Trust Documents – Rights of Beneficiaries and Duties of Trustees
Whether advising beneficiaries or trustees on their respective positions, the question of who may be entitled to documents relating to a trust and what documents must be provided is not straightforward.
Invariably, beneficiaries consider such requests to be reasonable, while Trustees may take the opposite view by denying the request or only offering to limit disclosure, which inevitably leads to disputes.
The issues surrounding these rights and obligations have been the subject of many cases, some older but there have been more recent cases which have shed light on evolving views while also providing insight into how to deal with it. requests for trust documents, whether as a beneficiary or as a trustee.
Duties of trustees
The starting position is that trustees are required to administer a trust in accordance with the provisions of the trust deed and the law. Likewise, the beneficiaries of the trust have the right to expect that of the trustees.
Trustees are required to maintain trust accounts and should be prepared to provide them to beneficiaries or to the court upon reasonable request.
Who can request disclosure?
Trustees must first determine whether the person requesting the information is entitled to the information or to the documentation. It has long been established that trustees must inform adult beneficiaries who have an interest in the possession, i.e. the right to income from the trust assets or the right to use the trust assets of the ‘existence of the trust and the nature of their interest in the trust (Brittlebank vs. Goodwin ).
Even when a beneficiary has only a potential future interest in the trust, the trustees should consider notifying the beneficiaries of the existence of the trust and their potential interest. This includes beneficiaries who may benefit from a discretionary trust (e.g. Chaine-Nickson v Bank of Ireland ).
In Re Settlement of Londonderry  in a case concerning a discretionary trust and the right to disclosure of trust documents, the court examined what were and were not trust documents and identified documents to which a beneficiary was or was not entitled to disclose. It was held that the right of disclosure covered only documents relating to the ownership, management or administration of any property vested in the trustees.
In Schmidt v Rosewood Trust Limited  a case involving a Isle of Man discretionary trust, the settlor’s son sought disclosure of trust documents because of his discretionary interest and expectation to benefit from discretionary trust settlements and because he was a director of the succession of the settlor. The Privy Council ruled that no beneficiary has the right or has the right to disclose the documents of the trust and that disclosure to a beneficiary does not depend on whether the beneficiary has an ownership interest in the assets. of the trust. The court added that beneficiaries could seek disclosure of the trust documents using the court’s inherent jurisdiction to oversee and, if necessary, intervene in the administration of the trusts. However, the court also ruled that “… no beneficiary (let alone a discretionary object) is entitled to disclosure of anything that can reasonably be described as a trust document. … When there are personal or commercial confidentiality issues, the court may need to weigh the competing interests of the various beneficiaries, the trustees themselves and third parties. Disclosure may need to be limited and safeguards may need to be in place. The assessment of a beneficiary’s claims (and in particular of a discretionary subject matter) can be an important part of the balancing exercise that the court must perform on the documents submitted to it. In many cases, the court may have no difficulty in concluding that a claimant with only a theoretical possibility of obtaining a benefit should not receive any remedy.. “
What should trustees do when they receive requests for information or documentation from a beneficiary?
As a beneficiary does not have a specific right of disclosure, trustees should, in exercising their discretion, take into account all information relevant to the beneficiary’s request. In doing so, administrators should consider the following:
- what is the purpose of the disclosure request
- the type of documents requested and their content
- whether or not disclosure would be in the best interests of all beneficiaries
For example, when a beneficiary requests disclosure of trust accounts but the trustees reasonably consider that the request is made for the purpose of attacking the trust or trust property, then the trustees should be careful where the disclosure may. not be in the best interest of the beneficiaries as a whole.
If the Trustees are unsure of the beneficiary’s purpose in requesting disclosure, then they should ask the beneficiary to explain their position and the reason for their request. It may even be prudent for trustees to provide limited or redacted information or documents.
The usual types of documents that recipients request disclosure of
- The trust deed – being at the heart of the trust, trustees should not object to disclosure without good reason.
- Additional trust documents – for example documents relating to the appointment and retirement of trustees, or documents relating to the modification of the trust. These would generally be disclosed.
- Trust accounts – because a trustee is obliged to keep and render accounts, the trustees must provide them. If they don’t, the beneficiary can ask the court to order the trustees to provide accounts. Trustees can expect courts to order accounts in addition to ordering trustees to pay costs.
In Henchley vs. Thompson  the court ordered a former trustee to provide an account to beneficiaries of his transactions with a trust many years after he ceased to be a trustee.
- Letter (s) of greetings – it is quite common for settlers to draw up a letter of wishes and declare that it must remain confidential to the trustees. It is well known that these are not binding on the trustees, although the trustees should take these wishes into account when deciding how to treat the trust.
In general, trustees are not required to disclose a letter of will. However in Breakspear vs. Ackland  the court questioned whether a letter of greetings should be disclosed. The court ruled that trustees should generally treat a letter of wishes as confidential and that they have the discretion to maintain, relax or waive confidentiality. The court also added:
- after the trustees have rendered their decision, the trustees are not required to give reasons for it, nor with respect to any other exercise of their discretion. If the trustees give the reasons for their refusal, the court can determine whether those reasons were appropriate.
- in difficult cases, trustees may seek the opinion of the court, which would require full disclosure to the court.
- If a beneficiary requests disclosure to the court, requesting that the court invoke its administrative jurisdiction, then the onus is on the beneficiary to show why the court should intervene. A simple refusal to disclose a will letter without giving reasons would not normally justify court intervention unless the recipient can prove unfairness.
- Documents relating to the exercise of powers and discretion of trustees – in general, trustees have discretion as to whether or not to disclose, although it is likely that trustees tend to withhold these documents.
- Legal advice documents – trustees have the right to seek legal advice when they deem it necessary. When the trustees obtain legal advice and pay for it from the trust fund, then although the advice may be privileged over third parties, it may not be privileged over beneficiaries and therefore might not. be disclosed.
In Lewis vs. Tamplin  the court confirmed that even when the trustees provided information, the trustees could not rely on solicitor-client privilege to withhold disclosure of legal advice when the advice was obtained for the benefit of the trust as a whole (and not for the benefit of the trust as a whole). trustees personally with respect to potential liability for breach of trust). In that case, the court ruled that beneficiaries did not have to demonstrate suspicious circumstances before the court could exercise its supervisory discretion to order disclosure (although the court was satisfied that there were circumstances. suspect).
So, can trustees refuse disclosure or not?
As a general rule, unless there is a valid reason not to disclose, trustees should lean in favor of disclosure (or perhaps only limited disclosure if appropriate in the circumstances).
If the trustees refuse to disclose, and as a result a beneficiary initiates proceedings, then the trustees risk the court ordering them to pay the costs, although each case depends on its specific facts.
What should beneficiaries do?
In the first case, the beneficiaries must request disclosure from the trustees giving the reasons for the request.
If the trustees refuse (and cannot be persuaded), the beneficiary might consider seeking a court order on the grounds that the court should invoke its discretion regarding the administration of the trust.
Alternatively, beneficiaries may consider making a pre-action disclosure request after consulting with a lawyer.
Graham McLean is a senior partner at Moore Barlow