The Disclosure of Trust Documents

The law has criticised and differentiate the approach, based on whether trust document should be disclosed to beneficiaries. There has been various case law and journal articles, that discus this area and that has identified, whether beneficiaries has a proprietary right to view such document. The current case law indicates that, the Court has ‘inherent jurisdiction to supervise the administration’ [1] of trust document, and whether this decision should be left up to the trustee’s to decide. This essay explore the area of law that, discuss disclosure of trust document, trustee’s duty to apply discretion, the Courts power to supervise the disclosure of trust documents, whether beneficiaries has a proprietary right to seek disclosure of trust document and the changes made between accountability and confidentiality. In order to discuss these issues, I will be analysing and evaluating various case law, journal articles and text books, which cover these issues. I will also conclude by stating the present situation of the law, and indicating the evidential fact which will be discussed in the body of this essay.

Trust document, are documents which contain information regarding the construction of a trust. Lord Justice Salmon stipulates that, they are documents obtain by the ‘trustees as trustees’, which retains information regarding the beneficiaries [2] .

Vadim Schmidt v Rosewood Trust Ltd, discuss disclosing trust document to beneficiaries [3] . In the latter case beneficiaries, seek disclosure for documents relating to the administration of the trust [4] . It has been submitted that, trust documents should not be withheld from beneficiaries [5] . This argument was justified by Lord Wrenbury in O’Rourke v Darbishire, who stipulates that, “[where the claimant proves that they are a] beneficiary and if the documents are documents belonging to the executor as executors, he has a right to access [these] documents which he desires to inspect….” [6] . This judgement has been criticized on the basis that, it may be infringing the trustee’s duty to act as trustees, and the settlor’s right to confidentiality.

In contrast Lord Justice Danckwert, in Re Londonderry’s Settlement stipulates that, “where trustees are given discretionary trusts which involve a decision upon matters between beneficiaries, viewing the merits and other rights to benefit under such a trust, the trustees are given a confidential role and they cannot properly exercise that confidential role if at any moment there is likely to be an investigation for the purpose of seeing whether they have exercised their discretion in the best possible manner”. His judgment thereby confirmed that trustees are given a ‘confidential role’. However, this role may not be adequately exercised, if they are subject to scrutiny by beneficiaries, querying whether they have implemented their discretion correctly [7] .

In conjunction, Lord Justice Salmon in the above case mention the word ‘embitter’ in his judgment, indicating how he believe disclosure of trust document could exasperate ‘family feelings’ towards trustees [8] . He also stipulates that, as a result of this aggravation, it may be difficult to “persuade any person to act as trustees where a duty to disclose their reason”, may cause disagreements, confusion or chaos between trustees and members of the family [9] . Based on the evaluation given in Re Londonderry Settlement, it may be said that the above named judges, reflected and agreed on the judgement given in the case of Re Cowin v Gravett [10] . This case illustrates that, any documents which has reasonably been regarded as trust documents, should not be disclosed to beneficiaries regardless of his rights [11] .

However, in assessing the decision made regarding this issue, it may be fair to state that Lord Walker in Vadim Schmidt v Rosewood Trust Ltd, agreed with the decision made in Re Londonderry Settlement and Re Cowin v Gravett to some extent. Although, Lord Walker did not plainly mention trustee’s confidentiality, it may be said he upheld this notion, due to the fact that, he limits beneficiaries right, by restricting the types of documents they were entitled to access [12] .

Confidentiality of a wish letter, is given to a trustee, ‘on a fiduciary basis’, as a result they are expected to apply the most appropriate judgment and take the beneficiaries interest into to consideration [13] . A Trustees primary duty is, to apply accountability to beneficiaries [14] . However, this does not reconcile with the ‘settlors desire to confidentiality’, in relation to trust instrument and their financial position [15] . Nonetheless, these issues can adhere, where there are “exceptional circumstances that outweigh the right of the beneficiaries to be informed” [16] . It is submitted that, where confidentiality and privacy arise in relation to the assessment of trust property, trustees duty to uphold confidentiality are protected, considering the conception of ‘openness and accountability’ is eminent [17] .

Trustees acquire their duties, as a result of the construction of a trust. They are expected to consider and apply each duty, when distributing trust properties to beneficiaries. It has been argued that, these duties involve offering beneficiaries access to the administration of trust document and providing them with an explanation, as to what procedures have been taken towards the ‘trust property’ [18] . Trustees are also said to have a ‘power of appointment’, this is generally considered as fiduciary powers. This is the power to appoint beneficiaries, Lord Justice Millet in Bristol and West Building Society v Mothew stated that “fiduciary must act in good faith”, when distributing trust property [19] . In regards to the case of Vadim Schmidt v Rosewood Trust Ltd, it is stated that, more funds would have been available for the beneficiary if the Courts had consider their argument for breach of fiduciary duty, which may have been awarded considering there was a breach [20] . However, this issue was overlooked by the Court, therefore indicating that they may have rejected this claim, considering it was not expressed in the judgments made [21] .

