Contents

Chapter 5
Trustees’ duties

Provision of information

RECOMMENDATION

R6The new Trusts Act should provide that:
(1) Trustees have a mandatory obligation to provide sufficient information to sufficient beneficiaries to enable the trust to be enforced;
(2) There is a presumption that trustees must:
(a) notify qualifying beneficiaries (those who the settlor intended to have a realistic possibility of receiving trust property under the terms of the trust) as soon as is practicable of the fact that a person is a beneficiary, names and contact details of trustees and the right of beneficiaries to request a copy of the trust deed or trust information; and  
(b) provide trust information to a beneficiary who requests it within a reasonable time.
(3) The presumptions in (2) do not apply if a trustee reasonably considers that the information should not be provided after taking into account the following factors:
(a) the nature of the interests held by the beneficiaries, including the degree and extent of a beneficiary’s interests or a beneficiary’s likely prospects of receiving trust property in the future;  
(b) whether there are issues of personal or commercial confidentiality;  
(c) the expectations and intentions of the settlor at the time of the creation of the trust as to whether beneficiaries would be notified;  
(d) the age and other circumstances of the beneficiaries;  
(e) the impact on the trustees, other beneficiaries, and third parties;  
(f) whether, in the case of a family trust, notification or non-notification may embitter family feelings and the relationship between the trustees and beneficiaries to the detriment of the beneficiaries as a whole;  
(g) the practicality of providing information to all beneficiaries or members of a class of beneficiaries in a trust where there are large numbers of beneficiaries or unascertainable beneficiaries;  
(h) whether some or all of the documents can be disclosed in full or in redacted form; and  
(i) whether safeguards can be imposed on the use of the documents (for example, undertakings or professional inspection).
(4) “Trust information” is defined to include any information regarding the terms of the trust, the administration of the trust, or the trust property that it is reasonably necessary for the beneficiary to have in order for the trust to be enforced, but does not include reasons for trustees’ decisions.
(5) A beneficiary may be charged for the reasonable costs of being provided with the trust information.
(6) Trustees are entitled to apply to the court for an order as to whether they are required to notify a beneficiary or class of beneficiaries under (2)(a), or for an order as to whether they are required to provide a beneficiary with trust information under (2)(b). A beneficiary is entitled to apply to court for an order that the trustees supply trust information. The court is able to review the exercise of the trustees’ discretion and merits of the trustees’ decision.

Disclosure of information to beneficiaries

5.46There cannot be any obligation, and hence there cannot be any trust, if the trustee does not owe a duty to account to any beneficiary.180 To be able to hold a trustee to account, beneficiaries need to know that they are beneficiaries of the trust and need to be able to be provided with trust information on request. While trust deeds can never dispense completely with the requirement to account to beneficiaries and the need to provide some information to some beneficiaries, what is required in each trust is dependent on the trust’s circumstances. The decision as to whether a particular beneficiary is entitled to be notified that he or she is a beneficiary or is entitled to receive trust information on request has been found by the Privy Council in Schmidt v Rosewood Trust to be something that is within the court’s inherent jurisdiction to supervise the administration of trusts.181 Based on this decision, which was followed in New Zealand in Foreman v Kingstone,182 the courts will apply the principle that a beneficiary should be notified of or provided with the information that is necessary to enable the trust to be enforced. We consider it important to translate this principle into statutory rules and guidance as to how a trustee is to exercise the trustee’s discretion.

5.47There appears to be general satisfaction among submitters with the principle in Schmidt v Rosewood Trust and no desire to change this. However, there is concern that from a practical perspective it is currently difficult for trustees to determine what their obligation to provide beneficiaries with information entails, because the position relies on the discretion of the court. The current law does not provide clear guidance to trustees in particular circumstances as to how decisions regarding notifying beneficiaries and providing beneficiaries with information should be made. It appears that trustees are commonly required to make decisions about providing information and could do with greater clarification and guidance. The New Zealand Law Society commented that the law is only partially satisfactory because there is uncertainty. It also pointed to several problems in practice: a lack of awareness among trustees of what the disclosure obligations are; inconsistent disclosure practices; uncertainty about the extent to which a settlor can exclude disclosure obligations; and uncertainty about what age beneficiaries must be before information must be disclosed to them.

