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IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
B e f o r e :
MR JUSTICE MORGAN
||- and -
Mr William Massey QC (instructed by Macfarlanes LLP) for the Settlors
Mr James Rivett (instructed by Macfarlanes LLP) for the Trustees
Mr Francis Barlow QC (instructed by Macfarlanes LLP) for the Minor Beneficiaries
Hearing dates: 10 October 2014
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Morgan:
- This judgment concerns applications which were made in three related claims. In each claim, the Claimant sought an order under section 1 of the Variation of Trusts Act 1958 ("the 1958 Act") approving an arrangement proposed to be entered into in relation to an existing trust on the grounds that the arrangement was for the benefit of the minor beneficiaries under that trust and for the benefit of future, yet unborn, beneficiaries under that trust. The three trusts are in similar terms, as are the proposed arrangements in each case.
- In each case, the claimant was the settlor of the trust and in one of the cases the settlor was also a trustee of the trust. The principal defendants were the trustees (or in one case, the other trustees), the adult beneficiaries (who have consented to the proposed arrangement) and the minor beneficiaries (acting through their litigation friend).
- The substantive issues which arose under the 1958 Act were the usual issues under that Act, namely:
(1) was the proposed arrangement a variation of the existing trusts?
(2) was the proposed arrangement for the benefit of the minor beneficiaries?
(3) was the proposed arrangement for the benefit of the unborn beneficiaries? and
(4) should the court approve the proposed arrangement?
- Before the hearing, the parties had contacted Chancery Listing and obtained its agreement that the cases would be listed for hearing in the Daily Court List with initials being used in place of the names of the parties.
- At the hearing, Mr Massey QC appeared on behalf of the Claimants, Mr Barlow QC appeared on behalf of the minor beneficiaries acting through their litigation friend and Mr Rivett appeared on behalf of the trustees who had rightly taken on the role of "watchdog" for the unborn beneficiaries: see Re Druce's Settlement Trusts  1 WLR 363 at 370. Each counsel had provided me in advance with detailed and thorough written submissions and I had been asked to do, and had done, extensive pre-reading of the documents before the court.
- At the beginning of the hearing before me, Mr Massey applied for the cases to be heard in private. I inquired whether the other counsel who appeared supported or opposed this application. I was told that they supported the application. I inquired whether there was anyone in court who wished to be heard on the application. Only the parties and their representatives were present. Although, as a result of pre-reading, I was doubtful whether I would ultimately direct that these cases should be heard in private, in order not to pre-judge the issue, I directed that the court would sit in private to hear the application for an order that the substantive cases be heard in private. At the conclusion of the submissions on the application, I announced my decision which was that the cases should be heard in open court but that it was appropriate to impose reporting restrictions as to the proceedings. I indicated that I would subsequently give reasons in writing for my decision. I also indicated that the written reasons would be in the form of an anonymised judgment.
- Following my ruling on the application, I sat in open court and heard submissions on the substantive issues. I was satisfied that the proposed arrangement was a variation of the existing trusts within the 1958 Act, that it was for the benefit of the minor beneficiaries and the unborn beneficiaries and that it was appropriate for the court to make an order approving the arrangement under the 1958 Act. I then ordered accordingly.
- This judgment contains my reasons for my decision that the cases should be heard in open court and that it was appropriate to impose reporting restrictions in relation to the proceedings.
- The parties relied upon CPR 39.2(3). I will set out the whole of Rule 39.2 which provides as follows:
"General rule—hearing to be in public
39.2 (1) The general rule is that a hearing is to be in public.
(2) The requirement for a hearing to be in public does not require the court to make special arrangements for accommodating members of the public.
(3) A hearing, or any part of it, may be in private if—
(a) publicity would defeat the object of the hearing;
(b) it involves matters relating to national security;
(c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;
(d) a private hearing is necessary to protect the interests of any child or patient;
(e) it is a hearing of an application made without notice and it would be unjust to any respondent for there to be a public hearing;
(f) it involves uncontentious matters arising in the administration of trusts or in the administration of a deceased person's estate; or
(g) the court considers this to be necessary, in the interests of justice.
