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Trustee liability, Trustees, Trusts

The public face of private trusts

There is no register of family trusts in New Zealand thus affording trustees considerable privacy.  However, one area where trusts are generally “open to the public” is where trust matters come before the High Court, or a higher court.

This has been highlighted in the case of Erceg v Erceg (SC) where the trustee respondents have unsuccessfully sought to have publication of certain matters in the substantive appeal (that has not yet been released) supressed.

Arnold J who gave the reasons for the decision started by reference the fact that open justice, which is a fundamental component of the common law “has been described as “an almost priceless inheritance” (Scott v Scott).  Going on to say that “… transparency of court proceedings maintains public confidence in the administration of justice by guarding against arbitrariness or partiality, and suspicion of arbitrariness or partiality, on the part of courts. Open justice “imposes a certain self-discipline on all who are engaged in the adjudicatory process – parties, witnesses, counsel, Court officers and Judges”…”.

There are some exceptions to open justice, generally to protect vulnerable members of society such as victims of sexual offending and children in family proceedings; and the court also has powers to hear some evidence in closed court.   Although the position is not the same in all jurisdiction, the court in New Zealand has been held to have the power to protect the administration of justice through non-publication orders in proceedings heard in open court that were effective against the general public (Siemer v Siemer).

In Erceg, orders were sought to prevent publication of various information including:

  • details of the amounts settled on various trusts
  • identities of the beneficiaries of a trust and the amounts distributed to one of them
  • the value of assets bequested by will, and
  • range of beneficiaries of a trust.

The grounds given for the non-publication request included:

  • matters of family privacy
  • the risk of family disharmony
  • matters of person safety
  • the trustees being unnecessarily burdened with requests for information or explanation from beneficiaries or people believing they might be beneficiaries, and
  • negative publicity.

In discussing the matter the court was of the view that while  “the courts are able to make orders to protect confidential information in civil proceedings” the threshold for non-publication is high and embarrassment to a family is insufficient for the court to agree to non-publication … there is a need to “show specific adverse consequences that are sufficient to justify an exception to the fundamental rule” of publication of judgments (ASB Bank Ltd v AB).  

The rationale behind this approach is explained in John Fairfax Group v Local Court of New South Wales, by Kirby P, as he then was who noted that:

“It has often been acknowledged that an unfortunate incident of the open administration of justice is that embarrassing, damaging and even dangerous facts occasionally come to light. Such considerations have never been regarded as a reason for the closure of courts, or the issue of suppression orders in their various alternative forms: … . A significant reason for adhering to a stringent principle, despite sympathy for those who suffer embarrassment, invasions of privacy or even damage by publicity of their proceedings is that such interests must be sacrificed to the greater public interest in adhering to an open system of justice. Otherwise, powerful litigants may come to think that they can extract from courts or prosecuting authorities protection greater than that enjoyed by ordinary parties whose problems come before the courts and may be openly reported.”

Also see Rinehart v Welker.

While the orders be sought in Erceg were not as wide as those sought in Rinehart v Welker nevertheless the application was declined the court noting at [21] that:

“(a) The mere fact that the proceedings deal with matters that some family members would prefer be kept private is insufficient to justify an order. We note that the family has been identified on the National Business Review’s Rich List for some years, and that the activities of various family members have been the subject of media attention from time to time. We consider that this analysis applies even if there is a risk that relationships within the family will be strained as a result of disclosure.

(b) If unfounded allegations against particular trustees or beneficiaries were to be made in the course of the hearing, the respondents would have the opportunity to counter them. Any fair and accurate report of the proceedings would have to reflect that response.42

(c) Concerns have been raised about the safety and security of family members, particularly Millie Erceg. If sufficiently grave, concerns of this type may justify an order. But in the present case, all that has happened is that security consultants have been called in as a result of media interest in the family’s affairs. That is not sufficient to displace the usual principle.”

The take home message is that the operation of justice is generally transparent.  This means that we all benefit from the ability to learn from decided cases.  However, some of us will sometimes find ourselves the subject of the lesson.  This is a mixed blessing that perhaps regrettably stops some matters from being heard.

References:

  • Erceg v Erceg [2016] NZSC 135
  • Scott v Scott [1913] AC 417 (HL) at 447 per Earl Loreburn.
  • Broadcasting Corporation of New Zealand v Attorney-General [1982] 1 NZLR 120 (CA)
  • Siemer v Solicitor-General [2013] NZSC 68, [2013] 3 NZLR 441 at [156]–[159] per McGrath, William Young and Glazebrook JJ
  • John Fairfax Group v Local Court of New South Wales (1991) 26 NSWLR 131 (NSWCA) at 142–143.
  • Rinehart v Welker [2011] NSWCA 403

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