beneficiaries. The plaintiff is dissatisfied with the way in which the trustees have been acting and, in particular, complains that they have withheld distributions to her at a time when they have made distributions to other beneficiaries and that they have asked her to complete a detailed questionnaire which contains both intrusive and irrelevant questions which they have not asked of other beneficiaries. However, the only remedy being sought by the plaintiff is that the defendants supply the plaintiff with copies of various categories of documents.
There does not appear to be any previous reported case in Jersey in relation to the principles which should be applied in such a case although there are a number of cases including those of West -v- Lazard Brothers (1987-88) JLR 414 and in relation to the representation of S S Bhandher (7 April 1997) Jersey Unreported in which the Royal Court has referred to the case of Londonderrys Settlement: In re Peat -v- Walsh [1965] Ch 918; [1964] 3 All ER 855; (1964) 108 Sol Jo 476, as being authoritative in relation to the right of beneficiaries to obtain documents from trustees.
Both parties accepted that, in England, that case was authoritative and the first area of argument before me revolved around the interpretation of that case.
It is clear to me that the Court of Appeal in England took the view that where there was a discretionary trust then there ought to be additional safeguards in relation to the matter as to which documents ought to be accessible to beneficiaries than would apply normally in relation to a trust. I quote now a section on page 928 of the judgement which reads as follows:-
"The court is really required here to resolve two principles that come into conflict, or at least apparent conflict. The first is that, as the defendant beneficiary admits, trustees exercising a discretionary power are not bound to disclose to their beneficiaries the reasons actuating them in coming to a decision."
However, the case itself refers in two places to a situation in which an exception applies to that rule. The first reference is on page 934 of the judgment and I am now going to quote the relevant section as follows:-
"I should add that very different considerations apply when it comes to a question of discovery in an action where a beneficiary is impeaching the validity of the trustees’ actions."
The second such section is on page 938 and reads as follows:-
"The position is quite different where the beneficiary seeks disclosure of documents from the trustees in the air, as in this case, from the position where the beneficiary seeks discovery of documents in an action in which allegations are being made against the bona fides of the trustees. If the documents in question are in the possession or power of the trustees and are relevant to the issues in the action, they must be disclosed whether or not they are trust documents."
Advocate Thacker on behalf of the plaintiff, argued that this exception applied whenever there was an allegation in the Order of Justice that the trustees had acted mala fide. In my view this is incorrect. The two sections make it clear that the exception to the general principle only applies in relation to an order for discovery in an action in which allegations are being made against the bona fides of the trustees. In this action the sole remedy being sought is the disclosure of the categories of document and it cannot possibly be right that these categories of documents be made available on discovery because that would mean that on discovery the plaintiff would be obtaining the entire remedy which he was seeking. It is clear to me that the sections of the judgement which I have quoted above had in view an action in which a wider remedy was being sought against the trustees by virtue of the impugning of their bona fides and that, in that context, the principle that the discovery of relevant documents ought to be made took precedence over the principle that documents relating to the manner in which the trustees had exercised their discretion ought not to be available.
Advocate Thacker put forward a second line of argument based upon a section from Diceys Conflict of Law (7th Ed’n). I am now going to quote from a relevant section beginning on page 1089 as follows:-
"(1) Nature of remedy and the method of enforcement. The nature of the plaintiff’s remedy is a matter of procedure to be determined by the lex fori. Thus if the plaintiff is by the lex causae only entitled to damages but is by English law entitled to specific relief, the latter type of remedy is available in England. Conversely, an English court will not grant specific relief where to do so is contrary to the principles of English law: thus no injunction can be obtained in England, for breach of negative stipulations in a foreign contract of service if such an injunction would in effect amount to specific enforcement of the contract. Again, a remedy which is discretionary according to English law cannot be demanded as of right in an English court merely because this is possible according to the lex causae."
Advocate Thackers argument here is that in Jersey the courts have indicated in the past in the cases of West -v- Lazard Brothers and the representation of Bhandher that they are prepared to take a wider view, when making orders in relation to the production of documents by trustees to beneficiaries, than appears to be the case in England. He alleges that in this case the assets are in Jersey and submitted that, accordingly, the Court in Jersey might well choose to follow the wider principles.
I am unable to agree with Advocate Thacker on this point. Firstly, there is no different remedy available in Jersey to that which is available in England. Secondly, it would be quite wrong if a Jersey Court were to grant a remedy which was available in both jurisdictions by exercising wider discretionary principles than those which were available under the law which governed the trust. Thirdly, in any event, it appears to me that in relation to the two cases which Advocate Thacker quoted to me, the Court was, in any event, only considering the issue as to the extent to which the provision of accounts ought to be ordered. It appears to me that there is a very great difference between an order relating to information about trust assets etc and an order relating to the manner in which trustees have made a decision relating to a discretionary trust.
In coming to a decision on these matters, I am, of course exercising the principles relating to the striking out of an action. The test in relation to striking out is a high one and it is only in plain and obvious cases that a strike out should occur. Where as in this case the matter comes down to a matter of determining foreign law, I must be very clear as to the position.
