Breakspear and Others v Ackland and another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Briggs |
| Judgment Date | 19 February 2008 |
| Neutral Citation | [2008] EWHC 220 (Ch) |
| Docket Number | Case No: HC07C00971 |
| Court | Chancery Division |
| Date | 19 February 2008 |
[2008] EWHC 220 (Ch)
MR JUSTICE BRIGGS
Case No: HC07C00971
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr John Brisby QC and Mr John Eidinow (instructed by Paris Smith & Randall LLP, No 1 London Road, Southampton SO15 2AE) for the Claimants
Mr Francis Barlow QC (instructed by Taylor Wessing, Carmelite, 50 Victoria Embankment, Blackfriars, London EC4Y 0DX) for the Defendants
Approved Judgment
I direct that pursuant to CPR PD 39A paragraph 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The claimants are beneficiaries under a settlement known as the Amport Account (“the Settlement”). By a Claim Form issued under Part 8 in April 2007 they seek the following three heads of relief against the defendant trustees:
(1) Disclosure of a wish letter written to the then trustees by Basil James Dunning (“Basil”) who, by common consent, was the de facto settlor of the Settlement.
(2) The setting aside of a purported addition of the second defendant (“Patricia”) as a beneficiary of the Settlement by deed dated 9 th March 1995; and
(3) Disclosure by the trustees of any appointments made or purported to be made pursuant to paragraph 7 of the Settlement.
Head 3 of the relief claimed has fallen away due to voluntary disclosure made by the defendants during the proceedings. That disclosure has revealed a purported appointment of income to Patricia, also on 9 th March 1995. The claimants have sought to have that set aside as well. I shall refer to the addition of Patricia as beneficiary and the appointment to her of income collectively as the March 1995 appointments. The defendants have resisted providing the wish letter referred to in head 1, but their evidence has revealed that Basil also communicated wishes to the then trustees orally. As a result, the claimants seek disclosure of the content of those oral statements as well.
The claim to set aside the March 1995 appointments, while of real importance to the parties, turns upon the particular construction of the Settlement and the events surrounding the making of the appointments, which are of no wider public interest. By contrast, the claim for disclosure of Basil's wish letter and of his oral statements of wishes raises a question of real importance for settlors, trustees, beneficiaries and trust lawyers, and of difficulty for a first instance judge. It is of importance because of the widespread use of wish letters in connection with discretionary trusts, and the uncertainty whether and to what extent they should generally be recognised as confidential. It is difficult both because the specific question has never been addressed by an English court, and because the relatively settled state of the law with regard to the identity and disclosure to beneficiaries of trust documents has been substantially re-cast, so far as concerns the underlying principles, by the decision of the Privy Council in Schmidt v. Rosewood Trust Ltd [2003] 2 AC 709, in a manner at least partially at variance with dicta in O'Rourke v. Darbishire [1920] AC 581 and Re Londonderry's Settlement [1965] Ch 918. Furthermore, the question whether beneficiaries should normally be able to obtain disclosure of wish letters from their trustees has been the subject of controversy in the reported decisions of courts in Australia, New Zealand and the Channel Islands, which are accustomed to administer trusts in substantially the same manner as the English courts.
I shall therefore deal with the claim for disclosure of Basil's wish letter first, and in greater detail than would normally be necessary to explain the reasons for the exercise of a discretion. For the most part my observations will be as applicable to his oral expressions of wishes as they are to the wish letter itself, save where I state otherwise. I shall therefore, for brevity, treat the question as one arising squarely in relation to the wish letter.
DISCLOSURE OF WISH LETTERS
The essential characteristic of a wish letter (to which Basil's is no exception) is that it is a mechanism for the communication by a settlor to trustees of the settlement of non-binding requests by him to take stated matters into account when exercising their discretionary powers. Typically, wish letters are concerned with the exercise of dispositive discretions, but they may include wishes in relation to the exercise of powers of investment, or of other purely administrative powers. For present purposes I am concerned with a wish letter which is substantially contemporaneous with the settlement itself. The question whether later wish letters have the same status is beyond the scope of this judgment.