(4) The court may order that the identity of any party or witness must not be disclosed if it considers non-disclosure necessary in order to protect the interests of that party or witness. "
- The parties relied in particular on sub-paragraphs (c), (d) and (f) of rule 39.2. It was submitted that:
(1) the evidence in the three cases revealed that the value of the assets of the trusts was very high and much higher than was typical in a case under the 1958 Act;
(2) the evidence disclosed information about the dividends policy of a company the shares of which were owned directly or indirectly by the trusts;
(3) the evidence as to the dividends policy would indicate the levels of profit made by the company;
(4) the company was a private company and its customers and its competitors were generally not aware of the levels of profit made by the company;
(5) if the company's customers became aware of the levels of profit made by the company, those customers (some of whom were powerful enterprises) could squeeze the profit margins of the company;
(6) apart from the adverse commercial consequences for the company and consequentially for the trusts, public knowledge of the value of the trust assets would create a risk as to the personal security of both the adult and the minor beneficiaries;
(7) these cases involved uncontentious matters arising in the administration of trusts.
- Counsel did not cite any authority as to the principles I should apply in relation to the application that the cases should be heard in private. I indicated in the course of the hearing that I might reach the conclusion that the reasons put forward were not sufficient to justify a decision that the cases should be heard in private. However, I was concerned about the special position of the minor beneficiaries. I inquired whether it would be appropriate to impose some restrictions to safeguard the children from the adverse consequences of them becoming aware at too early an age of the extent of their likely wealth and to protect them from friendships and relationships with others who were inappropriately influenced by knowing about the likely wealth of the children. I inquired whether a reason of that kind would be accepted in the Family Division as a sufficient reason for hearing a case in private. The parties asked for, and I granted, a short adjournment to consider that matter and when the hearing resumed I was provided with a witness statement dealing with that matter and I heard further submissions. Mr Massey then cited to me Cooper-Hohn v Cooper-Hohn  EWHC 2314 (Fam) and K v L  EWCA Civ 550 in relation to the practice in family courts and Mr Barlow cited to me Spens v IRC  1 WLR 1173 and Re Trusts of X Charity  1 WLR 2751 in support of a submission that Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms ("the Convention") did not apply to applications under the 1958 Act.
Private hearings: the legal principles
- Although the parties relied on CPR 39.2(3) as the governing rule, this provision is an exception to the general rule stated in rule 39.2(1) which is that a hearing is to be in public. Rule 39.2(3) identifies a number of cases where a court may direct that a hearing, or a part of it, should be in private. Apart from the particular cases in sub-paragraphs (a) to (f) of rule 39.2(3), the rule ends with sub-paragraph (g) which refers to a case where the court considers it is necessary in the interests of justice to conduct the hearing in private.
- Rule 39.2 is to be applied against the background of long established common law rules as to the fundamental principle of open justice and against the background of Articles 6, 8 and 10 of the Convention, set out in schedule 1 to the Human Rights Act 1998, coupled with section 12 of that Act dealing with freedom of expression. These rules have been the subject of a large number of highly relevant decisions over the decades. One can trace the authorities from the leading case of Scott v Scott  AC 417 through R v Legal Aid Board ex parte Kaim Todner  QB 966 (see, in particular, at 977) to a fairly recent discussion of the principles in Global Torch Ltd v Apex Global Management Ltd  1 WLR 2993, a case which concerned proceedings in the Companies Court. The authorities establish the following general propositions:
(1) There are two dimensions to open justice. The first is that the public are entitled to attend court proceedings to see what is going on. The second dimension is the right of the media to report the court proceedings to the public. The media should not be discouraged from publishing fair and accurate reports of court proceedings. In reality, very few members of the public attend court hearings so that the scrutiny of court proceedings is performed by the media acting on behalf of the public.
(2) The hearing of cases in open court deters inappropriate behaviour by the court. It maintains public confidence in the administration of justice. It enables the public to know that justice is being administered impartially. It makes uninformed or inaccurate comment about the proceedings less likely.
