Vadim Schmidt v Rosewood Trust Ltd (2003)
The right to seek disclosure of trust documents was an aspect of the court's inherent jurisdiction to supervise and if necessary to intervene in the administration of trusts and did not depend on the right or claim of a beneficiary to a proprietary interest in the trust property.
Appeal from the Staff of Government Division of the Isle of Man setting aside an order for disclosure made against the respondent trustee company ('Rosewood'). The appellant's father ('Mr Schmidt') was the co-settlor of two Isle of Man settlements, the Angora trust and the Everest trust of which Rosewood was the trustee. It appeared that over US$105m had been received by the two settlements since their creation. Mr Schmidt died unexpectedly and intestate in Moscow in 1997. The appellant was entitled to share in his estate and he obtained letters of administration in the Isle of Man and commenced proceedings against Rosewood in the Isle of Man alleging breach of trust and breach of fiduciary duty. He obtained an ex parte order prohibiting Rosewood and other defendants from dealing with the trust assets and requiring them to make extensive disclosure. The appellant commenced further proceedings seeking fuller disclosure of trust accounts and information about the trust assets, not by way of discovery in the 1998 proceedings, but by virtue of the discretionary interests or expectations that he had under the settlements personally and as administrator of his father's estate. The Deemster held that the application was not an abuse of process and made an elaborate order for Rosewood to make extensive disclosure and to provide information to named accountants, as "inspectors", and their lawyers to hold in confidence. Rosewood appealed arguing that the appellant and his father never had any interest in the settlements except as the mere objects of a discretionary power of appointment and were accordingly not entitled to trust documents or information. The Staff of Government Division set aside the Deemster's order. The appellant appealed to the Privy Council. HELD: (1) As a matter of construction of the trust deed it could not be assumed that the appellant in his personal capacity was a beneficiary in any sense under the Angora trust. In relation to the Everest trust the appellant in his personal capacity was no more than a possible object of the very wide power to add beneficiaries. (2) The right to seek disclosure of trust documents was an aspect of the court's inherent jurisdiction to supervise and if necessary to intervene in the administration of trusts. A beneficiary's right or claim to disclosure of trust documents or information did not depend on the proprietary basis of a transmissible interest in the trust property (O'Rourke v Darbishire (1920) AC 581 considered). The right to seek the court's intervention did not depend on entitlement to a fixed and transmissible beneficial interest (Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 considered). (3) The object of a discretion, including a mere power, could be entitled to the discretionary protection of a court of equity by way of disclosure of trust documents subject to considerations of confidentiality. No beneficiary had any entitlement as of right to disclosure of trust documents. (4) The Staff of Government Division was wrong to hold that the Deemster had no jurisdiction to make the order for disclosure he did. The Deemster's order should be restored and the matter remitted to the High Court of the Isle of Man for further consideration.