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Beneficiaries accessing trust documents

Disclaimer: The content of this Bulletin is general information only. It is not legal advice. Law Central Legal recommends you seek professional advice before taking any action based on the content of this Bulletin.


by John Wojtowicz (Director - Law Central Legal)

In recent years there has been a proliferation of litigation between trustees and beneficiaries. This has been caused by increasingly widespread concern that the trustee is not properly administering the trust for the beneficiary’s interest. Beneficiaries often worry they are not getting their entitlements, or that the trust’s assets are being diminished or squandered.

In order for a beneficiary to ensure they are getting their entitlements, the beneficiary must know what their entitlements are. Beneficiaries receive entitlements under law and they receive entitlements from the trust documents. A beneficiary can contact a legal professional to discover what their entitlements are under the law. But what about their entitlements under the trust documents? This bulletin will consider what rights a beneficiary has to view the documentation of the trust.

Traditionally there have been competing views as to what rights the beneficiary has to inspect trust documents. There was the Londonderry approach (from Re Londonderry’s Settlement; Peat v Walsh) and the Schmidt approach (from Schmidt v Rosewood Trust).

The basis of the Londonderry approach is that trust documents are the property of the trust and  that the beneficiaries have a proprietary interest in the documents. Accordingly the right of a beneficiary to inspect trust documents arises from the beneficiary’s interest in the trust property.

The case of Silkman ([2011] NSWSC 148) outlined the New South Wales position when Hammerschlag J ruled that the Schmidt approach should be followed.

Schmidt: What rights does a beneficiary have to view trust documents?

Under the Schmidt approach, the beneficiary has no equitable interest which would give rise to an inherent right to view trust documents. If the beneficiary wishes to view the trust documents, the trustee is entitled to refuse the request. This does not mean that a beneficiary is completely unable to view the trust documents. Upon application, the Court may use its inherent jurisdiction to oversee the correct administration of trusts, to compel the trustee to produce the trust documents and allow inspection by the beneficiary.

The Court will make this order entirely at their discretion. This means there are no specific circumstances when they will make the order and when they will refuse the order. The Court will look to all of the circumstances of each individual case and decide if disclosure is necessary for the proper operation of that trust. However, this does not mean that the Court has provided no guidance on the factors they will take into consideration when exercising the discretion.

The Court will consider the following issues when they are asked to order the disclosure of trust documents:

Settled Law?

Interestingly, New South Wales has followed the Schmidt approach, as mentioned above in Silkman and more recently, in Wright v Stevens [2018] NSWSC 548.

However in Victoria, the Londonderry approach was applied in Deutsch v Trumble [2016] VSC 263; 52 VR 108.

The Federal Court has recently followed Schmidt in Webster (Trustee) v Murray Goulburn Co-operative Co Limited (No 3) [2018] FCA 990.

Although not ruling explicitly either way, the High Court used Schmidt as the citation for authority of the Court to compel provision of information. See [278] – [279] of Wright V Stevens which states:

“Recently, Gageler J cited Schmidt v Rosewood Trust Ltd in Palmer v Ayres (2017) 259 CLR 478; [2017] HCA 5. That case involved whether the power of a court to summon a person for examination under s 596A of the Corporations Act 2001 (Cth) (“the s 596A power”) was invalid as contrary to Ch III of the Constitution.

Although his Honour did not consider the issue of document access in particular detail, at [84], he cited Schmidt v Rosewood Trust Limited as authority for the jurisdiction of the Court “to compel the provision of information by a trustee”. Relevantly, his Honour also noted that "fundamental to the law of trusts is that the court has jurisdiction to supervise, and in appropriate circumstances, to intervene in, the administration of a trust”.

What is a trust document?

An application to view trust documents will be limited to documents which the Court deems to be ‘Trust Documents.’ There is extensive case law on what the Court has ruled is not a trust document and therefore cannot be inspected by the beneficiary. In Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, the Court held documents which are not property of the trust but prepared by the trustee for his own purposes, will not be considered trust documents. The Court put these limitations in place to ensure the trustees reason for exercising certain discretions, remains confidential. This means documents which disclose the deliberations of trustees as to the manner in which they should exercise their discretionary powers will not be trust documents. Certain correspondence by the trustee will also be excluded from the definition of trust documents. This includes correspondence between the trustees, as well as correspondence between the trustee and beneficiaries.

Although it could be considered a trust document, different rights are attached to the trust accounts. In the case of Avanes v Marshall & Ors [2007] NSWSC 191 it was held that the application of the Schmidt approach to Australian law did not affect the beneficiaries existing rights relating to trust accounts. If requested, the trustee is obligated to grant the beneficiary access to the trust accounts.    

Gold and Platinum members read on for information relating to the appointor’s right to request documents

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Disclaimer: The content of this Bulletin is general information only. It is not legal advice. Law Central Legal recommends you seek professional advice before taking any action based on the content of this Bulletin.

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