However, it appears to me that the position under Londonderrys Settlement In re Peat -v- Walsh, in England is very clear and that it is very clear that a Jersey Court would be bound to follow those principles.
In that judgment, the Court of Appeal had to make decisions in relation to applications which were very similar in nature to those which are contained in this Order of Justice.
I am now going to quote from a section which commences on page 933 and which reads as follows:-
"In my judgment category (a) mentioned in the notice of appeal, viz., the minutes of the meetings of the trustees of the settlement; and part of (b), viz., agenda prepared for trustees’ meetings, are, in the absence of an action impugning the trustees’ good faith, documents which a beneficiary cannot claim the right to inspect. If the defendant is allowed to examine these, she will know at once the very matters which the trustees are not bound to disclose to her, namely, their motives and reasons."
There is a further relevant section commencing on page 934 which reads as follows:
"I cannot think that communications passing between individual trustees and appointors are documents in which beneficiaries have a proprietary right. On the other hand, as to category (ii), in general the letters of the trustees’ solicitors to the trustees do seem to me to be trust documents in which the beneficiaries have a property. As to category (iii), I do not think that letters to or from an individual beneficiary ought to be open to inspection by another beneficiary. Thus I think the judge’s order went too far, but it is very difficult to frame a declaration which will not cut down the rights of the beneficiaries too much. I propose that we should discuss this matter after my brethren have given their opinions on the matter."
The final decision of the Court of Appeal was contained in a section of the judgment which commenced on page 939, to which I was not referred by either advocate and which reads as follows:-
"And upon hearing counsel for the trustees and for the defendant, and upon reading the said order, order that so much of the said order dated April 30 1964, as aforesaid be discharged, and declare that without prejudice to any right of the defendant to discovery in separate proceedings against the trustees and subject to any order the court may think fit to make in particular circumstances the trustees as trustees of the settlement are not bound to disclose to the defendant any of the following documents (that is to say) (1) The agenda of the meetings of the trustees of the settlement, (2) correspondence passing between the individuals for the time being holding office as trustees of or appointors under the settlement, (3) correspondence passing between the said trustees and appointors or any of them on the one hand and the beneficiaries under the settlement on the other hand, and (4) minutes of meetings of the trustees or appointors and other documents disclosing the deliberations of the trustees as to the manner in which they should exercise the discretionary powers conferred upon them by clause 2 of the settlement or disclosing the reasons for any particular exercise of such powers or the material upon which such reasons were or might have been based: provided always that the trustees are bound to disclose to the defendant at her request any written advice from their solicitors or counsel as to the manner in which the trustees are in law entitled to exercise such powers."
The situation in this action is unusual inasmuch that the relief sought in the prayer to the Order of Justice is in almost identical terms to that granted at first instance by the High Court in the Londonderrys Settlement Case. The Royal Court in following the English Court of Appeal would be bound to come to the same decision. Accordingly, the following parts of the prayer of the Order of Justice must fail and should be struck out:-
(a)The reference in I (ii) to agendas;
(b)Sub-paragraph (a) of I (iii); and
(c)Sub-paragraph (c ) of I (iii).
Furthermore, in relation to the parts that remain the Court of Appeal only allowed these to remain in a reduced manner. I have two options here. I can either, as Advocate Thacker submitted, leave the remaining paragraphs intact so that the Royal Court can, in due time, make an appropriate order or, as Advocate Young submitted, I can strike out the offending paragraphs whilst giving the Plaintiff leave to file an amended prayer in terms which correspond with the judgement in the Londonderry’s Settlement case. I have chosen the latter course subject only to my not being able to strike out sub-paragraph (b) of I (iii) as no application was made for me to do this.
I shall need to be addressed upon the issue of costs.
Authorities
Royal Court Rules, 1992: Rule 6/13
Rules of the Supreme Court (1993 Ed’n) O.18, r 19
Trusts (Jersey) Law 1984 - Articles 46 and 46
Wenlock -v- Maloney [1965] 2 All ER 871
Cooper -v- Resch (formerly Cooper) (1987-88) JLR 428
Poole (née O’Rourke) -v- Poole (1987-88) JLR N-5
Practice Direction (1987-88) JLR N-5
Stephens (née Baureiss) v Stephens (1989) JLR 284
Channel Islands & Intl. Law Trust Co. Ltd -v- Pike (1990) JLR 27
Bowen -v- Noel Invs. Ltd (1990) JLR 184
Le Cocq -v- Gillespie (1991) JLR N-5
Londonderrys Settlement; in re Peat -v- Walsh [1965] Ch 918; [1964] 3 All ER 855;
(1964) 108 Sol Jo 476
Dicey’s Conflict of Law (7th Ed’n); pp 1089-1090; 1107-1116
West -v- Lazard Brothers (1987-88) JLR 414
Surinderpal Singh Bhandher -v- Barclays Private Bank and Trust Company Limited (formerly Barclay Trust International Limited) (7 April 1997) Jersey Unreported