Legal update: A Beneficiaries’ right to request information from Trustees

The principles established in Schmidt v Rosewood Trust Ltd [2003] relating to a beneficiaries’ right to request information from trustees was recently confirmed by the England & Wales High Court in Lewis v Tamplin [2018].

In Lewis the settlor set up a trust and left a farm in Glamorgan to her children as beneficiaries in equal shares and some of them became trustees of the trust. Later, some beneficiaries asked the trustees to disclose certain documents relating to the administration and management of the trust. The trustees only responded to the requests around 10 months later with inadequate information. The beneficiaries were dissatisfied with the disclosure and took out a formal application with the Court seeking the disclosure of information sought by the beneficiaries. The Court needed to address what kind of information the beneficiaries were entitled to.

The Court discussed the case of Schmidt and decided to uphold the principles laid down in that case. In summary trust documents remain confidential but at the same time trustees owe a fiduciary duty to beneficiaries to keep them informed of the management of the trust and, in appropriate circumstances, provide the beneficiaries with trust accounts and other trust documents.

If trustees are being difficult, the beneficiaries are entitled to take out an application with the court for a disclosure order of documents which fall within the Court’s inherent jurisdiction to supervise and intervene in the administration of a trust. The Court has the ultimate discretion to determine whether and what trust documents should be disclosed to the beneficiaries and the beneficiaries can only seek disclosure of documents relating to the trust assets they are entitled to.

This can be contrasted with the traditional approach as set out in the case of Re Londonderry’s Settlement [1965], which is often described to as the “proprietary right” approach. In short, under this approach beneficiaries are prima facie entitled to see the trust documents as the trust documents are “owned” by beneficiaries. Such general rule, however, is subject to an exception. If the trust documents disclose the trustee’s reasons in exercising their discretion under the trust, such document needs not be disclosed to the beneficiaries.

Schmidt itself has not been widely discussed in Hong Kong and it remains unclear as to whether Hong Kong will follow the “inherent jurisdiction” approach as adopted in Schmidt and Lewis, or the traditional “proprietary right” approach as adopted in Re Londonderry’s Settlement. However, it is likely that the Courts in Hong Kong will retain at least some judicial discretion in deciding what classes of trust documents should be disclosed to beneficiaries of a trust.

Ian De Witt

The above is not intended to be relied on as legal advice and specific legal advice should be sought at all times in relation to the above.

If you would like to discuss any of the matters raised in this article, please contact:

Ian De Witt
Partner | E-mail

Eddie Look
Partner | E-mail

Pamela Mak
Partner | E-mail

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

Find out more about our Wills and Trusts practice here.