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Beneficiaries, litigation, Right to trust information, Trusts

Blood from a stone

It’s a tricky road being a beneficiary.  All these rights – but how to enforce them?  What if you are a beneficiary, or you might be – and you want to see the documents that as a beneficiary, you have a right to?  How can you compel the trustees to confirm whether you are a beneficiary?  The answer is, with difficulty.  You can consider proceedings for an order identifying the trustees.  However, to do so, you must first satisfy the court as to the strength of your claim.  However, without the trust documents, the ability to satisfy the court can be severely compromised.  The court’s position being that

“It would be most undesirable for this court to make orders which would result in trustees of discretionary private trusts being badgered with claims by many beneficiaries for consideration to be given to their claims for trust moneys, or for accounts as to how trust moneys have been spent.”

So not a lot of strength in those rights.

However, consider the position where there is a clear beneficial interest – but your rights flow not from being a beneficiary yourselves but by virtue of your relationship with a beneficiary.  What are your options then?  Not much point looking to trust law for an answer, even the beneficiaries can be left out in the cold.

So what is a “beneficiary once removed …”  to do?

One option is Pre-commencement Discovery under the High Court Rules, r 8.20 to be precise.

Rule 8.20 provides that:

8.20 Order for particular discovery before proceeding commenced

(1) This rule applies if it appears to a Judge that—

(a) a person (the intending plaintiff) is or may be entitled to claim in the court relief against another person (the intended defendant) but that it is impossible or impracticable for the intending plaintiff to formulate the intending plaintiff’s claim without reference to 1 or more documents or a group of documents; and

(b) there are grounds to believe that the documents may be or may have been in the control of a person (the person) who may or may not be the intended defendant.

(2) The Judge may, on the application of the intending plaintiff made before any proceeding is brought, order the person—

(a) to file an affidavit stating—

(i) whether the documents are or have been in the person’s control; and

(ii) if they have been but are no longer in the person’s control, the person’s best knowledge and belief as to when the documents ceased to be in the person’s control and who now has control of them; and

(b) to serve the affidavit on the intending plaintiff; and

(c) if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the intending plaintiff.

(3) An application under subclause (2) must be by interlocutory application made on notice—

(a) to the person; and

(b) to the intended defendant.

(4) The Judge may not make an order under this rule unless satisfied that the order is necessary at the time when the order is made.

So a dance not a dash to the documents.

The analysis the court undertakes requires that:

  • the intending applicant must satisfy the court that they are or may be entitled to relief against another person
  • it is impossible or impracticable to formulate the claim without the documents sought, and
  • there are grounds for belief that the documents may be or have been in the possession of the relevant person

While it is not necessary to satisfy the court that there definitely is a claim, you do have to satisfy the court that the claim cannot be commenced without the documents sought; and you do have to identify who has them.

So if say, your claim is ultimately against a beneficiary, it is important to ensure that the trustees are also party to the application because it is the trustees who control the trust documents, not the beneficiaries.

Moving forwards, as beneficiaries, and related parties, endeavour to look to enforce rights (real or perceived) it is important, whichever side of the coin you rest to consider, what avenues might exist; and how such applications should be plead or defended as relevant.

References:

  • Poros v Bax [2015] NZHC 1579
  • Re Murphy’s Settlements; Murphy v Murphy [1998] 3 All ER
  • Manisty v Manisty [1973] 2 all ER 1203
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