E Law - Murdoch University Electronic Journal of Law, Vol 12, No #1 & #2 

Trustee Duties: Disclosure of Information

Tina Cockburn
Queensland University of Technology Faculty of Law

Contents

• Introduction
• General Rule: Access to documents and information
• Theoretical basis of the right to inspect
• Trust documents rule
• Qualification: Trustees not bound to disclose reasons for exercise of discretion
• Qualification: No entitlement to documents which are not trust documents
• Qualification: Secrecy provisions
• Discretionary trusts: Access to memorandum of wishes - trustee's obligations of confidentiality
• Qualification: A claim of confidentiality in the best interests of the beneficiaries
• Conclusion
• Notes

Introduction

1. The relationship between a trustee and beneficiary is a fiduciary relationship "of the highest order". [1]

2. Trustee's duties are derived from their basic fiduciary obligations. The trustee's duty to provide information to beneficiaries is a prescriptive (positive) duty, which is based upon the positive duty of trustees to manage assets for the benefit of others and the corresponding obligation to account to those beneficiaries.

3. This paper discusses the trustee's duty to provide information to beneficiaries and the circumstances in which the duty to provide information is qualified.

   General Rule: Access to documents and information

4. Trustees are under a duty to keep and render to the beneficiaries a full and candid record of their stewardship, including all appropriate financial accounts. They may employ accountants to assist in the keeping of proper accounts and can seek reimbursement for such expenses incurred in fulfilling this duty. [2]

5. Beneficiaries have a prima facie right of access to documents and information in relation to the trust. This rule does not extend to strangers. Mahoney J restated the general rule in Hartigan Nominees Pty Ltd v Rydge[3] as follows:

   In general a trustee is not obliged to volunteer documents or information to beneficiaries or possible beneficiaries. However, if a beneficiary requests it, a trustee is in general obliged to provide documents and information to the beneficiary, at his cost, in relation to the trust property, and to provide an accounting in respect of the administration of it. [4]

6. The right to seek and obtain information from the trustee concerning management of the trust fund extends to the objects of a discretionary power of appointment and does not depend on an allegation of fraud or other breach of trust being made against a trustee. [5] The beneficiary's right to information and inspection of trust documents is subject to an obligation to pay for the costs of this service. [6]

7. However, as noted in Marigold Pty Ltd v Belswan (Mandurah) Pty Ltd [7] by White AUJ:

   ...the right of a beneficiary to inspect trust documents, whether founded on proprietary right or fiduciary duty is not unqualified. Confidentiality or privilege are circumstances in which a discretion to refuse inspection may arise. [8]

   Theoretical basis of the right to inspect

8. There has been some debate as to the true theoretical basis of the right to inspect trust documents and records.[9]

9. Historically the basis of the beneficiaries' right to inspect documents was regarded as proprietary on the basis that trust documents are in equity the property of the beneficiaries.[10] Of course title to the documents, like other trust property, is vested in the trustee so the beneficiary cannot claim physical possession of the material.[11] In O'Rourke v Derbishire[12] Lord Wrenbury said:

   The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in a sense his own. Action or no action, he is entitled to access them.[13]

10. In Breen v Williams,[14] which concerned the right of a patient to inspect her medical records in her doctor's possession, Dawson and Toohey JJ explained this statement by saying:

    ... the right of access of a beneficiary to trust documents arises because of the beneficial interest of the beneficiary in the trust property and it is in that sense that the right may be described as proprietary. [15]

11. An alternative approach is based on the fiduciary duty of trustees to keep beneficiaries informed.[16] In Re Simersall; Blackwell v Bray,[17] Gummow J[18] referred to the following passage in Scott on Trusts:

    The trustee is under a duty to the beneficiaries to give them on their request at reasonable times complete and accurate information as to the administration of the trust. The beneficiaries are entitled to know what the trust property is and how the trustee has dealt with it. They are entitled to examine the trust property and the accounts and vouchers and other documents relating to the trust and its administration. Where a trust is created for several beneficiaries, each of them is entitled to information as to the trust. Where the trust is created in favour of successive beneficiaries, a beneficiary who has a future interest under the trust, as well as a beneficiary who is presently entitled to receive income, is entitled to such information, whether his interest is vested or contingent. [19]

12. His Honour concluded that a necessary incident of the trustee's personal obligation to hold and deal with the trust property for the benefit of the beneficiaries, is the liability of the trustee to account to the beneficiaries. [20]

13. In Schmidt v Rosewood Trust Ltd (Isle of Man),[21] their Lordships expressed general agreement with the approach adopted in the judgments of Kirby P and Sheller JA in the Court of Appeal of New South Wales in Hartigan Nominees Pty Ltd v Rydge. [22] Their Lordships said:

    But the Board cannot regard it as a reasoned or binding decision that a beneficiary's right or claim to disclosure of trust documents or information must always have the proprietary basis of a transmissible interest in trust property.

