Re Lemos Trust Settlement
| Jurisdiction | Cayman Islands |
| Judge | (Malone, C.J.) |
| Judgment Date | 22 January 1992 |
| Court | Grand Court (Cayman Islands) |
| Date | 22 January 1992 |
(Malone, C.J.)
A. Jones for the trustees;
J. Mowbray, Q.C., A. Foster and S. Stephens for the plaintiffs;
A. Duckworth for the last three defendants.
(1) Cowin, In reELR(1886), 33 Ch. D. 179; 56 L.J. Ch. 78, dicta of North J. applied.
(2) Londonderry”s Settlement, In re, [1965] Ch. 918; [1964] 3 All E.R. 855, dicta of Danckwerts, L.J. applied.
(3) Morice v. Durham (Bishop of )(1804), 9 Ves. 399; 32 E.R. 656; [1803–13] All E.R. Rep. 451; on appeal (1805), 10 Ves. 522; 32 E.R. 947, dicta of Grant, M.R. applied.
(4) National Anti-Vivisection Socy. Ltd. v. Duddington, The Times, November 23rd, 1989, unreported, dicta of Mummery J. considered.
Trusts-powers and duties of trustees-duty to give information to beneficiaries-duty to account to beneficiary circumscribed by general duty to protect trust and sometimes justified in withholding trust documents-duty to disclose information if beneficiary challenging bona fides but not if merely fishing for information relevant to foreign action to set aside trust
The beneficiaries of a trust brought proceedings against the trustees seeking the disclosure of documents and the trustees applied for orders for the payment of their costs out of the trust fund.
The beneficiaries were the plaintiffs in actions in both Greece and the Cayman Islands concerning a family settlement. In the Greek actions they sought to set aside the trust. In the Cayman action they sought from the trustees a comprehensive statement of accounts and a mandatory injunction to allow them to inspect and take copies of various classes of documents. Other beneficiaries of the trust were joined in the proceedings.
The trustees, who were not parties to the Greek actions, sought (a) orders to allow them to defend the Cayman proceedings by meeting their costs out of the trust fund; and (b) a direction that it was appropriate for them at the expense of the trust to seek advice in relation to the Greek actions.
The trustees submitted that they were entitled to the orders and direction sought because (a) they were necessary to enable them properly to perform their duties of protecting the trust and preserving it in the interests of all the beneficiaries; (b) the plaintiffs had no automatic right to disclosure of accounts and in contesting their claims they were properly performing their duties under the trust; and (c) the declared objective of the plaintiffs in the Greek actions was to set aside the trust. In the Cayman proceedings the plaintiffs were, therefore, merely seeking to take advantage of their positions as beneficiaries in order to obtain information for use in attacking the trust in another more favourable jurisdiction, on grounds that would be unlikely to succeed in the Cayman Islands. Accordingly, theirs was a bona fide defence of the trust which properly justified an order for costs.
The plaintiffs submitted in reply that (a) the trustees had a duty to account and that as beneficiaries they had an absolute right to the disclosure of the trust accounts; (b) the trustees in refusing to disclose the documents were acting mala fide and therefore could not support a claim for costs out of the trust fund to defend what was in effect a repudiation of their duties; and (c) since the Greek actions involved
claims to set aside the trust and damages and, moreover, were likely to be successful, the court should not make a pre-emptive order for costs in favour of the trustees if there was a real possibility that the trust fund would therefore be compromised or burdened to their disadvantage.
Held, granting the orders sought by the trustees:
(1) A trustee undoubtedly had a duty to account but a beneficiary”s entitlement to an accounting by a trustee was not an absolute one. If he were seeking disclosure in order to challenge the bona fides of the trustee in the same proceedings, he would have a prima facie right to inspect trust documents in order to examine exactly what had happened under the management of the trust. But there were circumstances in which a trustee would be justified in withholding all or some of the trust documents from him. In principle, trust documents were confidential and if a trustee were bound to disclose to any beneficiary any information he had received concerning beneficiaries, his duties under the trust and its protection would become impossible. For this reason, a beneficiary had no general right to see all trust documents and might in some circumstances have no right to examine accounting documents, as was the case in proceedings in which the beneficiary was not bringing a substantive action against the trustee for lack of bona fides but was merely seeking information that would be useful in foreign proceedings about the trust against different parties. The trustees had reasonable cause...
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Lemos v Coutts (Cayman) Ltd
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