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39 Essex Street , 25 JUL 2014

Trust confidentiality

Trust confidentiality

‘I want minimum information given with maximum politeness.' (Jacqueline Kennedy Onassis to her press secretary)

A settlor, particularly of a private non-charitable trust, may well expect the affairs of the trust to be conducted privately and away from the gaze of inquisitive outsiders. The trustees of a trust may consider that a young adult should not be told until he is more mature, or free from undesirable influences, that he is a beneficiary of a trust. Or they may be concerned that information is being sought by a disgruntled beneficiary who is looking for ammunition to attack the trust itself. On the other hand, a beneficiary who does not know of his interest under a trust cannot enforce his rights against the trustees. A beneficiary who is wrongly excluded as a beneficiary will not be able to challenge that decision without information. So who should be given what information about a trust? This question is not easy to answer.
The leading English authority is the Privy Council decision of Schmidt v Rosewood Trust Ltd (Schmidt v Rosewood).[1] Before that decision the legal analysis as to the duty of trustees to provide information to beneficiaries was unclear. The English courts had focused on the notion that certain beneficiaries have a proprietary interest in trust property and were entitled to inspect trust documents as they were ‘their' property. Since Schmidt v Rosewood it has become broadly accepted that disclosure is given as part of the trustees' duty to account to their beneficiaries.[2]  This article will examine (in outline) what this means.[3] This article is based on English trust law. In recent years many jurisdictions have enacted statutory provisions to regulate disclosure under trust law.[4] Nevertheless, even there, trust law principles may remain relevant.

[1] [2003] UKPC 26, [2003] 2 AC 709.
[2] But not everywhere, see eg, McDonald v Ellis [2007] NSWSC 1068 declining to follow Schmidt v Rosewood.
[3] This is a complicated area and a brief article. No attempt is made to explain all the relevant case-law of different jurisdictions or the differing views of commentators or judges. These are this author's views. Further, the question of the extent to which trustees are entitled to disclose trust information to third parties to protect the trustees' personal interests, such as where the trustees are facing criminal proceedings, is beyond the scope of this article but the reader is referred to the decision in B v T (Guernsey Court of Appeal, 11 July 2012).
[4] See, eg, the Bahamas, Cayman Islands, Guernsey, Jersey and Mauritius. This is not a full list.

The full version of this article appears in issue 2 of 2014 of the Journal of International Tax, Trust and Corporate Planning. If you subscribe to the journal please click here to read the full article.

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