    The more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the court's inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts. The right to seek the court's intervention does not depend on entitlement to a fixed and transmissible beneficial interest. The object of a discretion (including a mere power) may also be entitled to protection from a court of equity, although the circumstances in which he may seek protection, and the nature of the protection he may expect to obtain, will depend on the court's discretion. [23]

    Trust documents rule

14. The prima facie right to inspect trust documents and accounts is often expressed in terms of what has become known as the trust documents rule. Beneficiaries have a right to inspect trust accounts and the trust documents at their expense, [24] but not incidental documents such as correspondence between trustees, as trustees are not bound to give reasons. [25]

15. In Re Londonderry's Settlements[26] Salmon LJ noted the following features of trust documents:
    • they are documents in the possession of trustee qua trustee;
    • they contain information about the trust which the beneficiaries are entitled to know; and
    • the beneficiaries have a proprietary interest in the document and are accordingly entitled to see them. [27]

16. Lord Salmon's definition of trust documents has been criticised as assuming "the answer to the question it is directed to solve" and accordingly "of no assistance." [28]

    Qualification: Trustees not bound to disclose reasons for exercise of discretion

17. A trustee is not obliged to provide reasons for the exercise of his or her discretions. [29] Dal Pont and Chalmers have summarised the rationale for denying beneficiaries a right to reasons as follows:

    First, the disclosure of reasons for a decision is inconsistent with the proposition that the trustee's exercise of a discretionary power cannot be challenged in the absence of mala fides. Secondly, on a practical level a requirement to give reasons would add to trustees' already onerous obligations. Thirdly, the beneficiaries' knowledge of the reasons for the trustees' discretion may embitter the relationship between trustees and beneficiaries, and that between beneficiaries inter se, particularly in the case of family settlements. [30]

18. The authors note that the first justification is somewhat self perpetuating in that that the lack of reasons may render it difficult for beneficiaries to establish whether the trustees have acted bona fides. [31]

19. In Re Londonderry's Settlement[32] Harman J indicated that trustees exercising a discretionary power are not bound to disclose to their beneficiaries the reasons activating them in coming to a decision but that if they do give reasons, their soundness can be considered by the court. His Honour said:

    ... trustees exercising a discretionary power are not bound to disclose to their beneficiaries the reasons activating them in coming to a decision. This is a long standing principle and rests largely, I think, on the view that nobody could be called upon to accept a trusteeship involving the exercise of a discretion unless, in the absence of bad faith, he was not liable to have his motives or his reasons called in question either by the beneficiaries or by the court. To this is added a rider, namely that if trustees do give reasons, their soundness can be considered by the court.[33]

20. Where trust documents would otherwise disclose the reasons for the exercise of trustees' discretions, it has been suggested that "all parts of any documents which contain information to which the beneficiary is not entitled should be covered up before being shown to the beneficiary."[34] For example, in Marigold Pty Ltd v Belswan (Mandurah) Pty Ltd [35] White AUJ made an order in the following terms:

    In my opinion, the plaintiff is entitled to inspect the documents listed in that letter, subject to the defendant's right to provide copies with the deletion of the names of any persons in respect of whom confidentiality is claimed. The provision of copies of those documents, rather than the inspection of the originals in the possession of the defendant would probably meet the wishes of both parties. If, in the result, the plaintiff contends that it requires consequential further inspection, that can be the subject of an application in due course. [36]

    Qualification: No entitlement to documents which are not trust documents

21. The beneficiaries' right to inspect documents is limited to trust documents. Thus trustees are not obliged to disclose documents which are "not property of the trust, but prepared by the trustee for his own purposes."[37]

22. Documents not available for inspection on this basis include:
    • correspondence between trustees;
    • correspondence between trustees and beneficiaries;
    • other documents disclosing deliberations of trustees as to manner in which they should exercise their discretionary powers such as notes of their discussions among themselves, notes of their discussions with some of the beneficiaries or information provided by some of the beneficiaries.[38]