(3) Court hearings taking place in public enable information to become available to the public in a democracy. What goes on in the courts is inherently of legitimate interest, and real importance, to the public.
(4) The fact that a hearing in open court may be painful, humiliating and a deterrent either to a party or to a witness is not normally a proper basis for departing from the open justice principle. The interest protected by the open justice principle is the public interest in the administration of justice rather than the private welfare of those involved in court proceedings.
- Guidance as to how to apply these principles in practice was given in Practice Guidance (Interim Non-Disclosure Orders  1 WLR 1003 at  – , as follows (for convenience, I have removed the many references to cases other than Scott v Scott):
9 Open justice is a fundamental principle. The general rule is that hearings are carried out in, and judgments and orders are, public: see article 6.1 of the Convention, CPR r 39.2 and Scott v Scott  AC 417. This applies to applications for interim non-disclosure orders … .
10 Derogations from the general principle can only be justified in exceptional circumstances, when they are strictly necessary as measures to secure the proper administration of justice. They are wholly exceptional … . Derogations should, where justified, be no more than strictly necessary to achieve their purpose.
11 The grant of derogations is not a question of discretion. It is a matter of obligation and the court is under a duty to either grant the derogation or refuse it when it has applied the relevant test … .
12 There is no general exception to open justice where privacy or confidentiality is in issue. Applications will only be heard in private if and to the extent that the court is satisfied that by nothing short of the exclusion of the public can justice be done. Exclusions must be no more than the minimum strictly necessary to ensure justice is done and parties are expected to consider before applying for such an exclusion whether something short of exclusion can meet their concerns, as will normally be the case … . Anonymity will only be granted where it is strictly necessary, and then only to that extent.
13 The burden of establishing any derogation from the general principle lies on the person seeking it. It must be established by clear and cogent evidence … .
14 When considering the imposition of any derogation from open justice, the court will have regard to the respective and sometimes competing Convention rights of the parties as well as the general public interest in open justice and in the public reporting of court proceedings. It will also adopt procedures which seek to ensure that any ultimate vindication of article 8 of the Convention, where that is engaged, is not undermined by the way in which the court has processed an interim application. On the other hand, the principle of open justice requires that any restrictions are the least that can be imposed consistent with the protection to which the party relying on their article 8 Convention right is entitled. …
15 It will only be in the rarest cases that an interim non-disclosure order containing a prohibition on reporting the fact of proceedings (a super-injunction) will be justified on grounds of strict necessity, ie, anti-tipping-off situations, where short-term secrecy is required to ensure the applicant can notify the respondent that the order is made … . It is then only in truly exceptional circumstances that such an order should be granted for a longer period … ."
- I have also considered the practice as to the hearing of cases under the 1958 Act. Shortly after the coming into force of the 1958 Act, the question arose as to whether applications under the Act should be heard in open court. In Re Chapman's Settlement Trusts and Re Rouse's Will Trusts, reported together as a Practice Note at  1 WLR 372 at 375, Vaisey J stressed the importance of applications under the Act being heard in open court. He said that hearings in open court were necessary to ensure uniformity of practice and that the variation of trusts was a serious matter which ought not to be dealt with behind closed doors. In Re Byng's Will Trusts  1 WLR 375 at 381, Vaisey J said that there was a rule that all applications for the variation of investment clauses (whether under section 57 of the Trustee Act 1925 or the 1958 Act) were to be heard in open court unless there was a special reason to avoid publicity. The 3rd Supplement to the 18th Edition of Lewin on Trusts at para 45-99 states that, following these decisions, the hearing was "generally in open court". Lewin discusses the 1958 Act in the main work at paras 45-31 to 45-104 and numerous reported cases are cited where the reports give the names of the parties and the details of the case. There are three cases cited where the report is anonymised; these are Re T's Settlement Trusts  Ch 158, Re C L  1 Ch 587 and CD (a minor) v O  3 All ER 780. In Re T, the application was heard in chambers on the ground that "it involved consideration of certain confidential facts relating to a ward of court" (see at page 160) and an anonymised judgment was given in open court. Re CL was a case in the Court of Protection. The application was heard in chambers and an anonymised judgment was reported by leave of the court (see at page 589); the judgment does not discuss the question of the hearing being in private. CD (a minor) v O was an edited version of a judgment given on an application made in writing and dealt with on paper without a hearing and treated as having been heard in private; the judge permitted the anonymised judgment to be published whereas the full version was subject to an embargo (see at page 781). The judgment does not further discuss the question of the matter being dealt with in private.
