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It is a fundamental principle of trust law that a beneficiary must be able to enforce the trust and to make the trustee account for his conduct in the administration of the trust.
To allow the beneficiary to enforce the trust, he must receive sufficient information about the trust assets. A trustee therefore has a duty to provide certain information to beneficiaries, which usually will include a copy of the trust document, any deeds of variation of the trust, deeds of appointment and trust accounts. However there may be instances where as beneficiary you seek further information or documentation from the trustee, for example trustees correspondence and other evidence of how the trustees have managed the trust. A beneficiary has no entitlement as of right to such documentation - it is at the trustee's discretion to disclose any requested information.
The extent of a beneficiary's right to trust information was clarified in the case of Schmidt -v- Rosewood (2003). The Court held that the right to information is based on the fiduciary duty of the trustees to keep the beneficiaries informed, rather than on any ownership right of the documents and information: it is not a question of whether a document is a "trust document" or whether the beneficiary has an interest in the document, the right to trust information arises under the Court's inherent jurisdiction to supervise and, if necessary, to intervene on behalf of the beneficiary to enforce the trust against the trustee. Since Schmidt a document will be ordered to be disclosed if disclosure will be "conducive to the proper administration of the trust". Trustees now need to consider each case being made by a beneficiary to have access to trust information, rather than whether or not a document can be classified as a trust document.
Although it is helpful that the Court has given an authoritative ruling on the nature of the right, it does mean that the parties will have in effect to second guess what the Court may decide should be disclosed if an application were to be made to Court. When facing a request for disclosure of information from a beneficiary, the trustee should consider the purpose of the request and the interest of the beneficiary. The trustee should take into consideration:
- The nature of the beneficiary's interest
- The information the beneficiary is requesting
- The reasons for the request for information
- Whether the information may be commercially sensitive
The grounds upon which a trustee may be able to refuse disclosure include where :
- There is a legal reason to refuse (eg if it contains privileged legal advice)
- The document is confidential (eg if relevant to one beneficiary but not the other)
- The beneficiary only has a theoretical possibility of benefiting from the trust (eg the possible interest is too remote)
- The information is requested for an adverse purpose (eg challenging the validity of the trust itself - which will not be in the interest of the beneficiaries as a whole)
- Disclosure is impractical or too costly
In addition, before refusing disclosure, the trustee should consider whether he is able to offer part of the document/information requested or ask for an undertaking in relation to the use of the information disclosed. Outright refusal of disclosure is not always the only option. A trustee should consider any request for information carefully, as if the Court finds there is no good reason for the trustee to have refused, he is at risk of an order for costs (as was case in Schmidt), which could mean a significant financial penalty for him personally.