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Beneficiaries of offshore trusts ordered to disclose documents

Moylan J explains order for disclosure by beneficiary parties

In Tchenguiz-Imerman v Imerman [2013] EWHC 3627 (Fam) Mr Justice Moylan has given a judgment explainning his order in financial remedy proceedings for disclosure by beneficiaries of offshore discretionary trusts who had been joined as parties.

During the course of contested financial remedy proceedings, adult beneficiaries of a number of offshore discretionary trusts were joined as parties to the proceedings.  The court subsequently ordered that the beneficiaries, as parties, should disclose copies of documents that had been provided to the Royal Court of Jersey as part of an application by the trustees.  The Royal Court had given the beneficiaries permission to make such disclosure, if they were ordered to do so by this court.  However, the Royal Court expressed a number of concerns and invited the court not to require such disclosure.  The proceedings were resolved by a consent order but the parties requested a judgment dealing with the order for disclosure.

The parties married in 2001 and separated in 2008 and have one child.  The husband was previously married and has three adult children who are the beneficiaries joined as parties to the proceedings.  The husband's admitted wealth consisted of approximately £7 million of assets in his own name and approximately £20 million of assets held within nuptial settlements of which the husband is the principal beneficiary.  The focus of the wife's claim, in reliance on the sharing principle, was the wealth held within trusts said at one point to be worth £360 million but said to have reduced to £130 million.  The trusts were settled by the husband's father in 2008, the assets deriving from previous settlements which had been distributed to the husband's father.  The assets included very substantial funds generated during the course of the marriage and previously held within a discretionary trust settled by the husband some years prior to the marriage.  The original beneficiaries of the trust had been the husband, his spouse or widow and his children and remoter issue.

In an earlier judgment, Moylan J expressed the view that the trustees were in the best position to assist the court in the exercise of its powers under the Matrimonial Causes Act 1973.  This was because the critical question before the court was whether the trustees were likely immediately or in the foreseeable future to exercise their powers in favour of or in some way for the benefit of the husband.  The trustees provided some information about the trusts but declined to provide a considerable part of the information and documents sought by the wife and, it appeared, were not willing or were unlikely to be willing to provide evidence as witnesses.  As the trustees were not participating, the adult beneficiaries were joined as parties because this would assist with the investigation and resolution of the issues in the case and the adult beneficiaries would be subject to direct disclosure obligations.

Moylan J provides a helpful analysis of the authorities and the position of the court when considering the need for the facts rather than drawing inferences in cases where it is the trustee who controls the availability of the wealth through the exercise of its discretion.  In particular, it is necessary for the court to know trustees' reasons for coming to the conclusion that they do and therefore why the disclosure of the documents as sought was necessary.

The judgment also provides a helpful analysis of the court's approach in relation to the Royal Courts of Jersey's judgment for their preference that there be no disclosure.  Moylan J makes clear the respect for comity as between states while at the same time stating the need for courts to have the facts when considering an application for financial resources particularly involving trusts in cases of this sort.

Richard Harrison QC of 1 King's Bench Walk and Dakis Hagen of Serle Court (instructed by Withers LLP) acted for the applicant. Charles Howard QC and Harry Oliver of 1 King's Bench Walk and Jonathan Hilliard of Wilberforce Chambers (instructed by Hughes Fowler Carruthers) acted for the respondent. Christopher  Pocock QC and Laura Moys both of 1 King's Bench Walk (instructed by Mills and Reeve) acted for the adult children.

For the judgments and case summary by Richard Tambling of 1 Garden Court, which is reproduced here, please click here.

1/12/13