23. It is important to note that in Hartigan Nominees Pty Ltd v Rydge,[39] the majority was careful to point out that the limitation should only be extended so far as is necessary to preserve the confidentiality of the reasons for the exercise of the trustee's discretions and their reasoning process.[40] For example, where the information sought is confidential business information, access may be allowed provided the beneficiary undertakes in writing not to use or disclose the information other than for the purposes authorised by the court.[41]

    Qualification: Secrecy provisions

24. The beneficiaries' rights to access information may be regulated by the trust instrument. Thus beneficiaries do not have access to documents which are expressed to be confidential, especially where such documents may relate to the exercise of the trustees' discretions.[42]

25. In Tierney v King[43] access was denied to actuarial reports obtained to enable the trustees to exercise their discretionary powers in circumstances where the trust deed contained a secrecy provision. The general rule that a beneficiary has a proprietary interest in and a right to inspect trust documents was balanced against a rule to the effect "that trustees acting in good faith are not bound to disclose reasons for the exercise by them of a discretionary power or the information (even if committed to writing) which may bear upon or affect those reasons."[44] Mathews J[45] said:

    There is a general rule that a cestui que trust has a proprietary interest in and a right, therefore, to inspect trust documents (O'Rourke v. Darbishire [1920] AC 581, at p. 626; Re Fairbairn [1967] VR 633) and the appellant relies on this general rule; but even accepting that the documents, the subject of the application, are trust documents the rule, as was pointed out by Salmon L.J. In Re Londonderry's Settlement [1965] 1 Ch 918 at pp 936-937, must be balanced with another which is to the effect that trustees acting in good faith are not bound to disclose reasons for the exercise by them of a discretionary power or the information (even if committed to writing) which may bear upon or affect those reasons. The actuarial reports are obtained by the respondents to enable them to exercise one or more of the powers which by clause 2.12 are entrusted to their discretionary decision. When one considers this in conjunction with the secrecy provisions of the deed (clause 7.7) one cannot be satisfied that this is a case for a Judge's interference. Moreover the right conferred upon the respondents in clause 7.7, by way of exception to the general provision, to publish financial, statistical or other information is, it seems to me, confined to a right to publish to all participants rather than to one or a limited number of them. There is an implication from it that one participant is not entitled to inspect documents containing such information. [46]

    Discretionary trusts: Access to memorandum of wishes - trustee's obligations of confidentiality

26. In Hartigan Nominees Pty Ltd v Rydge[47] the New South Wales Court of Appeal considered whether the beneficiaries or potential beneficiaries of a discretionary trust were entitled to have access to a memorandum of wishes to which the trustees had regard to in carrying out the trust.[48] In that case a discretionary beneficiary brought an application for a declaration that he was entitled to inspect the memorandum and that the trustees ought not take it into account in the exercise of their discretions. A majority of the Court[49] decided there was no warrant for the disclosure of the memorandum of wishes.

27. Mahoney JA affirmed the Re Londonderry's Settlement[50] test and held that the right of a beneficiary to obtain on request documents or disclosure of information in relation to the trust is limited to documents which are the property of the trust. The right did not extend to the property of the trustee - material prepared by the trustees for their own purposes such as to administer the trust or discharge their duties.[51] Information need not be disclosed if the result of disclosure would be to make known reasons why a discretionary power has been exercised and would be likely to give rise to family difficulties. [52] Further, if information is given to a trustee in confidence then it will not be available to beneficiaries. Even if such documents were the property of the trust, because they were confidential they could not be disclosed. [53] Mahoney JA said:

    I would, for myself, see the matter of confidentiality as being of particular significance in discretionary trusts of the present kind. In deciding questions of disclosure, it is important in my opinion to have regard to the essential nature of such discretionary trust. Such a trust is not a mere commercial document in which the public may have an interest. It is a private transaction, a disposition by the settlor of his own property, ordinarily voluntarily, in the manner in which he is entitled to choose. Special cases apart, it is proper that his wishes and his privacy are respected.