- It seems therefore that from the coming into force of the 1958 Act until more recent events to which I will refer the settled practice was that applications under the Act were heard in open court although it was open to the parties to apply to the court for the case to be heard in private. There is no reported instance of any discussion of the principles which the court would apply to an application for a case under the 1958 Act to be heard in private.
- The Civil Procedure Rules were made in 1998 and came into force on 26 April 1999. CPR 39.2 retains its original wording. Part 39 was (and still is) supplemented by PD 39A – Miscellaneous Provisions Relating to Hearings. Para. 1.5 of PD 39A sets out a number of matters where hearings should in the first instance be listed by the court as hearings in private. The list originally included, at para. 1.5(11), "an application under the Variation of Trusts Act 1958 where there are no facts in dispute". That sub-paragraph was removed from the Practice Direction in around 2003 although the note in the current White Book at para. 39.2.4 has not been amended to reflect the removal of the sub-paragraph.
The application of the principles in this case
- I will now attempt to apply CPR 39.2 to the present cases. The parties submit that, in the circumstances of these cases, I have the power to order that the hearing or a part of it be in private. They rely on sub-paragraphs (c), (d) and (f) of rule 39.2. There is some scope for argument as to whether the parties can establish that which is required by these three sub-paragraphs. As to sub-paragraph (c), the evidence includes confidential information. To the extent that such information is referred to in open court, it will cease to be confidential information, at least to some extent. Whether the loss of confidence will amount to "damage" within sub-paragraph (c) may be open to argument although I consider that the real argument is as to whether the risk of such damage is sufficient to justify a hearing in private. As to sub-paragraph (d), the cases involve existing children and, possibly, children yet unborn. However, it is open to argument whether a private hearing is "necessary" to protect the interests of children. I would prefer to consider the question of "damage" for the purposes of sub-paragraph (c) and the question as to what is "necessary" for the purposes of sub-paragraph (d) as part of my consideration of the wider question as to whether it is appropriate to hold the hearing in private. As to sub-paragraph (f), again, it may be open to argument whether the present applications relate to "the administration of trusts" and whether they involve "uncontentious matters". As to the latter point, there are no factual disputes and all the parties submitted to me that I should be satisfied that these are cases in which it is proper to approve the proposed arrangements. However, it may be that matters can only be "uncontentious" when all the relevant parties have capacity to agree on those matters and that is not this case. As the cases were argued on one side only, and as I consider (for the reasons which I will give) that I should not order a hearing in private in these cases, I will not rule on the precise scope of sub-paragraph (f) but will assume that the parties are right that these cases are within that sub-paragraph. Assuming that these cases come within one of the sub-paragraphs of rule 39.2, the real question is whether I ought to order a hearing in private.
- The general rule is that a court hearing is to be in public. That general rule applies to applications under the 1958 Act. When considering whether to depart from the general rule the court must apply the general principles as to open justice. As stated in the Practice Guidance referred to in paragraph 14 above, open justice is a fundamental principle so that derogations from it can only be justified in exceptional circumstances when they are strictly necessary to secure the proper administration of justice. There is no general exception to the principles of open justice where privacy or confidentiality is in issue. The burden of establishing a derogation from the general principle lies on the person seeking it and it must be established by clear and cogent evidence. These principles are principles of the common law. They do not depend on the case coming within article 6 of the Convention. Accordingly, it is not necessary for me to rule upon Mr Barlow's submissions that article 6 does not apply to an application under the 1958 Act. As the case was argued on one side only, I will not discuss that point further.
