Ancillary relief – Letters of request – Assets in offshore trust – Conjectural documents – Fishing expeditions – Jurisdiction of court to order letters of request
[2005] EWCA Civ 1606
Court of Appeal
Sir Mark Potter P, Wilson and Lloyd LJJ
Barry Singleton QC and Deborah Eaton for the appellant husband instructed by Withers, Martin Pointer QC, Daniel Hochberg and James Ewins for the respondent wife
20 December 2005
Ancillary relief – Letters of request – Assets in offshore trust – Conjectural documents – Fishing expeditions – Jurisdiction of court to order letters of request
The husband appealed against two orders made in ancillary relief proceedings following an application by the wife for the issue of a letter of request to the Bermudian courts. Both orders were designed to elicit material about a discretionary trust established by the husband. The trust was originally situated in Jersey but the husband had procured its transfer to Bermuda, when he himself had relocated there. The beneficiaries of the trust were the husband, the wife, their children and the husband's remoter issue. The husband was the only person who had put assets into the trust. Since its establishment it had been operated as an interest in possession settlement. The wife valued the trust assets at £67m.
The central question was whether the trust was a financial resource of the husband for the purpose of s 25(2)(a) of the Matrimonial Causes Act 1973. The letter of request ordered by the judge was that the husband's Bermudian solicitor, who was a director of the sole trustee, be asked to produce trust accounts, trust deeds, resolutions and letters of wishes, to state to what extent the trustee consulted with the husband about prospective policy decisions and the extent to which the trustee had discussed the possible collapsing of the trust and changing the husband's letter of wishes, and to provide details of communications with the husband's accountant, himself the subject of the second order. The accountant was ordered to produce documents relating to advice or discussions concerning the trust.
The husband raised a number of objections to the orders, in particular that the application was a ‘fishing’ expedition and that the documents sought were conjectural only and therefore there production was not permitted by s 2(4)(a) of the Evidence (Proceedings in Other Jurisdictions) Act 1975.
Held – dismissing the appeal, save for a minor modification to the letter of request –
(1) The central question, whether the trust was a financial resource of the husband for the purpose of s 25(2)(a) of the 1973 Act, should be expressed in terms of whether the trustee would be likely to advance the capital immediately or in the foreseeable future rather than whether the husband had ‘effective control’ over the trust. Since a trustee would usually be acting entirely properly if, after careful consideration of all the relevant circumstances, it resolved in good faith to accede to a request by the settlor for the exercise of his power of advancement of capital, whether back to the settlor or to any other beneficiary (see paras [12], [13]).
(2) Insofar as they sought the production of documents, the orders for the letter of request and for the inspection appointment could not lawfully have been made if they represented a ‘fishing’ expedition. Insofar as the letter of request sought the taking of oral evidence, it would be preferable to conduct the initial appraisal by asking whether the intention was to obtain the solicitor's evidence for use at trial and there was reason to believe that he had knowledge of matters relevant to issues at trial. Different principles did not apply in financial proceedings following divorce from those applied in other types of proceeding. Neither the application in respect of the solicitor, nor that in respect of the accountant constituted a ‘fishing’ expedition. The wife had made a particularised allegation regarding the advancement of capital and was seeking to elicit evidence in support of that allegation. The request was not part of a search for material that might enable the wife to raise an allegation (see paras [37], [38], [39]).
(3) In financial proceedings following divorce there was no need to limit the production of documents by a non-party to those documents whose existence could be proven. Whilst such a limitation might make sense in ordinary civil litigation, it could not be regarded as mandatory in a special type of proceeding where it would largely render ineffective the jurisdiction to secure the production of documents. A wife would seldom have the requisite knowledge to prove the existence of a document. This conclusion was reinforced by s 25 of the 1973 Act, which imposed a quasi-inquisitorial role on the courts to investigate issues in ancillary relief litigation and that duty could not be disabled by any fetter upon the court's ability to extract relevant documents from a non-party not expressly mentioned by s 2(4) of the 1975 Act. Such an approach was also consistent with the Family Proceedings Rules 1991, r 2.51(B), which required the court to ensure that the parties were on an equal footing. One of the aims of the Rules was to encourage a ‘cards on the table’ approach (see paras [46], [47], [48], [72]).
(4) An inspection appointment could only be ordered in respect of a document inspection where it appeared necessary for the fair disposal of the application or for saving costs, and the same principle applied to a letter of request for the production of documents. The judge was correct to conclude that the production of documents was necessary (see para [50]).
