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Court orders relating to trusts / disclosure requirements (Third party…
Court orders relating to trusts / disclosure requirements
Remedies that can be authorised by the court include cancelling or rectifying a trust if
the object for which the trust was created failed
the trust deed is executed under duress or in ignorance or mistake or procured by fraud, misrepresentation, or undue influence, if the settlor has not become aware of its legal effect
it was intended to prejudice creditors
it was designed to defeat dependents
Prohibitory injunctions (restrictive)
These are court orders issued against a person or persons directing them to refrain from the continuation or repetition of a wrongful act. For example these may be issued in cases where there is misapplication of funds from a trust is suspected or proven
Refusal to obey this injunction may result in the criminal penalty of contempt of court, with the risk of a fine and/or imprisonment
This option is available to beneficiaries who have reason to suspect that a possible breach of trust is to be committed by a TSP as they do not have to wait until it is committed before taking action. They can ask the court to restrain the TSP from committing †he possible breach.
If the TSP has already committed the possible breach, the beneficiary can seek an injunction to restrain further possible breaches by the TSP
Anton Piller Orders
A court order to permit inspection of documents so preventing the defendant (the TSP) from concealing, removing or destroying vital evidence such as documents before the heading of pending action
Allows the plaintiff to enter the premises of the TSP to examine and make copies of any documents of similar material
Failure to comply with a search order is punishable by contempt of court
Mareva Injunction
Issued to prevent assets leaving the jurisdiction and to enable courts to recover assets that have been misappropriated or applied incorrectly
Once issued it is usually tabled to any financial institution that is suspected of holding assets or monies before any substantive legal proceedings have taken place
Such an injunction can be obtained quickly if there is just cause, so that the potential illegal funds are not transferred away to another jurisdiction
The TSP should be cautious when dealing with any request for information about trust to which have been appointed as a TSP
The TSP must be mindful of who is requesting this information and ensure that the requesting party is entitled to receive such information
Any information that is otherwise disclosed could itself be a potential breach of trust and a breach of the confidentiality that should be expected with any fiduciary relationship
The TSP may be requested to disclose information to a variety of individuals or organisations for a variety of reasons including
The terms of the trust deed provide for the disclosure
The trust law of the jurisdiction provides for the disclosure
The TSP is required to disclose the information in oder to comply with other legislation such as anti money laundering legislation
The TSP is required to disclose the information in order to comply with court instructions against the receipt of court orders such as Anton Piller orders and Mareva injunctions
The TSP is required to disclose the information in order to comply with local or international fiscal or anti crime rules
The TSP should bear in mind that the settlor who is often the client is not usually automatically entitled to receive information in this capacity as they are also no longer the legal owner of the assets nor entitled to benefit from them, unless they are also a beneficiary, in which case they may be entitled to information in that capacity
Difficulties could occur if the settlor is not a beneficiary to the trust as any disclosure could be seen as a potential conflict of interest as the TSP should act for the benefit of the named beneficiaries and not as a pawn of the settlor
The TSP should consider whether or not it is in the best interests of the beneficiaries to disclose information to the settlor but it depends on whether there are identifiable vested interests. The settlor could go to the court for a ruling on their specific rights but the court may not look favourably as this should have been considered when the trust was originally constituted
The beneficiaries have an equitable right, in persona, to seek information concerning their rights from the TSP under equity, common law and trust law. These rights may include the right to receive details of
Any vested entitlement as this cannot be denied
The manner in which the trust assets are being held
The assets held in any underlying companies of the trust
The investment policy, monitoring process and valuation of trust assets
Distributions made to themselves
Audit disclosures
TSPS are accountable to the beneficiaries in respect of the accounting records of the trust. In some cases there is a need for an audit to take place, this could be because
The trust is associated to an underlying company which is not exempt from audit
The Trust has charitable status and is required to be audited under the laws of the jurisdiction
This was agreed when the trust was constituted
The TSP should provide and maintain a transparent, open and cooperative relationship with the auditing firm and ensure that the auditor has access to the following
Trust deed and other trust documentation
Details of the beneficiaries
Minutes of decisions me by the TSP
Accounting transaction records and any file notes
Details of the distributions made, trust assets, including monies held and where
Details of the valuation methods used when preparing accounting statements
Third party disclosure: during the trust period the TSP may reasonably expect to disclose information to the following parties
The protectors
Will have rights and powers set out in the trust deed and/or trust law but is not a party to the trust
A court appointed official
Such as an administrator or executor of a deceased beneficiary's estate tat has been empowered by the court. This person will have access to the able to ascertain the beneficiaries for probate purposes
A creditor
Owed monies by the TSP, is not able to access any information held but has the power depending if default has occurred to apply to the court for restitution of the sum due
The family of the beneficiary
If not named as beneficiaries, they do not have direct power, unless set out under a power of attorney but may go to the court to obtain information. This would usually be when the beneficiary is considered vulnerable and not Sui juris
Serious and Organised Crime
Will be able to request disclosures under the terms of a warrant issued by the court of the jurisdiction, for example if money laundering was suspected
Tax authorities
Under international co-operational agreements usually under a confirmed court order by the local court
Intermediaries
Foreman v Kingstone (2005) - trustees disclosed:
Financial statements.
◆◆ Accounts and details of beneficiaries to whom assets had been provided.
◆◆ Copies of all deeds appointing trustees.
◆◆ Details of all distributions of income and capital.
◆◆ Information as to the amount and state of the property in trust funds.
◆◆ Information about the management of trust property.
◆◆ Details of changes in the structure of the trust.
◆◆ Memoranda of wishes or like communications from the settlor.
Londonderry's Settlement (1965)