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The rights of new trustees to former trustees' legal advice

The recent Jersey case of In the matter of the Bird Charitable Trust and the Bird Purpose Trust [2012] JRC006 raised interesting issues as to the circumstances in which a new trustee can obtain from the former trustee copies of documents containing legal advice which the former trustee had received. 

The general law is that a new trustee is entitled to require the former trustee to deliver up to it all records, books and other papers belonging to the trust.  Further, it has been held in the English courts that there is a duty of care owed by former trustees to their successors in answering requests for information and if, through negligence, the former trustee misleads his successor and there is loss to the trust as a result, the former trustee will have no defence to an action in negligence.

In the case of Bird, the issue before the court was whether a former trustee was under an obligation to hand over to new trustees legal advice as to, inter alia, the validity of appointment of other trustees and a protector.  That advice was paid for by the trust (the costs of which, in total, were said to be in the region of US$1million).

In summary, the court held that there was no automatic right of a new trustee to see all such documents or information held by the former trustee (as legal advice was not "trust property" within the meaning of certain legislation) and that the court has the ultimate discretion as to whether such documents or information are to be supplied in a specific case.

This does not mean, however, that the court must decide in every case what documents (including documents containing legal advice) a former trustee must supply to a new trustee.  If a former trustee wants to withhold legal advice, the onus is on the former trustee to show that the advice is not reasonably necessary for the new trustee to have in relation to the future administration of the trusts, or that it could not be of assistance to a new trustee to satisfy itself that the trust has previously been properly administered.  The court therefore held in Bird that the legal advice should be disclosed by the former trustee to the new trustees, so as to enable the new trustees not just to ensure the future proper administration of the trust but also to ensure that there had been no previous maladministration. 

An important comment contained in the court's judgement was that "the fact that an outgoing trustee is concerned that information provided may lead to …action against it is not a reason to refuse provision of that information provided that it is otherwise properly and reasonably required".

It is difficult to imagine many circumstances in which legal advice which has been sought and obtained by the former trustee, inevitably in relation to the trust, will not assist the new trustee in some way and, if that is the relevant test, a trustee should bear that in mind when obtaining such advice.   However, the issue raises difficult questions of where the legal privilege in such advice lies, whether the result would have been different had the former trustee paid for the advice with its own funds and highlights the relative lack of authority or guidance from the English courts on the issue.

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