- I suspect that in many applications under the 1958 Act the parties are reluctant to have their cases heard in open court. The subject matter of an application under the 1958 Act may be regarded by the parties as a private family matter involving a discussion of the family's private financial affairs. The parties may take the view that those matters concern no-one but themselves and that is a sufficient justification for the hearing to be in private. If that is their view, the law is clear that it is not a sufficient justification for the hearing to be in private. The 1958 Act conferred this jurisdiction upon the court. In 1958, and at all times since, the general principle has been that court hearings are in open court and that has applied to applications under this Act as to other court hearings.
- In the present case, the parties have suggested that there are specific reasons why the court should be persuaded to derogate from the general principle of open justice. The first reason put forward relates to the fact that the trusts directly or indirectly own the shares in a private company. It is said that there is a risk that a hearing in open court would lead to the company's customers becoming aware of the levels of profit made by the company and that would lead to those customers effectively squeezing the profit margins of the company, damaging the value of the trust assets. I have considered the evidence put forward in support of this submission and I do not regard it as particularly strong. It certainly does not come anywhere near satisfying the requirement of clear and cogent evidence justifying a derogation from the open justice principle. If the evidence in this case sufficed for that purpose, I imagine that there would be very few cases in the Companies Court which would be suitable to be heard in open court.
- The parties have also submitted that a hearing in open court would lead to disclosure of the high value of the trust assets and of the identity of the beneficiaries and this would lead to a risk to the personal security of those beneficiaries. I have considered the evidence put forward in support of this submission and I regard it as very slender indeed. It does not begin to reach the standard of clear and cogent evidence which is required to justify a derogation from the open justice principle.
- As explained earlier, the parties put in further evidence as to the effect of publicity on the wellbeing of the children involved in this case (including any future children). There are five existing children all of whom are under ten. The evidence stressed the concern of the children's parents for their wellbeing. There was detailed evidence that the parents had striven to create as normal a life as possible for the children. A modest and low-key unostentatious lifestyle was a core value of the family. The parents were determined that the children should not know at too young an age of the extent of the family's wealth. It was considered that such knowledge could deter the children from taking full advantage of the educational opportunities open to them. Further, such knowledge at a young age could create a sense of entitlement which might discourage the children from making their own way in life and contributing to society. The evidence also explained in detail the concerns of the parents in relation to the children becoming a magnet for false friends and those who might seek to take advantage of the children's wealth. The evidence also commented on the way in which publicity as to the children's wealth might be disseminated, and even distorted, by social media.
- In the light of this evidence, I am persuaded that the court should be prepared to take appropriate steps to protect the children from the adverse effect on their upbringing and personal development which might well result from an open court hearing generating publicity as to their potential wealth. The question then is: what are "appropriate steps"?
Reporting and other restrictions
- To answer that question, I need to consider the circumstances in which a court may impose reporting restrictions on a case that has been heard in open court. It has long been recognised that the court has an inherent power to impose such restrictions and, more recently, it has been stated that such a power is conferred by the provisions of the Human Rights Act 1998: see Re S (A Child) (Identification: Restrictions on Publication)  1 AC 593 at  –  and Re Guardian News and Media Ltd  2 AC 697 at . The principles as to when it is appropriate to impose reporting restrictions are summarised in H v News Group Newspapers Ltd Practice Note  1 WLR 1645 by Lord Neuberger of Abbotsbury MR at  – , as follows:
"21 In a case such as this, where the protection sought by the claimant is an anonymity order or other restraint on publication of details of a case which are normally in the public domain, certain principles were identified by the judge, and which, together with principles contained in valuable written observations to which I have referred, I would summarise as follows: (1) The general rule is that the names of the parties to an action are included in orders and judgments of the court. (2) There is no general exception for cases where private matters are in issue. (3) An order for anonymity or any other order restraining the publication of the normally reportable details of a case is a derogation from the principle of open justice and an interference with the article 10 rights of the public at large. (4) Accordingly, where the court is asked to make any such order, it should only do so after closely scrutinising the application, and considering whether a degree of restraint on publication is necessary, and, if it is, whether there is any less restrictive or more acceptable alternative than that which is sought. (5) Where the court is asked to restrain the publication of the names of the parties and/or the subject matter of the claim, on the ground that such restraint is necessary under article 8, the question is whether there is sufficient general, public interest in publishing a report of the proceedings which identifies a party and/or the normally reportable details to justify any resulting curtailment of his right and his family's right to respect for their private and family life. (6) On any such application, no special treatment should be accorded to public figures or celebrities: in principle, they are entitled to the same protection as others, no more and no less. (7) An order for anonymity or for reporting restrictions should not be made simply because the parties consent: parties cannot waive the rights of the public. (8) An anonymity order or any other order restraining publication made by a judge at an interlocutory stage of an injunction application does not last for the duration of the proceedings but must be reviewed at the return date. (9) Whether or not an anonymity order or an order restraining publication of normally reportable details is made, then, at least where a judgment is or would normally be given, a publicly available judgment should normally be given, and a copy of the consequential court order should also be publicly available, although some editing of the judgment or order may be necessary. (10) Notice of any hearing should be given to the defendant unless there is a good reason not to do so, in which case the court should be told of the absence of notice and the reason for it, and should be satisfied that the reason is a good one.