Trustee’s duty and obligation regarding their rights and responsibilities, was argued in Murphy v Murphy where it was stated that, trustees are obliged to disclose ‘personal details’, relating to the trust [22] .

However, a descending view was proposed in Re Beloved Wilkes’s Charity This case illustrates that, “trustees are appointed to execute a trust according to discretion, they are not bound to state reasons for any conclusion at which they may arrive in fulfilling the duty imposed on them…..”. It thereby concluded that, trustees need not disclose the reason for their decision [23] .

Furthermore, the principal case of Re Londonderry Settlement, held that trustees are not obliged to disclose information relating to trust document [24] , whilst Lord Wrenbury in O’Rourke v Darbishire argued that, beneficiaries should be allowed to view these documents, as it is in some ‘sense his own’ [25] . It may be argued that Re Londonderry Settlement, has overruled O’Rourke v Darbishire considering this issue was confirmed in Breakspear v Acland [26] . The Courts in this case decided that, trustees are not bound to release information relating to the construction of trust document [27] . In addition, the latter case confirmed that even though trustees can exercise this power, the Court is not prohibited from stepping in and justifying any decision made [28] . This therefore reconciles the decision made in Vadim Schmidt v Rosewood Trust Ltd, where it was decided that, the Courts has an ‘inherent jurisdiction to intervene’ [29] . The law appears to be contradicting, when deciding whether or not trustees should or should not uphold their right to disclose trust document, seeing that it decides differently in alternative cases.

Authority has established that, beneficiaries have a ‘proprietary right’ in trust document. Nonetheless, it has been questioned whether this ‘traditional view’, has been overturned in the case of Vadim Schmidt v Rosewood Trust Ltd [30] . This issue has been raised by various academics and judges. In O’Rourke v Darbishire, Lord Wrenbury defines proprietary right as, an authority to scrutinise documents belonging to beneficiaries [31] .

A beneficiary has a proprietary interest in the trust fund, where they are beneficiaries ‘under a discretionary trust’ [32] . Lord Sumner in O’Rourke v Darbishire indicates that a “cestui que trust [33] “, who brings an action against ‘his trustee”, is normally permitted to scrutinise all trust documents relating to the issue [34] .

However, beneficiaries rights to scrutinise trust instruments is said to be more ‘extensive’ [35] , than it is a ‘mere object of a power’ [36] . Vadim Schmidt v Rosewood Trust Ltd broached that, in order to identify disclosure of trust document, it should not be left up to the beneficiaries ‘proprietary right’ [37] . Alternatively, the Court should be qualified to provide this right, in order to apply their discretion [38] . This case, address the issue as to whether beneficiaries has a proprietary right in trust property and concluded that, proprietary interest is irrelevant even though it is frequently established [39] .

This approach has clearly and unequivocally, opposed the decision argued by Lord Wrenbury. Where he indicated that, beneficiaries have a proprietary right to access trust document, by stipulating that “…beneficiaries [are] entitled to see all trust document because they are trust document and because he is a beneficiary” [40] . In his submission, he added that the documents are in some “sense his own”, subsequently they should not be deprived of this right [41] . Having disclosed this judgment, it may be correct to illustrate that the case of O’Rourke v Darbishire, upheld that beneficiaries hold a proprietary right to view trust document [42] . This right is said to have overturn the notion of ‘legal privilege’ considering that, information is held by trustees for beneficiaries and ‘not them selves’ [43] .

In some respect, it appears as if Vadim Schmidt v Rosewood Trust Ltd, has upheld the decision made in Re Londonderry Settlement, where Lord Harman broach his doubts has to whether beneficiaries has a proprietary right, to view any trust document [44] . This was therefore confirmed, considering the latter case upheld the trustees appeal and submitted that, trustees are not bound to disclose any information to beneficiaries [45] . Nonetheless, critics have enunciated that, Re Londonderry Settlement does not agree that beneficiaries have proprietary right [46] .

Hypothetically, the case of Vadim Schmidt v Rosewood Trust Ltd purported that, the principle between right of discretionary trust and an object of mere fiduciary power, should not be distinguished [47] . In Bristol and West Building Society v Mothew the Court illustrated that a fiduciary is an individual who act on behalf of another, therefore developing “a relationship of trust and confidence” [48] . The judgement went on further, stipulating that, the ‘object of loyalty’ distinguishes fiduciary responsibilities and that a “fiduciary must act in good faith” [49] . Fiduciary mere power enables, but does not require trustees to exercise trust obligation [50] . On the other hand, discretionary trust requires a fiduciary to exercise their discretion under a discretionary trust and to ‘carry out their powers [51] . Although, the appellant in the Rosewood case argued breach of fiduciary duty, the Court did not express any view as to whether there was a fiduciary breach [52] .

