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Beneficiaries, Directions, Right to trust information, trust, Trustee liability, Trustee Resolutions, Trusts

Disclosure vs Discovery

Is a beneficiary more entitled to trust information pursuant to an application for discovery, rather than pursuant to a an application for disclosure?

As a basic principle, courts do not permit discovery as a “fishing expedition.” However, as noted in Gavin v Powell at [41] “… the trustees’ obligations as to disclosure and a beneficiary’s right to information will be relevant in determining  whether discovery of certain documents … would be oppressive or disproportionate…”

The relevant background is set out at [1] to [4]

[1] Daniel Powell is a trustee of the Daniel Powell Family Trust (DPT). Daniel and his family are discretionary beneficiaries of the DPT. Daniel’s sister, Charlotte Gavin and her children and grandchildren are also discretionary beneficiaries of the DPT. A judgment of the High Court required an independent professional trustee to be a co-trustee with Daniel. Janine Ballinger, a solicitor, was appointed.

[2] At Daniel’s request, Ms Ballinger retired as a trustee of the DPT. In doing so, she and Daniel exercised powers as trustees under s 43 Trustee Act 1956 to appoint another trustee in her place. They appointed Paul Dorrance, a solicitor and partner in the firm of Duncan Cotterill, who had acted for Daniel in earlier proceedings concerning the DPT.

[3] Charlotte has issued proceedings asking the Court to remove Daniel and Mr Dorrance as trustees and for a sole trustee, potentially the Public Trustee, to be appointed in their place.

[4] Charlotte seeks discovery of documents relating to the removal of Ms Ballinger as a trustee, the appointment of Mr Dorrance, and the “client file” that Ms Ballinger had while acting as a trustee. The application for such tailored discovery is opposed.

Gavin v Powell raises the question as to whether the court will order disclosure through the cloak of discovery.  The simple answer is yes, but with certain caveats.   There need not be discovery of documents that came into existence through the trustee’s role as trustee that would (a) require trustees to disclose reasons for trustee decisions that are not at issue in the proceedings (to do wold otherwise allow a fishing expedition) and (b) disclose information that a beneficiary would not normally be entitled to with due regard to obligations and rights regarding disclosure as set out in the Supreme Court decision in Erceg v Erceg.  See[51].

Also, rules regarding privilege with respect to documents that come into existence for the purposes of legal advice still apply. See [55]. With this regard the court declined to order discovery only to put the defendant’s to the cost of listing such document for discovery purposes to then claim privilege.

Documents that did not come into existence for the purposes of seeking or giving legal advice that related to reasons for wanting to replace the trustee should be discovered.

Discovery was ordered with respect to documents held recording communications regarding the appointment of Mr Dorrance as trustee in place of Ms Ballinger.

Editor’s note: the case raises important considerations as to matters to take into account when trustees, particularly court appointed trustees, are asked to retire and how matters regarding such retirements and appointments are managed, documented and communicated.

References:

  • Gavin v Powell [2018] NZHC 2866
  • Powell v Powell [2014] NZHC 476 (2014) 3 NZTR 23-011
  • Powell v Powell [2014] NZHC 2096 at [36]
  • Powell v Powell CA546/2014 [2015] NZCA 133, [2015] NZAR 1886
  • High Court Rules, r 8.19
  • Erceg v Erceg [2017] NZSC 28
  • AMP Society v Architectural Windows Limited [1986] 2 NZLR 190

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