    In a discretionary trust of this kind, the settlor has placed confidence in his trustee and has on that basis transferred property to him. It has, I think, been the purpose of the law to respect that trust. It depends upon confidence and confidentiality. The settlor seeks to have the trustee resolve, without unnecessary abrasion, the conflicting claims of persons in an area, the family, where disputes are apt to be bruising. In cases of this kind, if a settlor's wishes cannot be dealt with in confidence, the purpose of the trust may be defeated. [54]

28. Sheller JA considered that the definition of trust document provided by Londonderry was not helpful.[55] Further he considered that the notion of beneficiaries having a proprietary right in the assets of the trust, including trust documents was not particularly relevant in the case of discretionary trusts where the beneficiaries cannot claim any proprietary right to any particular assets. His Honour thought that the proprietary interest theory was not helpful.[56] He considered that beneficiaries have no right to see documents private to the trustees which may evidence the reasons why the trustees have made their decisions (such as minutes of meetings and agenda documents), however because of the nature of the trust, he did not think that the memorandum evidenced reasons for the trustees decisions any more than the deed itself did.[57] However, a basis for requiring trustees not to disclose documents in their possession is confidentiality. In this case the fact that a separate memorandum was delivered and the wishes were not disclosed in the trust instrument or a document attached to it lead to the conclusion that the memorandum was given to the trustees in circumstances of confidence.[58] Sheller JA said:

    That (the instigator of the trust) did not disclose his wishes in, or in a document attached to, the deed of settlement, but delivered a separate memorandum of wishes to the trustees, leads to the conclusion that it was his, and thus the settlor's, intention that his wishes should remain confidential, and consequently that the contents of the memorandum were obtained by the trustees in circumstances of confidence, which bound the trustees not to disclose them to the respondent and to withhold the memorandum from him. [59]

29. Kirby P would have allowed access to the memorandum of wishes, for the following reasons:[60]

    • If the correct rule is that beneficiaries are allowed access to trust documents, the memorandum of wishes is a trust document - "an essential component of, or companion to" the trust deed. Further the beneficiary has a proprietary interest in the document. His Honour did not consider it imperative to decide this as both the trust document approach and the proprietary approach were unsatisfactory in his view.

    • Londonderry's Settlement is an unsatisfactory decision and does not represent the local law.

    • To accept that as a prerequisite to access that a beneficiary should be able to show misconduct or wrongdoing on the part of the trustee, would be to impose an unreasonably high barrier to the effective supervision by the court of the actions of trustees ostensibly subject to that supervision.

    • The trustee was a professional trustee, had access to advice, was paid fees and should be accountable.

    • The rule of secrecy which the trustees urge is one which may effectively deny the beneficiaries access to relevant information. "Only by securing access could the beneficiary fully exercise his rights. Those rights included the rendering of the trustees accountable before the law for the discharge of their duties as trustees."[61]

    • The trustees need not fear undue harassment by beneficiaries or the courts as the courts will uphold the discretion reposed in trustees by the trust deed so long as they perform their duties bona fide and without malice.

    • There had been no express request that the memorandum of wishes be kept secret by the trustees. If there was an express statement as to secrecy the position may well be different.[62]

    • It is inappropriate to follow Re Beloved Wilke's Charity and Re Londonderry's Settlement in Australia. Australian society accepts a generally greater level of accountability than has been accepted by the law of England. There are different attitudes to the role of the individual and the citizen in society; the proper function of the courts; and the accountability of one person to another before the law. In discretionary trusts in Australia what is more likely to be at stake is money and fiscal obligations than the reputation of the family name. The anxiety about washing "dirty linen" in public is less likely to concern an Australian family caught up in a dispute about a discretionary trust than it is in the different social milieu of a noble family in the United Kingdom.

30. If a claim of confidentiality is made by the trustees, the onus is on the trustees to justify denial of the beneficiaries' prima facie entitlement to information.[63]

    Qualification: A claim of confidentiality in the best interests of the beneficiaries

31. It has been suggested that a broader claim of confidentiality may be available to trustees, even in the absence of an express or implied provision as to confidentiality in the trust deed limiting the beneficiary's rights of access to information - a claim that maintaining the confidentiality of certain trust documents is in the interests of the discharge of the trustee's duties to the beneficiaries as a whole.[64]

32. In Rouse v IOOF Australia Trustees Limited[65] there was an appeal by the beneficiaries of a trust seeking appointment of an inspector of the trust pursuant to s84C of the Trustee Act 1936 (SA) and an order that they be permitted to inspect and copy certain documents in the possession of the trustee.

33. The appellants were investors in a managed investment scheme, under which the investors were beneficiaries of a trust of which the respondent IOOF Australia Trustees Limited (IOOF) was trustee. IOOF had been engaged in ongoing legal proceedings relating to a management dispute. The appellants had called upon IOOF to permit them to inspect and to copy a large number of documents in its possession. Over time IOOF has made a good many documents available to the plaintiffs, albeit reluctantly, and the appellants claimed it had done so only under the threat of legal proceedings. The case concerned a dispute over access to two groups of documents that IOOF continued to refuse to disclose to the appellants. These documents were:
    
    • Documents relevant to the management dispute: witness statements, expert reports, legal advice instructions to legal representatives, assessments of prospect of success and other documents forming part of the trustee's brief to counsel in the management dispute and for which the trustee has legal professional privilege in relation thereto; and
    • Communications between the trustee and some of the beneficiaries who were members of an association of investors.

