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Beneficiaries, Beneficiary rights, Cases, Right to trust information

Balancing beneficiaries’ rights to documents against the trustees’

It can be a tricky thing being a beneficiary.  All those rights – but how to enforce them?  The court has an inherent right to enforce trusts – can that can entitle beneficiaries to trust documents so that the beneficiaries can ensure the trust is (or is not) being properly managed.  However, there are limits to what a beneficiary is entitled to.  Although the extent of these limits is often determined on a case by case basis.  The decision in Van Dam v Went provides a useful practical example of the limits.  In Van Dam v Went the beneficiaries wanted to see the financial statements for a company the trustees had a significant shareholding in.  However, the court had to decide how much they could see after the trustees declined the original information request and then (quite properly) sought directions from the court as to what they had to show the beneficiaries.  in deciding the limits the court considered the judgment in Erceg v Erceg where the court also had to consider an application for trust documents that required the court to consider its inherent jurisdiction to supervise and, if necessary, to intervene in the administration of trusts.  In that case it was stated that:

“[27] The request highlights the conflict acknowledged in the authorities between the rights of a beneficiary to seek information to ensure the accountability of trustees and the established principle that trustees exercising a discretionary power are not bound to disclose to the beneficiaries the reasons behind their decisions.

..

[32] With respect, I consider Potter J overstated the position in suggesting the need for exceptional circumstances to exist to outweigh the beneficiaries’ “right” to be informed. The point is, as the Privy Council made clear, that the beneficiary does not have a proprietary right to information; rather, the Court will require disclosure of information to ensure the trustees meet their obligations towards the beneficiaries. The beneficiaries’ right is to have the Trust property properly managed. There are corresponding obligations on the trustees to properly manage the Trust and to meet the fiduciary obligations they owe to all beneficiaries. In order to ensure that the trustees are held to account, it may be necessary for the beneficiaries to have access to the relevant Trust documents. The beneficiary’s ability to apply to the Court for access to Trust documents, and the Court’s discretionary authority to direct access, is ancillary to the beneficiaries’ primary right to have the Trust property properly managed. What information may be required to enable the beneficiaries to hold the trustees to account in a particular case will therefore depend on the obligation in issue. The matter must be considered in the context of the application, the disclosures sought, and the relevant obligations in issue. Further, as the Privy Council confirmed, where there are issues of personal confidentiality disclosure may properly be limited.

[33] For those reasons, I consider the context of the application to be particularly relevant. In my view there is a difference between a request such as in the present case, made to enable counsel for the beneficiary to give the beneficiary general advice as to her position and potential rights, and a request for disclosure in the context of an application for discovery in properly and responsibly instituted proceedings which raise, for example, a possible breach of trust. In this regard it is relevant that this is an application for summary judgment in which the Court is asked to exercise its discretion in making the orders sought.”

In Van Dam v Went the court ordered disclosure of valuations (including any written requests for valuations and information supplied to the valuer); a related shareholder agreement; financial statements for the company in question and related companies; and a schedule of fees paid to the trustees.  However, the trustees did not have to provide documents that related prior to the trustees’ interest in the company; documents relating to private transactions; and as no issue as to management arises it was not necessary for the trustees to disclose “trustee resolutions, their minute book, a schedule of beneficiary loans/advances and distributions, or the background to or advice taken regarding the restructuring.”

The decision demonstrates that there is no one size fits all approach with documents and that the court’s inherent jurisdiction will be used in a targeted fashion – and not to enable fishing expeditions.

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