Beneficiaries' Rights To The Disclosure Of Trust Documents

INTRODUCTION

The purpose of this briefing note is to consider Jersey

trust law in relation to beneficiaries' rights to trust

documents, in particular, Article 29 of the Trusts (Jersey) Law

1984, as amended, and the cases of In re Rabaiotti 1989

Settlement [2000 JLR 173] and Schmidt v. Rosewood Trust

Company Ltd [2003] 3 All ER 76.

TRUSTEES' DUTY TO ACCOUNT

In the English case of Armitage v. Nurse [1998] Ch

241 it was held that there was an irreducible core of

obligations owed by a trustee to beneficiaries which is

fundamental to the concept of a trust. If those obligations are

missing then there is no trust. The duty of a trustee to

account to beneficiaries for his administration of a trust is

one of those core obligations and the right of beneficiaries to

trust documents enables beneficiaries to enforce that duty to

account.

Although it is clear that, in principle, beneficiaries have

a right to see trust documents, it is also the case that there

are limitations on this right and, as a result, it is often

difficult for a trustee to decide how to react to requests for

disclosure.

RIGHTS TO DISCLOSURE CONFERRED ON BENEFICIARIES UNDER THE

TRUSTS (JERSEY) LAW 1984 (AS AMENDED) (THE

"LAW")

Article 29

Article 29 of the Law reads as follows:

"Trustee may refuse to make disclosure

Subject to the terms of the trust and subject to any

order of the court, a trustee shall not be required to disclose

to any person, any document which -

discloses the trustee's deliberations as to the

manner in which the trustee has exercised a power or

discretion or performed a duty conferred or imposed upon

him or her;

discloses the reason for any particular exercise of

such power or discretion or performance of duty or the

material upon which such reason shall or might have been

based;

relates to the exercise or proposed exercise of

such power or discretion or the performance or proposed

performance of such duty; or

relates to or forms part of the accounts of the

trust,

unless, in a case to which sub-paragraph (d) applies,

that person is a beneficiary under the trust not being a

charity, or a charity which is referred to by name in the terms

of the trust as a beneficiary under the trust or the enforcer

in relation to any non-charitable purposes of the

trust."

The right of beneficiaries to see the accounts of

the trust

At first glance Article 29 can appear somewhat confusing,

but it is clear that, despite its heading, it confers positive

rights on beneficiaries to see documents relating to the

accounts of the trust (a point confirmed in Rabaiotti).

Unfortunately, the meaning and scope of the phrase,

"documents which relate to or form part of the

accounts of the trust", is not entirely clear. In

West v. Lazard [1987-88 JLR 414] it was given a very

wide meaning so as to include "all accounts, vouchers,

coupons, documents, and correspondence relating to the

administration of the trust property". However In re

Lombardo Settlement (5 December 1990 unreported) and In re a

settlement [1994 JLR 139] it was suggested that the phrase did

not have such a wide meaning. The Economic Development

Committee, in its recent consultation on proposed amendments to

the Law, did consider introducing a definition of accounts but

decided that to do so would be too difficult.

Documents which beneficiaries are not entitled to

see

Article 29 also sets out several categories of documents

which a trustee is not normally required to disclose to

beneficiaries, namely, documents which fall within

sub-paragraphs (a) to (c). In very general terms, they are

those documents which set out the reasons for the exercise of

the trustee's powers or the performance of his duties.

The role of the courts and the trust

instrument

It is also important to note the opening words of the

Article, which make it clear that disclosure or nondisclosure

(as the case may be) is subject to an order of the court (see

Rabaiotti below) or the terms of the trust instrument. In

relation to the latter, it may be possible for a trust

instrument to further restrict beneficiaries' rights to

trust documents or indeed widen them beyond the scope of

Article 29. What is clear though is that the trust instrument

cannot unduly restrict or exclude entirely beneficiaries'

rights to trust documents and...