34. At first instance the judge concluded that the appellants had no right as of course to inspect the documents in question - the mere assertion of their status as a beneficiary did not give them the right to inspect the documents in question.

35. On appeal to the Full Court the trial judge's decision to uphold the trustee's right to exercise its discretion to refuse access was upheld.

36. Doyle CJ[66] noted that the function of the Court in these proceedings was "to decide whether the trustee has a discretion to refuse to permit inspection, not to decide whether that discretion, if it exists, should be exercised. Its exercise is a matter for IOOF."[67]

37. His Honour considered that there were three questions for determination. These were:
    
    • Are the relevant documents trust documents?
    • Is the right of a beneficiary to inspect trust documents subject to any qualification?
    • Do the circumstances as described by me give rise to a discretion on the part of IOOF to refuse to permit inspection? [68]

38. As to the first question, Doyle CJ proceeded on the basis that the documents related to the administration of the trust of which IOOF was trustee and were therefore trust documents.[69] He considered that the right of a beneficiary to inspect trust documents is qualified by the existence of the duty to act in the best interest of the beneficiaries.[70] As to whether the circumstances were such that IOOF was entitled to refuse to permit inspection of the documents in question, he concluded that "the trustee had a discretion to decline to permit inspection of the documents and therefore was entitled to make the decision that it did make."[71]

39. In relation to whether the right of a beneficiary to inspect trust documents is qualified by the existence of the duty to act in the best interest of the beneficiaries Doyle CJ said:

    ... the right of a beneficiary to inspect trust documents is not unqualified...

    Despite the lack of guidance from the case law, I consider that the trustee must be entitled to refuse access to trust documents, and not only when that is done to maintain the confidentiality of the reasons for the exercise of a discretion when the beneficiaries have no right to access to those reasons. To begin with, there may be cases in which an obligation of confidentiality attaches to documents in possession of the trustee by virtue of the circumstances in which those documents were received. The fact that a person is a beneficiary may mean that the obligation of confidentiality is not an objection to the person inspecting the documents, but in my opinion it is conceivable that there will be cases where a trustee receives a document under circumstances such that, to allow inspection by a beneficiary, would give rise to a breach of obligations of confidentiality imposed upon the trustee. The present case does not fall in this category, because the assertion of confidentiality is made by IOOF, and is not made in response to an obligation imposed upon IOOF.

    However, it seems to me that it would be right to recognise that a trustee might refuse to permit inspection of trust documents on grounds of confidentiality, however the claim of confidentiality might arise. To say that is not to say that it will always be open to a trustee to claim confidentiality. It is to do no more than acknowledge that in principle a trustee should be able to advance a claim of confidentiality in answer to a right of inspection asserted by a beneficiary. Whether the claim is a valid answer in a particular case will depend upon the particular circumstances.

    There must be various situations in which a trustee, particularly a trustee conducting a business, would be put in an impossible position if the beneficiary of the trust could, as a matter of right, claim to inspect documents in the possession of the trustee and relevant to the conduct of the business. It is readily conceivable that there will be situations in which an undertaking of confidentiality is not sufficient protection. The fact that the trust is one in which numerous beneficiaries have an interest, and the further fact that those beneficiaries may have differing views about the wisdom of the course of action being pursued by the trustee, only serve to emphasise, in my opinion, the need for the law to recognise some scope for a trustee to refuse to disclose information on the grounds that it is confidential and on the further ground that the disclosure is not in the interests of the beneficiaries as a whole. I make that observation on the basis and on the assumption that the ultimate right of the beneficiaries will be to have the trustee removed if they are dissatisfied with the approach of the trustee.

    Ultimately, I would rest the existence of the relevant discretion upon the need to reconcile the undoubted duty of a trustee to make disclosure to beneficiaries of information about the trust, and the undoubted duty to permit the inspection of trust accounts and trust documents, with the equally fundamental obligation of a trustee to conduct the affairs of a trust, and particularly a trust which involves the conduct or management of a business, in the interests of the beneficiaries as a whole. I consider that on occasions the reconciliation of these interests may entitle a trustee to decline to provide information to particular beneficiaries, when the trustee has reasonable grounds for considering that to do so will not be in the interests of the beneficiaries as a whole, and will be prejudicial to the ability of the trustee to discharge its obligations under the trust. It may be that the ultimate foundation of the discretion is the obligation of the trustee to discharge its duties to manage the affairs of the trust in the interests of the beneficiaries.

