Open justice versus privacy of trust (HSBC Trustee (CI) Ltd v Kwong and others)

First published in ePrivateclient in May 2018.

Private Client analysis: Stephen Alexander, partner at Mourant Ozannes, discusses the practical implications of the judgment in HSBC Trustee (CI) Ltd v Kwong and others, which provides helpful guidance on the approach the Jersey courts take in relation to the publication of judgments concerning applications by trustees for directions as to the administration of a trust.

HSBC Trustee (CI) Ltd v Kwong and others [2018] JRC051A

What are the practical implications of this case?

Data security incidents at financial institutions, law firms and trust and corporate service providers (including the ‘Panama’ and ‘Paradise’ papers) in recent times have renewed the discussion about the appropriate level of transparency of trusts and other private wealth structures.

One aspect of this discussion turns on the manner by which applications by trustees for directions as to the administration of a trust should be reported by the courts. Should they be reported, as they traditionally have been in many jurisdictions, in an anonymised manner so as to preserve privacy of the trust and those connected to it, or should there be a greater emphasis on full and open publication of judgments? The Royal Court of Jersey’s recently published judgment of HSBC Trustee (CI) Ltd v Kwong and others provides important guidance on the approach that the Jersey courts take in relation to the publication of judgments concerning such trustee directions applications.

It is well established that open justice is a principle of fundamental importance to the rule of law in Jersey as well as in England (Jersey Evening Post Ltd v Al Thani [2002] JLR 542). This is because it enables the public (usually through the media) to see what the courts are doing. It is a protection against injustice on the part of the courts. As Lord Woolf MR said in R v Legal Aid Board ex p Kaim Todner (a firm) [1999] QB 966, [1998] 3 All ER 541, at para [977] (and applied in HSBC Trustee at para [16]):

‘It is necessary because the public nature of proceedings deters inappropriate behaviour on the part of the court. It also maintains the public’s confidence in the administration of justice. It enables the public to know that justice is being administered impartially.’

However, the principle of open justice is not absolute. One notable exception is in a trust context where trustees are seeking directions from the courts as to the administration of that trust. Such directions applications often pertain to a trustee’s momentous decision, such as a decision to exercise powers to distribute trust assets or to exclude beneficiaries, for which the trustee seeks approval from the court.

It has long been a core principle of Jersey trust law that a trustee is entitled to discharge his duties in private, ‘away from the glare of publicity’ (Re A Settlement [1994] JLR 139). The underlying reasons turn on the need to ensure that trustees can carry out their role freely and independently, in the best interests of the beneficiaries as a whole and in the accordance with the terms of the settlement.

On the issue of publication of judgments pertaining to such trustee directions applications, the ordinary approach of the Jersey courts to balance needs of open justice and privacy of trust administration matters is to publish such judgments in an anonymised form:

‘However, the court is conscious of the importance of public justice and accordingly its practice is that, if a written judgment is produced, it will normally arrange for the judgment to be published but in anonymised form. The judgment will, so far as possible, contain the full reasoning and factual description contained in the judgment but will simply omit names and any other matters which would permit identification’ (HSBC Trustee, para [27]).

What was the background?

This case concerned an application by the trustee, HSBC Trustees (CI) Ltd, for the Royal Court’s approval of a momentous decision by the trustee to divide certain specified assets held by four family trusts between trusts established for the family branches of the settlor’s three sons.

The application, which was heard in private, was approved by the Royal Court. However, one issue which remained was whether the judgment should be published and, if so, whether it should be anonymised in any way.

What did the court decide?

The Royal Court took the view that there must be good reason for it to depart from the principles of open justice and, on the particular facts of this case, there were no such reasons (at para [67]). Indeed, the court found that the essential features of the case were already in the public domain (at para [56]) and the judgment would not add materially to what has already been published (at para [57]).

The court also accepted that full publication would be the most effective way at remedying one of the main concerns of the beneficiary who did not want publication, namely, inaccurate overseas press reports (at paras [58] and [68]). The court took into account the fact that most of the adult beneficiaries (with their respective families) were in favour of publication of the main judgment (at para [66]).

The Royal Court concluded, in light of the above factors, by finding that the judgment should be published in full, without anonymisation (albeit with some minor details omitted).

The Royal Court’s findings are important in endorsing underlying trust law principles pertaining to privacy and transparency and, while they do not represent a widening of the scope of open justice in trust cases, provide clarification on the circumstances in which deviation from that principle of open justice will be permissible.

Stephen Alexander acted on behalf of the one of the beneficiary respondents to the application. Interviewed by Susan Ghaiwal.

The views expressed by our Legal Analysis interviewees are not necessarily those of ePrivateclient.