22 Where, as here, the basis for any claimed restriction on publication ultimately rests on a judicial assessment, it is therefore essential that (a) the judge is first satisfied that the facts and circumstances of the case are sufficiently strong to justify encroaching on the open justice rule by restricting the extent to which the proceedings can be reported, and (b) if so, the judge ensures that the restrictions on publication are fashioned so as to satisfy the need for the encroachment in a way which minimises the extent of any restrictions."
- The decision in H v News Group Newspapers Ltd was applied by the Court of Appeal in K v L. That case concerned a dispute as to ancillary financial relief for a former spouse. The parties had children and applied to the Court of Appeal for reporting restrictions to prevent publicity as to the financial position of the parties and, hence, their children. The court considered the principles summarised in H v News Group Newspapers Ltd and imposed reporting restrictions and gave an anonymised judgment. The evidence before me, in support of reporting restrictions and anonymity, is stronger than, or at least as strong as, the evidence in K v L. I am persuaded that I ought to impose reporting restrictions in this case and, further, that this judgment should be anonymised.
- As is made clear in the Practice Guidance referred to at paragraph 14 above, any derogation from the principles of open justice should not be more than the minimum strictly necessary to ensure that justice is done. I considered at the hearing that if I imposed reporting restrictions and anonymised any judgment in this case, then it was not necessary to go further to protect the interests of the children and, in particular, it was not necessary to hear the cases in private.
- At the end of the hearing I imposed, on an interim basis only, reporting restrictions in general terms. I now invite the parties to submit a draft order which will continue hereafter; the draft order should spell out the detail of the restrictions which are sought and I will then make an appropriate order.
- I also indicated at the hearing that I would make an order under CPR 5.4C and 5.4D to the effect that a non-party would not be entitled to obtain a copy of a statement of case or of any judgment or order without obtaining the permission of the court and any application for such permission should be on notice to the parties. I will also now add a direction that a non-party may not obtain a transcript of the hearing without the permission of the court and any application for such permission should be on notice to the parties.
Listing in the future
- Finally, I wish to comment on the future listing of applications under the 1958 Act. If the parties intend to apply at the hearing of the substantive application for an order that the application be heard in private, or that there be reporting restrictions or that any judgment should be anonymised, and they wish the substantive hearing to be listed without the names of the parties but with random initials only, then it is to be expected that Chancery Listing will accede to that request. In such a case, in addition to random initials, the listing should refer to the Variation of Trusts Act 1958 but will not state that the hearing is in private. This procedure should not be abused. A request to Chancery Listing to list the case in this way should only be made where a party genuinely intends to argue at the substantive hearing that the court should sit in private or impose reporting restrictions or give an anonymised judgment. If the parties are in doubt as to whether it is appropriate to make such a request, they may apply to the court in writing in advance of the substantive hearing for a direction that the substantive hearing might be listed in the way described above. I have the authority of the Chancellor of the High Court to make the comments in this paragraph.
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