    I wish to make it clear that the discretion that I envisage is a limited one, and must always be limited by the general duty of disclosure by a trustee to which I have referred. The existence of the discretion cannot be used as an excuse for paternalism or to disregard the interests of beneficiaries. Its existence depends upon the need to protect the trustee's ability to discharge its obligations. The availability of the discretion will depend very much upon the circumstances of the particular case.

    ... I do not, in what I have said, contemplate the use of that discretion to enable a trustee to deal in a partial or discriminatory manner as between beneficiaries or groups of beneficiaries, except to the extent that the necessary result of a proper exercise of the discretion may be that particular beneficiaries are not given access to a document. [72]

40. The above comments were adopted in Marigold Pty Ltd v Belswan (Mandurah) Pty Ltd[73] by White AUJ,[74] who noted:

    It was held in Rouse & Ors v IOOF Australia Trustees Ltd [1999] SASC 181, a decision of the Full Court of the Supreme Court of South Australia, that the right of a beneficiary to inspect trust documents, whether founded on proprietary right or fiduciary duty is not unqualified. Confidentiality or privilege are circumstances in which a discretion to refuse inspection may arise - see Londonderry's Settlement [1965] Ch 918. [75]

41. In Schmidt v Rosewood Trust Ltd (Isle of Man),[76] the Privy Council rejected the traditional approach based on classification of documents as trust documents or otherwise, affirming the trustee's right to assert confidentiality on broad grounds relating to the due administration of the trust. Their Lordships held:

    No beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. [77]

42. In that case the appellant sought disclosure of trust accounts and other information about the trust assets from the trustees of the two settlements in his personal capacity by virtue of the discretionary interests or expectations which the he claimed to have; in his capacity as administrator of the estate of his late father who had such discretionary interests or expectations during his lifetime.

43. After noting that "(o)ne possible reaction would be that Mr Schmidt and his colleagues have made their bed and they must lie on it; if they have deliberately entered into a web of camouflage, it is hardly for anyone claiming through them to complain that the position is not transparent",[78] it was considered that that this inclination must be resisted.[79] It was held:

    As already noted, it has not been suggested that the settlements are shams, or tainted with illegality. It is fundamental to the law of trusts that the court has jurisdiction to supervise and if appropriate intervene in the administration of a trust, including a discretionary trust. [80]

44. The court came to the following conclusions:

    • A beneficiary's right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, is best approached as one aspect of the court's inherent jurisdiction to supervise (and where appropriate intervene in) the administration of trusts.[81]

    • No beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties.[82]

    • During Mr Schmidt's lifetime substantial distributions were made for his benefit. The appellant as Mr Schmidt's personal representative does not accept that these funds have been fully accounted for. On the face of it the appellant (as personal representative) seems to have a powerful case for the fullest disclosure in respect of these funds.[83]

    Conclusion

45. It is clear that beneficiaries have a prima facie right of access to information relating to the trust and that trustees have a corresponding duty of disclosure.[84] Though there has been some debate as to the basis of this entitlement, it is submitted that the better view is that the duty of disclosure is based on the trustee's duty to hold the trust property for the benefit of the beneficiaries and the corresponding fiduciary duty of trustees to account to the beneficiaries.[85]

46. The prima facie right to inspect trust documents and accounts is often expressed in terms of what has become known as the trust documents rule. Documents to which beneficiaries have been granted access as trust documents have included the following:
    • Documents concerned with the financial management of the trust, for example records, books of account, and original documents such as receipts necessary to enable the substantiation of entries and records;
    • Documents relating to the trust property or the conduct and management of any business owned by the trust including balance sheets, profit and loss statements; and
    • Written advice from counsel as to manner in which the trustees are entitled or bound to exercise their powers. [86]

47. However, the right of a beneficiary to inspect trust documents is not unqualified. Trustees have not traditionally been required to disclose documents which reveal the reasons for the exercise of their discretions. [87]

48. Nor are trustees obliged to disclose documents which are not trust documents, that is "not property of the trust, but prepared by the trustee for his own purposes", [88] for example correspondence between trustees; correspondence between trustees and beneficiaries; and other documents disclosing deliberations of trustees as to manner in which they should exercise their discretionary powers. It has been suggested, however, that this limitation should only be extended so far as is necessary to preserve the confidentiality of the reasons for the exercise of the trustee's discretions and their reasoning process. [89]