The case of Schmidt v Rosewood also discussed, the application of discretionary trust and whether the trustees or the Court should apply discretion when deciding whether beneficiaries can view trust document. It also indicates that, one of the trusts has an object or mere power [53] , in addition it confirm that the Court has discretion to exercise both trust [54] .

The respondent in the above case argued that, the appellant was only a ‘mere object of discretionary powers’ [55] . In order to consider, who has discretion to decide whether beneficiaries may or may not view trust document, the Court in Vadim Schmidt v Rosewood Trust Ltd considered Justice Holland view in Randall v Lubrano. In which, it was enunciated that, a ‘trustee is still a trustee’ despite the broadness of his discretion in the administration and appliance of ‘a discretionary trust’, whether or not the discretion is enforced in a deed [56] .

Vadim Schmidt v Rosewood Trust Ltd indicated that, a trustee is not permitted to benefit in any way from the trust fund [57] . However, Lord Walker illustrated that, discretionary trust has a right against trustee, rights which are not restricted and indicates right to exercise his/ hers discretion [58] .

Furthermore, the latter case also illustrated that, “the object of a discretion 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 Courts discretion” [59] . This has vaguely illustrated that, the Rosewood case has left the application of discretion in a trust, up to the Courts and not to the trustees fiduciary responsibility.

After the enactment of the Rosewood case, academics discuss whether disclosure of trust documents based on beneficiary ‘proprietary right over the trust fund’, still exist [60] . However, they seem to have discovered that the Courts have been using their discretion to intervene, on behalf of the beneficiary in order to identify their rights [61] .

Vadim Schmidt v Rosewood Trust Ltd upheld that, a beneficiary proprietary right to seek disclosure of trust document depend upon “the Courts inherent jurisdiction” [62] . It also concluded that, this was the most effective approach regarding disclosure [63] . The present law on disclosure has been demonstrated in this case, the Court has developed the previous judgment made in Re Rabiotte Settlement. Where it has enunciated that, the Court has discretion, to order disclosure in cases where they are deciding whether it is ‘necessary’ and is protecting beneficiaries or protecting ‘an object of mere power [64] . This has therefore rejected the respondents (Rosewood) argument, as to “no object or mere power” have a right to claim disclosure [65] .

This issue was also considered in Re Cowin v Gravettwhere, Justice North stated that prima facie [66] right to disclosure derives from, the Court jurisdiction over the trust and not from the beneficiary proprietary right [67] . The latter case also disclosed that, beneficial interest may not be an adequate reason for the Courts to disclose trust document [68] .

Subsequently, this issue was also raised in Mcphail v Doulton, where it was concurred that the Court has the power to intervene, where trustees have been acting ‘capriciously’ and has therefore acted outside their powers [69] . Based on the latter sentence, it may therefore be said that Mcphail v Doulton has somewhat agreed with Re Cowin v Gravett, upholding that the Court has jurisdiction to intervene where disclosure of trust document is considered.

In conjunction, it may be illustrated that the right to seek disclosure is not considered based upon the trustee’s discretion or the beneficiaries proprietary right, but instead is left up to the “Court of equity” “general supervisory jurisdiction” [70] . Authority indicated that, if the Court where unable to ‘order disclosure’ of trust document, there would be some ‘inconsistency’ with the Courts position considering trustees were unable to hold assets on trust for beneficiaries [71] . In addition, the case of Breakspear v Ackland, upheld that there was an agreement in ‘common law jurisdiction’ that, the Court and trustees ‘should approach the request for disclosure of wish letter by calling for the exercise of discretion rather than the adjudication upon a proprietary right’ [72] . The latter case therefore indicate that, the disclosure of trust document, should not be left up to the beneficiaries proprietary right but instead the trustees and the Courts inherent jurisdiction.

Reflecting on the issues illustrated above, it may be said that the right to seek disclosure of trust document depends on the Court inherent jurisdiction to supervise and intervene in the administration of trust document where necessary and is not based on the beneficiaries proprietary right. Authorities confirm the latter argument, by concluding that beneficiaries are restricted in regards to disclosure. However, arguments has been raised as to whether beneficiaries can exercise their proprietary right to view trust document, in relation to these argument this issue was undermined in Re Londonderry Settlement, where it was illustrated that they do not have such right. Moreover, the primary notion has been set and modern cases has upheld the factors raised in Vadim Schmidt v Rosewood Trust Ltd, which enunciates that trustees are not bound to disclose trust document, however the Court has the power to intervene and justify their decision. These decisions, therefore indicates that the provision as to disclosure of trust document does not depend upon the beneficiaries propriety right as illustrated in O’Rourke v Darbishire and has somewhat been overturned, but is based upon the trustees accountability to uphold the settlors confidentiality and most importantly, the Court inherent jurisdiction to supervise the trustees decision and intervene, where necessary as illustrated in Re Londonderry Settlement and Vadim Schmidt v Rosewood Trust Ltd.