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Beneficiaries, Beneficiary rights, Disclosure, Right to trust information, Settlors, trust, Trustee liability, Trustee Resolutions

Disclosure request declined – 24 years a leap too far for a beneficiary who had already received 25%

As noted by Woolford J in para [1] Addleman v Lambie Trustee Limited relates to “an unfortunate dispute between sisters as to what level of disclosure is appropriate for the affairs of the Lambie Trust (the Trust)…”

Prudence and Annette are sisters.  In1972 Annette broke her spinal cord diving into a tidal pool in Sydney and became a quadriplegic needing constant nursing care.  Annette successfully sued the local council for negligence and was awarded a total of A$1,029.084, which she entrusted to her father to hold for her benefit.  There was no formal trust deed.  However, nothing turns on this.  The Trust was formally settled in 1990 with the primary purpose of ensuring Annette’s welfare and financial security.

Not relevant to the case in hand and so not addressed was the question as to who the trust’s “true” settlor was.  As is commonly the case the settlor might be more properly considered a nominee and Annette and her father the “de facto” settlors.  Submissions were made that de facto settlors do not exist outside of the tax regime.  The matter was not decided, but does raise, the issue of the use nominee settlors.

The discretionary beneficiaries of the trust were named as:

  • the final beneficiaries
  • any child or remoter issue of the final beneficiaries
  • any wife, husband, widow or widower of any final beneficiary, and
  • any lawful charitable object.

The final beneficiaries were named as Annette, Prudence and two companies of which Annette was a director and “effective” owner.

In 2000 a letter recording Annette’s fathers wishes for the “ultimate distribution of the Lambie Trust funds” provided that he wished for 25% of the balance of the funds to be paid to Prudence.  It was raised, in the decision, but not answered, as to whether a nominee settlor can write a memorandum or letter of wishes.    Annette’s father died in 2001.

In 2002 NZ$4,257,000 (approximately 1/4 of the trust fund) was distributed to Prudence. Annette advised this was done in an attempt to retain or rebuild a good relationship between her and Prudence due to Prudence having threatened legal proceedings against their father’s estate.  Prudence was advised at the time that the distribution represented a full distribution of the funds that would be paid to her from the Trust.

In 2003 Prudence’s English lawyers requested information from the trustees, which was provided.

More than ten years later Prudence’s lawyers requested further information over the prior 24 year period “in order to ensure that the Trust property is being properly managed and there is proper accountability in terms of the Trust deed.”

The trustee responded advising that all of the funds had been seeded from Annette’s compensation and no further information was provided.

Proceedings were issued in 2015.

The information requested was significant and the writer directs readers to para [23] of the judgment, which spans some three pages and is somewhat more extensive than the information requested in Erceg.

As noted by Woolford J at [32] Prudence’s request went far beyond basic documents such as the trust deed.  Prudence did at the time of her application already have the trust deed, memorandum of wishes, documents regarding trustee appointments and the source of the Trust’s funds.  The question was raised as to whether some of the documents sought were privileged.  There was also a comment made that “there may be documentation relating to Annette’s private life because the Trust is essentially her trust.”

Prudence’s observation that she would take a practical approach to disclosure was not borne out by the extent of disclosure requested.  Woolford J was of the view that the disclosure sought would be unnecessarily burdensome and far beyond the minimum necessary to confirm the proper administration of the Trust.  The use of the term minimum necessary is perhaps a gloss on the decision in Erceg.

Of further interest was the consideration given to context where the Court simply did not accept Prudence’s reasons for wanting disclosure. Her statements that she wished to ascertain her father’s wishes and that he must have wished to look after her financially because she was listed as a final beneficiary were not accepted.

Woolford J did not accept either, her submission that she was enquiring for altruistic reasons and the Court was of the view that that she was essentially on a fishing expedition.

Prudence did not accept that the  $4.257m distributed to her from the trust was a final distribution to her and it appeared she was unhappy with the amount of provision being made for Annette as she questioned the stated costs of Annette’s care as a quadriplegic.  This was against a backdrop of other litigation filed by Prudence against the family.  Woolford J was of the view that Prudence would likely undertake further litigation if extensive disclosure was made.  Notwithstanding that there were no allegations of trustee wrong doing.

Interestingly, despite being one of the two living final beneficiaries WoolfordJ was satisfied that the Trust was settled primarily for Annette’s benefit and that Prudence was added as a “back stop”.

Consideration was given to Annette and her father’s wishes for privacy (Annette was a reluctant object of public interest after the council settlement following her accident).  While a settlor’s desire for confidentiality will not ordinarily warrant a refusal of at least basic information – in this case the inevitable revelation of details personal to Annette militated against disclosure. Of concern also was Annette’s significant annual care costs of approximately $250,000 that were likely to escalate as she aged.

The decision helpfully considers the factors put forward by the Supreme Court in Erceg and provides a useful context for measuring other applications against.  The decision warrants reading for the considered approach and the consideration of all of the factors from Erceg, showing none to be determinative.

References:

  • Addleman v Lambie Trustee Limited [2017] NZHC 2054
  • Erceg v Erceg [2017] NZSC 28

 

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