Trusts and beneficiary's rights to information

This paper examines the following issues relating to investment trusts:
1. Beneficiary's right to information under trust law
2. Duties of a trustee to provide information in respect of a trust
3. A beneficiary's rights under Trust Laws to seek information from a trustee
4. The nature of a letter of wishes
5. Must a trustee disclose the information.
A beneficiary has a proprietary right to trust documents, it is by no means an absolute right and there may be documents or categories of documents which it would be just and proper to exclude from the ambit of the right where the documents are not relevant or evidentially essential to the beneficiaries' case, or where the probative value is minimal and considerably outweighed by prejudice to the other beneficiaries, or to the proper administration of the trust. Where the beneficiary is making serious allegations impugning the validity of the trustees' actions, it is only in an exceptional case that an absolute refusal of an application for accounts would be justified. Each case is to be considered on its own merits.1
The principles governing the disclosure of information to beneficiaries as outlined by two cases are as follows:
a) A beneficiary will normally be permitted to inspect and take copies of essential trust documents on the basis of the proprietary right he holds over them.
b) A normal right does not extend to detailed information about the affairs of the companies owned by the trust. To obtain information of that kind, the beneficiary must make out a special case.
c) In order to make out a special case, the beneficiary must specify the documents that he or she wishes to see.
d) There must be no valid objection by the trustees or directors, or (in special circumstances), beneficiaries whom the trustees consider should properly be consulted upon the matter.
e) The beneficiary seeking disclosure must give proper assurances that he or she will not disclose the documents to anybody, but his or her own legal or other advisers and will not make copies, save as may be properly advised by his or her legal or other advisers.
f) Disclosure may have to be limited and safeguards may have to be put in place.
g) A beneficiary under a trust is ordinarily entitled to disclosure to trust documents.
h) A distinction is to be drawn between beneficiaries under a discretionary trust and objects of disposition power.
i) Is generally entitled to the production for inspection of all documents relating to the affairs of trust.
j) He has a right to access to the documents, which he desires to inspect upon what has been called is the judgement in this case, a proprietary right.
k) The beneficiary has a proprietary interest in and a right to see, all trust documents.
l) For an order for discovery, the complainant failed to meet the proprietary criteria.
m) The beneficiary`s rights to inspect trust documents are founded not upon any equitable proprietary right, which he or she may have in respect of those documents, but upon the trustee's fiduciary duty to keep the beneficiary informed and to render accounts. It is the extent of that duty that is in issue. 2
It is the trustee's fiduciary duty to keep the beneficiary informed and to render accounts.
A trustee has to furnish to a beneficiary:
(a) trust documents,
(b) information or the means of obtaining information as to the mode in which the trust property or beneficiary's share has been invested or otherwise dealt with,
(c) full accounts in respect of trust being managed,
(d) to specify whether the beneficiary has a present interest in the trust property or only a contingent interest,
(e) whether or not he is an object of a discretionary trust.
The current position is that although trustees possesses a duty to provide information to beneficiaries arising from the trustees' fiduciary obligation to account for their dealings with the trust property, yet no beneficiary is entitled as of right to disclosure of trust documents or trust information. Indeed, there may be compelling reasons for refusing disclosure, but each case will depend on its own facts.
Under trust laws for getting information from a trustee, the beneficiary is entitled to see the trust documents, since the beneficiary has proprietary interest in some of the documents. A beneficiary can also hold the trustee accountable for trust accounts, even if he is a remote beneficiary, he does possess the same rights.
A letter of wishes is a non-binding indication by the settler of the manner in which he wishes the trustees to exercise their discretion in relation to a discretionary trust.
Letters of wishes are normally used in testamentary trusts, although theoretically there is no reason why they should not be used in an inter vivos trust.
Letters of wishes are useful where a trust instrument gives the trustees very wide powers and discretions. The letter of wishes principally sets out the manner in which the settler wishes the trustees to exercise their powers and discretions, but is not binding on the trustees. All binding requirements must be contained in the trust instrument itself. It is also quite common for letters of wishes to make posthumous expressions of thanks or love to the objects of the trust.
In the light of what has been stated above, the trustee is bound to show formal documentation regarding investments, opinion and instructions sought from solicitors, regarding trustee's duties and even in the case of hostile litigation.3 However, the trustee is not bound to disclose the letter of wishes provided by the settler. But minutes of the regulatory authorities regarding shares of the company are to be revealed to the beneficiaries.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates)
1. Lemos v Coutts & Company (Cayman) [1992-93] CILR 460.
2. Schmidt v. Rosewood Trust [2003] UKPC 26: 3 ITELR 734, Re Ojjeh's Trust [1992-93] CILR 348.
3. Breakspear v Auckland [2008] EWHC 220 ch there is an inevitable tension between confidentiality and disclosure in relation to wish letters, and that it is advisable to lay down guidelines to attempt to avoid unnecessary litigation. Applying Londonderry, he said:
"It is in the interests of beneficiaries of family discretionary trusts, and advantageous to the due administration of such trusts, that the exercise by trustees of their dispositive discretionary powers be regarded, from start to finish, as an essentially confidential process."