The recent High Court case of Lewis v Tamplin serves as a useful reminder to trustees and beneficiaries alike that beneficiaries have a right to receive documents relating to the trust and trustees cannot refuse disclosure lightly.
Background to Lewis v Tamplin
This case involves three grandchildren of Ms Gladys Tamplin deceased and a family trust of land called the Tamplin Trust. The Trust consisted of a 12.3 acre farm in Glamorgan which had potential for development and had a value in excess of £10 million.
Options had been granted twice by the trustees of the Trust and a further option had been mooted. Ms Tamplin had left the Trust to her six children and their issue in equal shares, which included the grandchildren.
High Court proceedings
The grandchildren issued High Court proceedings against the Trustees seeking disclosure of information and documents relating to the Trust. The grandchildren had asked to see a variety of documents including professional advice given to the Trustees because they were concerned that the Trustees:
- might not have generated any income from the land
- might not have entered into option agreements prudently, and
- might have distributed income to other beneficiaries.
The Trustees had agreed to provide the grandchildren with 87 pages which included partial trust accounts and the first option agreement, They had refused to make further disclosure because the grandchildren ‘had already had sufficient information about the trustees’ stewardship of the trust.’
The High Court rejected the Trustees’ ‘extreme and indefensible approach to disclosure’ and the Trustees’ ‘hopeless arguments’ against disclosure, and granted an order for disclosure to the grandchildren.
The High Court helpfully clarified the rules and principles governing trust disclosure to beneficiaries:
1. The basic principle is that ‘beneficiaries have the right to hold trustees to account for their stewardship of the trust fund and the performance of the trust obligations’. ‘The court will not be satisfied with the ‘say-so’ of the trustees that they have had sufficient information already.’
2. Trustees are not entitled to withhold from trust beneficiaries information and documents which relate to their administrative powers but they are entitled under the Londonderry principle to withhold from trust beneficiaries information and documents relating to their discretionary dispositive. The judge gave the following explanation:
‘the decision made by the trustees in the exercise of a dispositive power produces, or at least may produce, different treatment for different beneficiaries… Hence the trustees are justified by practical considerations in withholding their reasons for that exercise. Plainly, that does not apply to a request to trustees for information about the trust. No decision of the trustees on such a request will change the entitlement of the beneficiaries among themselves to benefits under the trust.’
3. Trustees can assert legal professional privilege against beneficiaries in respect of legal advice obtained for their personal benefit e.g. in relation to a possible breach of trust, but not in respect of legal advice obtained for the benefit of the trust:
‘where trustees seek legal advice for the benefit of themselves personally, e.g. in relation to possible breach of trust liability…and pay for it themselves, …that advice may well be privileged in favour of those trustees as against these beneficiaries. But, where the advice is sought for the benefit of the Tamplin Trust as a whole, and the trustees pay for that advice out of Tamplin Trust funds, then such advice, even though it may be privileged as against third parties, is not privileged as against the beneficiaries, and is liable to be ordered to be produced.’
4. The Saunders v Vautier principle does not impose a requirement on beneficiaries to request disclosure collectively. The principle simply gives trust beneficiaries the power to collectively agree to put an end to the trust.
5. The court has jurisdiction to supervise trustees and ‘is entitled to interfere with a disclosure decision whenever it thinks proper to do so in order that the beneficiaries may be able to hold the trustees to account.’ The court’s suspicion does not need to be excited for the court to be entitled to exercise its supervisory jurisdiction.