49. The beneficiaries' rights to access information may also be regulated by the trust instrument, so that beneficiaries will not have access to documents which are confidential,[90] especially where such documents may relate to the exercise of the trustees' discretions such as in cases where access to memorandum of wishes is sought.[91]

50. It has been suggested that a broader claim of confidentiality may be available to trustees, even in the absence of an express or implied provision as to confidentiality in the trust deed limiting the beneficiary's rights of access to information - a claim that maintaining the confidentiality of certain trust documents is in the interests of the discharge of the trustee's duties to the beneficiaries as a whole.[92] Recently in Schmidt v Rosewood Trust Ltd (Isle of Man),[93] the Privy Council emphasised the trustee's right to assert confidentiality on broad grounds relating to the due administration of the trust, holding:

    No beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. [94]

51. The courts therefore must undertake a balancing exercise in relation to the determination as to whether trustees have disclosure obligations. The prima facie entitlement to access to trust documents and records stems from the trustee's duty to hold property for the benefit of beneficiaries and the corresponding duty to account. However this is balanced against the trustee's duty to act in the bets interests of the beneficiaries, which may not always justify disclosure. Perhaps in the final analysis, the overriding criterion is that the courts have a supervisory jurisdiction over trusts which will be impeded by excessive secrecy in the administrative of trusts. As was also noted in Schmidt v Rosewood Trust Ltd (Isle of Man):

    A beneficiary's right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, is best approached as one aspect of the court's inherent jurisdiction to supervise (and where appropriate intervene in) the administration of trusts.[95]

    Notes

    [1] Re Permanent Trustee Australia Ltd (1997) 137 FLR 190 at 199 per Hansen J. See also Maguire v Makaronis (1997) 188 CLR 449 at 473 ("The trustee is the archetype of a fiduciary.")

    [2] s52 Trusts Act (Qld)

    [3] (1992) 29 NSWLR 405

    [4] Ibid at 431

    [5] Spellson v George (1987) 11 NSWLR 300; approved Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Mahoney J at 425

    [6]Re Fairbairn [1967] VR 633

    [7] [2001] WASC 209

    [8] Ibid at [23]; citing Rouse v IOOF Australia Trustees Ltd [1999] SASC 181 and Londonderry's Settlement [1965] Ch 918

    [9] Discussed Ford and Lee Principles of the Law of Trusts 3rd ed, para 9290; MacLean Trusts and Powers pp30-31. See for example Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405; Morris v Morris (1993) 9 WAR 150 at 153; Rouse v IOOF Australia Trustees Ltd [1999] SASC 181 at [88] - [92]; Jacobsen v DAFNA Nominees Pty Ltd [1999] VSC 529 per Ashley J at [95]; Marigold Pty Ltd v Belswan (Mandurah) Pty Ltd [2001] WASC 209at [20] - [23]; Schmidt v Rosewood Trust Ltd (Isle of Man) [2003] UKPC 26

    [10] O'Rourke v Darbishire [1920] AC 581

    [11] Re Simmersall (1992) 108 ALR 375

    [12] [1920] AC 581

    [13] Ibid at 626

    [14] (1996) 186 CLR 71

    [15] Ibid at [89]

    [16] See Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Kirby P at 421-422 and Sheller JA at 442-445

    [17] (1992) 35 FCR 584

    [18] Ibid at 587 - 588

    [19] (4th ed 1987), par 173 under the heading "Duty to Furnish Information"

    [20] Ibid n17 at 588 - 589; see also Rouse & Ors v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at [48]

    [21] [2003] UKPC 26

    [22] (1992) 29 NSWLR 405 per Kirby P at 421-422 and Sheller JA at 442-445

    [23] [2003] UKPC 26 at [50] - [51]

    [24] Re Bosworth (1889) 58 LJ Ch 432

    [25] Re Londonderry's Settlement [1965] Ch 918

    [26] Ibid

    [27] Ibid at 938

    [28] See for example Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Sheller JA at 443; see also R Boaden 'The Rights of Beneficiaries' (1994) LIJ 37 at 38

    [29] Re Londonderry's Settlement [1965] Ch 918; Tierney v King [1983] 2 Qd R 580; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Mahoney JA at 434; Sheller JA at 444-445.

