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The right of trust information for beneficiaries

The High Court has recently revisited the issue of the right of beneficiaries to information about the operation of a trust.

While beneficiaries have always been able to request information, it is for the trustees to decide whether to provide it. In many cases, such as a request for trust accounts, this should not prove controversial. However, beneficiaries can always invite the Court, which has inherent jurisdiction to ensure the proper administration of a trust, to order disclosure if it is refused.

The trustees and beneficiaries in the recent case are family members. In 1951, Ernest and Gladys Tamplin jointly purchased a farm containing land, which today has a development value estimated at £10million.

Gladys and Ernest had six children. Ernest died in 1985 and the following year Gladys settled two trusts, both appointing certain of her children as trustees, with the first trust holding 50 per cent of the farm for herself and the second 50 per cent for her six children. Gladys died in 1986 leaving her 50 per cent share to the six children.

By the time the latter trust became the subject of court proceedings, four of the children had died intestate. The two surviving children and the son of one of their deceased siblings are the trustees. Three of the children of the other deceased siblings, the claimants, sought information from the trustees which included legal advice given to them, correspondence with third party advisors, trust accounts, and agreements entered into with potential developers.

The trustees’ arguments for refusing such disclosure were broadly:

  1. The claimants had received all the information to which they were reasonably entitled (as far as the trustees were concerned)
  2. The trustees were as a matter of principle not obliged to explain their decisions, and therefore not obliged to disclose information which may have informed those decisions
  3. For the Court to intervene, something must have come to light to ‘excite the suspicion of the court’ that the trust was being mismanaged, and no such suspicion existed.

Judge Matthews rejected these arguments, criticising what he considered to be an ‘extreme and in my judgement indefensible approach’. He asserted that while beneficiaries do not have an automatic right to disclosure, the Court can, and will, order disclosure if it determines on the facts that information should be disclosed. In doing so, the Court was performing its supervisory role to oversee the proper administration of a trust. Upholding the claimants’ request, Judge Matthews said that they wanted the information ‘for precisely the right reasons, namely to hold the trustees to account, and thus to vindicate their own beneficial interests, by way of an action for breach of trust if need be’.

However, while the resulting order provided for considerable disclosure, the Judge took care to clarify its scope.

Documents disclosed must be the property of the trust; documents usually protected by legal professional privilege should be disclosed but only if obtained for the benefit of the trust (and the beneficiaries). While advice given to trustees relating to their role and paid for by them personally remains privileged; the trustees were not entitled to withhold documents which may show reasons behind their decisions, but beneficiaries cannot ask trustees to explain their reasons any further.

This case does need to be seen in the context of the trustees having initially denied that the beneficiaries had a fixed (not merely discretionary) interest in the trust. It highlights the difficulties that can arise when parties die without leaving a will and how family dynamics can play out to the disadvantage of individuals who may not be immediately aware of their entitlement. However it also shows that the Court may assist beneficiaries in requesting appropriate disclosure so that trustees can be held properly to account.

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Published: 25 July 2018

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July 2018