The large increase in the use of wish letters has gone hand in hand with the rise in the popularity of discretionary trusts, in preference to the more detailed fixed interest trust. The combination of a broad discretionary trust accompanied by a wish letter may be said to have two particular advantages. The first, an advantage which it enjoys over the old-fashioned fixed interest trust, is that it preserves flexibility for the trustees in responding to changes in the beneficiaries' circumstances which are not or cannot be foreseen by the settlor. The second advantage, which stems from the placing of the trusts affecting the property and the settlor's non-binding wishes into separate documents, is that the settlor may make use of a confidential wish letter as the medium for the written expression of facts, beliefs, expectations, concerns and (occasionally) prejudices about the beneficiaries which it would or might be hurtful, impolitic or simply undesirable for him to include in a document which the beneficiaries had a right to inspect. That advantage may be summarised in the word confidentiality, so long as it is appreciated that the word has both a subjective and an objective connotation. Confidentiality may serve a purely selfish desire of the settlor to keep his wishes, beliefs and the communication of certain facts secret from the family. Objectively speaking, that secrecy may in many cases be thoroughly beneficial, since it may tend to preserve family harmony and mutual respect, while enabling trustees to be briefed as to matters relevant to the exercise of their discretionary powers, rather than kept in ignorance of them.
The use and advantages of wish letters in conjunction with broad discretionary trusts is not confined to family trusts. For example, the advantage of flexibility may be equally applicable to an employee trust. Nonetheless, the advantage of confidentiality is at its most obvious in relation to a family trust, and it is in the effect upon that advantage which any uncertainty or change in the law relating to disclosure of wish letters at the request of beneficiaries is at its most acute. Plainly, if the law is that, generally, wish letters are not disclosable, settlors will be encouraged to use them as the medium for the communication of valuable but confidential information relevant to the exercise of the trustees' discretionary powers. If by contrast wish letters are generally disclosable, that potential advantage is likely to be wholly closed off for the future, and the disclosure of genuinely confidential information in existing wish letters at the request of beneficiaries is likely to risk causing precisely the harm which led to that information being included in a wish letter in the first place, and to defeat what may to date have been real expectations of confidentiality in the minds both of settlors and trustees.
Since few would argue that clearly and rationally expressed wishes and relevant information included by settlors in wish letters could be treated by trustees as wholly irrelevant to the exercise of their discretionary powers, it is inescapable that their content will potentially be relevant, both to beneficiaries in monitoring the performance by trustees of their fiduciary obligations, and to the court in enforcing that performance where necessary and appropriate. Furthermore, the contents of a relevant wish letter may make all the difference to a beneficiary in understanding, in the context of an otherwise broadly drafted discretionary trust, what are or may be his or her expectations of benefit from the assets of a family settlement. While such expectations may on occasion be damaging, in particular to young beneficiaries, a broad knowledge of their prospects may be of significant advantage to them in planning both their own lives, and the education and maintenance of their children and other dependants. It is incidentally for this latter purpose that the claimants say that they have made their claim to disclosure.
There is therefore an inevitable tension between on the one hand the advantages of confidentiality, and on the other hand, the advantages of disclosure, in relation to wish letters. It is precisely this tension which has generated the controversy evident in the Australian, New Zealand and Channel Islands authorities. It is tempting to say that the infinitely variable weight to be given to those competing considerations in any particular case is best resolved by the exercise of discretion by the judge resorted to for the resolution of the impasse, rather than by the laying down of rules or even guidelines. But in my judgment this superficially attractive solution has real disadvantages. The first is that unless the principles are generally understood, settlors are likely to treat the uncertainty as to the general confidentiality of wish letters as a disincentive to their...
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