Beneficiaries have a prima facie right of access to information relating to their trust and trustees have a corresponding duty of disclosure. This right to access trust documents is exceedingly broad and encompasses almost all documents or information which can be categorised as ‘trust documents’. The definition of a ‘trust document’ was brought up in Silkman v Shakespeare and ‘may include those which evidence or record the nature, value and condition of trust assets’. Of these trust documents, trustee’s will always have a duty to disclose Accounts, Vouchers and Financial records.
One legal ‘grey area’ that remains is whether a beneficiary will be privileged to legal advice obtained by a trustee for the administration of trusts. As an example, legal advice which concerns a breach of trust, despite relating to the administration of a trust, may be privileged information between the trustee and their legal counsel.
Two competing approaches have developed around a beneficiary’s access to trust information.
The Londonderry Approach:
This approach is the more expansive of the two and was developed in the case of re Londonderry’s Settlement. The underlying basis of the Londonderry Approach is that documents are the property of the trusts or are so closely related to trust property that the beneficiary has a legal interest in them. Therefore, beneficiary’s right to inspect the trust documents held by the trustee is an equitable proprietary interest. The only thing that needs to be shown to the courts, when using this approach, is that the documents in question are trust documents. If this can be shown, then the courts will use their inherent jurisdiction to grant assess of the documents to the beneficiary. The most determinative factor when using this method is whether the documents in question where paid for using the trust’s funds.
The Schmidt Approach:
This approach has come out of the verdict of Schmidt v Rosewood Trust Ltd (Isle of Man). It represents a shift away from the former proprietary approach, seen in the Londonderry, to one more at the discretion of the courts. This approach has been used because it allows the court to take into account the parties competing interests in trust documents and determine if the beneficiary has a right to obtain trust documents.
What may be considered by the court has not been enumerated but can be inferred from cases. As an example, a beneficiary will not have a right to confidential communications between the trustee and their solicitor made for the dominant purpose of giving or receiving legal advice. The beneficiary’s rights to see these trust documents in these circumstances are not regarded as relevant for proper administration and transparency of the trust. However, a beneficiary may have a right to litigation documents if they relate to management of trust estate. Other factors that the courts can consider are the confidential nature of the documents, the trustee’s obligations and the reason the information is being sought (e.g. is it just a ‘fishing expedition’). Ultimately, what needs to be shown for the beneficiary requires the trust documents for supervision and administration of the trust.
Recently, in Avanes v Marshall the Schmidt approach was used because the judge felt it did not represent a significant departure from the Londonderry Approach and should be adopted in Australia.
Summary:
In most circumstance, Trustees will be obliged to release trust documents when a beneficiary makes a request for information. When a dispute about access to information arises, the court will use its inherent jurisdiction to settle the matter. The approach used by the court could have a significant bearing on whether the beneficiary has access to the information in question. A beneficiary will have access to trust documents if the documents don’t contain confidential information of a third party or access is not at the discretion of the trustee. Qualifications like legal professional privilege, the confidential nature of the material, the trustee’s other obligations, and the reason for the information being sought, may all be used to determining this.
Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.