5.48We do not think it possible or desirable for legislation to introduce fixed rules about which beneficiaries must receive what information because the law is, and needs to continue to be, trust and beneficiary specific. There will always need to be consideration of a number of factors in order to judge whether the trustee’s mandatory general obligation to provide sufficient information to sufficient beneficiaries for the trust to be enforced results in a particular beneficiary or class of beneficiaries having a right to be notified of their status and to be provided with trust information. However, we consider that it is helpful for legislation to present the process that applies and the factors that may outweigh the general disclosure obligation (see draft clauses 38 to 44 below).

5.49In response to feedback from submitters and consultees, we have clarified the recommendation from what was presented in the Preferred Approach Paper.183 We have removed the option for the Public Trust to provide advice on whether trustees are required to release information to beneficiaries. This proposal was not supported by submitters. We now consider that trustees are sufficiently able to obtain advice on this issue from a range of sources, including a lawyer, the Public Trust or another adviser.

5.50We are aware that some people would consider the presumption to notify certain beneficiaries (qualifying beneficiaries) to be an advancement on where the law is currently, although for trustees to be accountable it is clearly the case that some beneficiaries have to know about the trust. Trustees are likely to need to be more proactive in notifying beneficiaries. This may alter the way that some settlors choose to structure the beneficiaries of a trust, and may limit the types of beneficiaries included in a trust. We are confident that these recommendations will help trustees carry out their role with respect to beneficiaries in a way that truly reflects the respective rights and obligations of the parties involved in a trust.

5.51In some cases there will be good reasons for settlors desiring to hold back information from some beneficiaries. So long as this can be justified in accordance with the factors proposed, settlors will continue to be able to do this.

How the recommended provisions will workTop

5.52We intend that the provision we recommend in R6(1) will confirm the mandatory obligation on trustees to provide sufficient information to sufficient beneficiaries to enable the trust (that is, the terms of the trust and the duties of the trustees) to be enforced. The new Act will set out two presumptions: that the trustee must notify qualifying beneficiaries of certain basic trust information (R6(2)(a)) and that the trustee must provide information to a beneficiary who requests it (R6(2)(b)). Despite these presumptions the trustee may decide that the information should not be provided if the trustee considers it reasonable not to after taking into account a range of factors (R6(3)). These factors are intended to allow the trustee to take into account the particular circumstances of the trust and the beneficiaries, the intentions of the settlor and the type of information. The factors are not determinative of what decision must be made but they provide guidance as to what process and type of consideration a trustee must go through before withholding information.

5.53The provisions we recommend apply to every trust. However, there will be certain types of trusts for which there will be a high likelihood that it will be reasonable for the presumptions not to apply because of the nature of these trusts (for instance, a large number of beneficiaries, presence of commercially sensitive information). Some types of trusts already contain perfectly adequate information provisions schemes within the terms of the trust, such as some Treaty settlement trusts, or within a statute, such as financial markets trusts. Another example is the energy trusts, which have the “Guidelines for access to information by beneficiaries of electricity community and consumer trusts”, a form of self-regulation supported by the Government when energy trusts were developed. They were introduced as an alternative to regulations to address this issue.184

Application to existing trustsTop

5.54The provisions in this recommendation should apply to all trusts settled after the enactment of this Act and all trusts already in existence after the lapse of two years after the enactment of this Act. We acknowledge that there may be administrative challenges with trustees meeting these obligations and think that there should be sufficient time for these to be worked through. Trustees of existing trusts will need to consider the settlor’s implied intention when balancing the reasons for withholding information against the presumptions to notify and provide information to beneficiaries, as existing trusts may not have an express statement of the settlor’s intention regarding disclosure of information to beneficiaries.

180David J Hayton, Paul Matthews and Charles Mitchell Underhill and Hayton Law of Trusts and Trustees (18th ed, LexisNexis, London, 2010) at [56.14] [Underhill and Hayton]; Armitage v Nurse, above n 166, at 253.
181Schmidt v Rosewood Trust [2003] UKPC 26, [2003] 2 AC 709 at [66].
182Foreman v Kingstone [2004] 1 NZLR 841 (HC); see also Rauch v Maguire [2010] 2 NZLR 845 (HC) at [30].
183Preferred Approach Paper, above n 164, at P9.
184Submission of the Auckland Energy Consumer Trust on the Fourth Issues Paper at 1–2.