(5) In financial proceedings following divorce where the court was asked to consider whether to order an inspection appointment, or to order the issue of a letter of request for the production of documents, it was obliged to exercise its power in a way that was proportionate to the sums involved, the importance of the case, the complexity of the issues and the financial position of each party. In view of the sums involved it was clearly appropriate to grant the order (see para [52]).
(6) The order was not be oppressive since both the solicitor and the accountant were professionals (see para [55]).
(7) The judge's request that the solicitor be required to divulge communications between the accountant and the trustee was wider than the extent of the obligation to divulge communications between the husband and the trustee and was too wide. It was to be modified so that the two obligations ran parallel to one another (see para [56]).
(8) Whilst traditionally trustees were regarded as entitled to refuse to disclose to beneficiaries any document that bore on their reasons for taking a particular decision in the exercise of their discretion over trust income or capital, no such decision had been taken in the instant case beyond the appropriation of income to the husband. Accordingly, the general proposition against disclosure of the trust accounts did not apply. Furthermore, it was not true to say that a discretionary beneficiary did not have sufficient interest to be entitled to disclosure. The trustee would not be bound to succeed in persuading the Bermudian court, should it seek to do so, that the evidence ought not to be ordered to be given, such that it would be pointless to order that the letter of request be issued (see paras [64], [65], [66]).
Statutory provisions considered
Matrimonial Proceedings and Property Act 1970, s 5
Matrimonial Causes Act 1973, s 25(2)(a)
Evidence (Proceedings in Other Jurisdictions) Act 1975, s 2
Rules of the Supreme Court 1965 (SI 1965/1776), Ords 38, 39, rr 1, 2, 3(3), 9, 14
Family Proceedings Rules 1991 (SI 1991/1247), rr 1.3, 2.51B, 2.61B(7)(a), 2.62(7)
Civil Procedure Rules 1998 (SI 1998/3132)
Bermudian Evidence Act 1905
Gibraltarian Evidence Ordinance
Cases referred to in judgment
Asbestos Insurance Coverage Cases, Re [1985] 1 WLR 331, [1985] 1 All ER 716, HL
B v B (Matrimonial Proceedings: Discovery) [1978] Fam 181, [1978] 3 WLR 624, [1979] 1 All ER 801, FD
Browne v Browne [1989] 1 FLR 291, CA
D v D (Production Appointment) [1995] 2 FLR 497, FD
First American Corporation v Zayed [1999] 1 WLR 1154, [1998] 4 All ER 439, CA
Frary v Frary and Another [1993] 2 FLR 696, CA
Khanna v Lovell White Durrant [1995] 1 WLR 121, [1994] 4 All ER 267, ChD
Letterstedt v Broers (1884) 9 App Cas 371, PC
Morgan v Morgan [1977] Fam 122, [1977] 2 WLR 712, (1976) FLR Rep 473, [1977] 2 All ER 515, FD
Netbank v Commercial Money Center [2004] Bda LR 46, Berm SC
Panayiotou v Sony Music Entertainment (UK) Ltd [1994] Ch 142, [1994] 2 WLR 241, [1994] 1 All ER 755, [1994] EMLR 229, ChD
Parra v Parra [2002] EWCA Civ 1886, [2003] 1 FLR 942, CA
Schmidt v Rosewood Trust Ltd [2003] UKPC 26, [2003] 2 AC 709, [2003] 2 WLR 1442, [2003] 3 All ER 76, PC
State of Norway’s Application, Re [1987] QB 433, [1986] 3 WLR 452, [1989] 1 All ER 661, CA
State of Norway’s Application (No 2), Re [1990] 1 AC 723, [1989] 2 WLR 458, [1989] 1 All ER 745, HL
The Esteem Settlement, Re [2004] WTLR 1, [2004] JRC 92, Jersey RC
W v W (Disclosure by Third Party) (1981) 2 FLR 291, FD
Westinghouse Electric Corporation Uraniam Contract Litigation MDL Docket 235 (No 2), Re [1978] AC 547, [1978] 2 WLR 81, [1978] 1 All ER 434, HL
White v White [2001] 1 AC 596, [2000] 3 WLR 1571, [2000] 2 FLR 981, [2001] 1 All ER 1, HL
Zakay v Zakay [1998] 3 FCR 35, Gib Sup Ct
