A common issue that arises when dealing with trusts is establishing what information and/or documents a beneficiary is entitled to see, once it is established that they have an interest in the trust.
The following guidance applies to those interested in a trust, whether it is created during someone's lifetime or by their will. There may be different considerations that apply where the information is about an estate that is still being administered by the personal representatives.
Disclosure of documents by trustees - the "core" duty to inform and account to beneficiaries regarding their trust interests
The "core" duties of trustees include:
- to keep accounts and produce them (subject to the qualifications explained below) to beneficiaries when requested/required;
- to give beneficiaries all reasonable information as to the way in which the trust estate is invested and managed; and
- to inform a beneficiary of his interest in a trust (e.g. when a beneficiary comes of age).
The reason for imposing a duty to provide a certain amount of information is to ensure that trustees can be held to account by beneficiaries. There is a tension, however, between these "core" duties and the need for trustees to be able to discuss matters freely between themselves and to make decisions based on sensitive or confidential information. There are also practical, administrative issues which operate to limit how much information trustees could or should provide to beneficiaries.
Limits to trustees' duties to inform and account to beneficiaries
Following a (still) authoritative judgment of the Privy Council and subsequent decisions applying the relevant principles, this issue should be approached as follows:
- trustees have fiduciary duties to their beneficiaries, including the "irreducible core duty" to keep beneficiaries informed and to keep (and provide) accounts; so beneficiaries therefore have a legitimate expectation of disclosure of information, albeit no absolute entitlement to disclosure of anything as of right;
- the court can order disclosure as part of its inherent jurisdiction to administer trusts; but
- whether any given beneficiary of a trust is entitled to certain information will depend on all the facts.
There have been a number of cases dealt with in the courts where the controversial documents and information have included:
- A settlor's letters of wishes/guidance to trustees (beneficiaries are often particularly interest to know or understand the intentions of the person who created the trust and equally often, it may be the settlor's intention that their particular guidance about who should benefit from the trust, although not binding on the trustees, be kept private); and
- legal advice given to trustees in relation to the trust.
Decisions relating to these (and other) categories of document have provided further guidance on how the court is likely to deal with these issues, but the cases turn very much on their individual facts.
Disclosure obligations may also vary depending on the procedural rules in any given jurisdiction. There may be a very different approach to the entitlement to information for beneficiaries in some of the offshore trust jurisdictions (many of which have made changes to their local laws to preserve trustees' ability to limit information provided to beneficiaries, so as to increase the attractiveness of their jurisdiction to settlors, for whom that issue is of great concern).
Trustees may decide voluntarily to disclose documents to beneficiaries if they consider it is in the best interests of all the beneficiaries, or if it it may assist in avoiding court proceedings. Trustees may not always consider that is the appropriate course to take, however.
If trustees are not sure what course to take, they may seek the court's blessing of their decision or, in extreme cases, surrender their discretion to the court. On the other hand, beneficiaries may ask the court to intervene and order information and documents to be disclosed to them. The risk in any form of litigation is that the court will order the unsuccessful party to pay the costs of the other party (or parties).
Some key considerations for trustees (and, ultimately, the courts) when faced with requests for information are:
- who is asking (status of beneficiary and remoteness of interest)?;
- what they are asking for and does it constitute privileged legal advice, confidential or commercially sensitive information?;
- why they are asking (for example in order to pursue a claim against the trustees or other beneficiaries)?;
- what are the views/interests of other beneficiaries?;
- is there any guidance from the settlor in the trust document or any letter of wishes, etc?; and
- would it be expensive or impractical to provide the disclosure?
Beneficiaries of a Bahamian trust recently tried a slightly different approach to obtain information relating to the trust.
In Dawson-Damer & ors v Taylor Wessing LLP & ors  EWHC 2366, the beneficiaries made a request under the Data Protection Act 1998 (known as a "Subject Access Request") for information held by the trustees' English law firm.
The request was resisted on various grounds (including that a substantial part of the information sought was likely to be protected by legal advice privilege) and the matter came before the court earlier this year.
In summary, the application was unsuccessful, although the attempt and the content of the decision is gives trustees and their advisers good reason to consider what information they hold about beneficiaries (and how they hold/organise that information).