Beneficiaries rights to Trust documents

Jul 28, 2020

A general misconception is that if you are a Beneficiary of a Trust, you automatically have a right to information about the Trust. However, this is not always the case.

The historical approach – a proprietary right

If we think about the basics of Trust law, a proprietary right to Trust documents seems to make perfect sense.

Under a Trust, a legal person holds property or assets for the benefit of another. That is, the property has vested in the Trustee, but the true owner is the Beneficiary. Historically, a Beneficiary’s right to Trust documents was regarded as proprietary on the basis that in equity, Trust documents are the property of the Beneficiaries.

In the English case Re Londonderry’s Settlement[1] (initially followed in Australia), the Court identified the following common characteristics of Trust documents, to which the proprietary right extends:

  • they are in the possession of the Trustees as Trustees;
  • they contain information about the Trust which the Beneficiaries are entitled to know; and
  • the Beneficiaries have a proprietary interest in the documents and are therefore entitled to see them.

Simple, right? … Not quite.

Disputes regarding the disclosure of other documents relating to Trusts are common and in Australia, the Courts have steered somewhat away from the proprietary approach.

The current approach – judicial consent

The current position in Australia, established in Schmidt v Rosewood Trust Ltd[2] and which was adopted in Avanes v Marshall[3], is that Beneficiaries do not have an ‘as of right’ entitlement to disclosure of all documents, but that they are entitled to request that the Court exercise its inherent jurisdiction to intervene in the administration of the Trust.

In Avanes v Marshall, Gzell J remarked:

‘The decision [in Schmidt] should not be regarded as abrogating the Trustee’s duty to keep accounts and to be ready to have them passed, nor the Trustee’s obligation to grant a beneficiary access to Trust accounts. But when it comes to inspection of other documents there should no longer be an entitlement as of right to disclosure of any document.  It should be for the court to determine to what extent information should be disclosed’. (Our emphasis)

What will the Court take into account?

When exercising the discretion, the Court is required to ‘balance the competing interests of different Beneficiaries, the Trustees themselves, and third parties’ to determine whether particular documents should be disclosed. Whilst there is no clear formula, the courts will consider the following:

  • the confidential nature of the documents;
  • whether the Beneficiaries already have sufficient information regarding the Trust;
  • whether disclosure would disclose a Trustee’s reasons for exercising a discretionary power;
  • whether the Trust deed contains a secrecy provision in respect of the document.

If you have any queries about your duties as a Trustee, rights as a Beneficiary, or Trust law more broadly please contact Kimi Shah.

[1] [1965] Ch 918.

[2] [2003] UKPC 26.

[3] [2007] NSWSC 191.