    [30] Dal Pont and Chalmers Equity and Trusts in Australia and New Zealand 2nd ed, 2000, LBC Information Services at 622; citing Re Londonderry's Settlement [1965] Ch 918 per Salmon LJ at 936-937; Re Fairbairn (decd) [1967] VR 633 at 639-640

    [31] Dal Pont and Chalmers Equity and Trusts in Australia and New Zealand 2nd ed, 2000, LBC Information Services at 622

    [32] [1965] Ch 918

    [33] Ibid at 928-9; see also Karger v. Paul [1984] VR 161 at 165-6.

    [34] Re Londonderry's Settlement [1965] Ch 918 per Salmon LJ at 937

    [35] [2001] WASC 209

    [36] Ibid at [53]

    [37] Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Mahoney J at 431

    [38] See Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Mahoney JA at 432, 434; per Sheller JA at 444-445; Re Londonderry's Settlement [1965] Ch 918 per Salmon LJ at 938; per Harman LJ at 933; discussed Dal Pont and Chalmers Equity and Trusts in Australia and New Zealand 2nd ed, 2000, LBC Information Services at 623

    [39] (1992) 29 NSWLR 405

    [40] Ibid per Mahoney JA at 434; per Sheller JA at 444-445

    [41] Morris v Morris (1993) 9 WAR 150 at 155

    [42] Tierney v King [1983] 2 Qd R 580

    [43] [1983] 2 Qd R 580

    [44] Ibid at 583 citing Re Londonderry's Settlement [1965] 1 Ch 918 at pp 936-937

    [45] with whom Kelly and Macrossan JJ agreed

    [46] Ibid at 583

    [47] (1992) 29 NSWLR 405

    [48] Discussed D Maclean Beneficiary's Right to See Confidential Trust Documents (1993) 67 ALJ 703; D Davies Trust Administration: Secrecy and Responsibility (1995) 7 Bond LR 5

    [49] Mahoney and Sheller JJA, Kirby P dissenting

    [50] [1965] Ch 918

    [51] Ibid at 432

    [52] Ibid at 434

    [53] Ibid at 433

    [54] Ibid at 436

    [55] Ibid at 443

    [56] Ibid at 443-444

    [57] Ibid at 445

    [58] Ibid at 445

    [59] Ibid at 446

    [60] Ibid at 418-420

    [61] Ibid at 422

    [62] Ibid at 420

    [63] Re Fairbairn [1967] VR 633 at 638

    [64] Rouse v IOOF Australia Trustees Limited [1999] SASC 181; applied Marigold P/L v Belswan (Mandurah) Pty Ltd [2001] WASC 209 at [48]

    [65] [1999] SASC 181

    [66] with whom Perry and Martin JJ agreed

    [67] Ibid at [55]

    [68] Ibid at [85]

    [69] Ibid at [86] discussed below

    [70] Ibid at [99] - [103]

    [71] Ibid at [105]

    [72] Ibid at [99] - [103]

    [73] [2001] WASC 209

    [74] Ibid at [48]

    [75] At [23]

    [76] [2003] UKPC 26

    [77] Ibid at [67]

    [78] Ibid at [36]

    [79] Ibid at [36]

    [80] Ibid at [36]

    [81] Ibid at [66]

    [82] Ibid at [36]

    [83] Ibid at [68]

    [84] Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405

    [85] Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Kirby P at 421-422 and Sheller JA at 442-445; Schmidt v Rosewood Trust Ltd (Isle of Man) [2003] UKPC 26

    [86] Re Londonderry's Settlement [1965] Ch 918; discussed R Boaden The Rights of Beneficiaries (1994) LIJ 37 at 37

    [87] Re Londonderry's Settlement [1965] Ch 918; Tierney v King [1983] 2 Qd R 580; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Mahoney JA at 434; Sheller JA at 444-445.

    [88] Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Mahoney J at 431

    [89] Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Mahoney JA at 434; per Sheller JA at 444-445

    [90] Tierney v King [1983] 2 Qd R 580

    [91] Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 per Sheller JA at 445; Mahoney JA at 433, 436; cf. Kirby J who considered that in the absence of an express statement as to an obligation of confidence, there should be no implication of confidence: ibid at 420

    [92] Rouse v IOOF Australia Trustees Limited [1999] SASC 181; applied Marigold P/L v Belswan (Mandurah) Pty Ltd [2001] WASC 209 at [48]

    [93] [2003] UKPC 26

    [94] Ibid at [36]
    

    [95] Ibid at [66]

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    Document author: Allen Creighton
    Document creation: August 17 2005
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