Partner and head of private wealth disputes at law firm Hugh James, Roman Kubiak, looks at the topic of information and disclosure requests by beneficiaries. This article is part of a series. The article examines case law and rulings.

Continuing a series of articles from law firm Hugh James, Roman Kubiak, who is partner and head of wealth disputes at the firm, discusses the topic of information and disclosure requests by beneficiaries. (See his previous article.) The editors are pleased to share these insights; the usual editorial disclaimers apply. To comment, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com.

It is generally accepted that trustees have a duty to account to beneficiaries and that beneficiaries can therefore call on trustees to produce accounts, often in the hope of seeing details of trustee remuneration, distributions, gains and losses. A case often cited with such requests is Armitage v Nurse [1997] EWCA Civ 1279, where Lord Justice Millet referred to the: 

“irreducible core of obligations owed by trustees to beneficiaries and enforceable by them which is fundamental to the concept of a trust. If the beneficiaries have no rights enforceable against the trustees there are no trusts.”

But what information beneficiaries are entitled to is a moveable feast and, indeed, how these principles have been applied in various jurisdictions has also differed, with the courts constantly balancing beneficiaries' rights against trustees' need for discretion.

In 2003 we had the Privy Council decision in Schmidt v Rosewood Trust Ltd [2003] UKPC 26 which was an appeal from the Manx High Court where the beneficiaries sought disclosure of trust accounts and other documents from trustees of two Manx trusts.

Schmidt appears to overturn the previous decisions in cases like O’Rourke v Darbishire [1920] AC 581 and Re Londonderry’s Settlement [1965] Ch 918. Those cases had confirmed that beneficiaries had an automatic proprietary right to trust documents. 

While the main principles have been debated at length both by lawyers and courts alike, what Schmidt seems to suggest is that beneficiaries have no absolute right to disclosure. Instead, the courts have an inherent jurisdiction to order disclosure but, generally speaking, the extent to which they will order disclosure of trust documents, and which such documents they will order disclosure of, largely depends on the extent of the beneficiary’s interest in the trust. 

Schmidt was adopted into English law by Mr Justice Briggs, as he then was, in Breakspear v Ackland [2008] EWHC 220 (Ch).

So, what information are we talking about? 

Well, it could be anything from the trust accounts, trust deed or financial statements, to letters of wishes, minutes of trustee meetings, correspondence with advisors or board minutes for any underlying corporate entities. 

And how have these principles been applied in the various trust jurisdictions?

In Jersey one of the earlier leading cases was in re Rabaiotti 1989 Settlement [2000 JLR 173] where Mr Rabaiotti was ordered to disclose certain documents in relation to a number of discretionary trusts of which he was a beneficiary to his former wife, in the context of ancillary relief proceedings. 

The Royal Court held that there was a strong presumption in favour of disclosing accounts to a beneficiary but that it had an overriding discretion to withhold disclosure of documents where it was in the best interests of the beneficiaries as a whole. One such class of documents that the court held would often warrant a refusal to disclose was the letter of wishes. 

Jersey has enshrined its treatment of disclosure in article 29(1) of the Trusts (Jersey) Law 1984, which states that:

"Subject to any order of the court, the terms of a trust may –

1. confer upon any person a right to request the disclosure of information or a document concerning the trust;
2. determine the extent of the right of any person to information or a document concerning the trust; or
3. impose a duty upon a trustee to disclose information or a document concerning the trust to any person." 

As such, where a trustee of a Jersey-based trust is faced with a disclosure request, step one is to check the trust instrument before considering who’s making the request and, assuming that they’re a beneficiary, step two is to check the extent of their beneficial interest.

Article 29(2) goes on to confirm that, subject to any order of the court and the terms of the trust, beneficiaries and enforcers of purpose trusts "may request disclosure by the trustee of documents which relate to or form part of the accounts of the trust."

Likewise, the Jersey courts have very much leant towards ordering disclosure of the trust instrument and details of distributions and dealings with the trust assets to beneficiaries, albeit subject to appropriate redactions.

Article 29(3) confirms that, again subject to any order of the court, a trustee can refuse disclosure "where the trustee in the exercise of its discretion is satisfied that it is in the interests of one or more of the beneficiaries, or the beneficiaries as a whole, to refuse the request."

Further, and a useful point for trustees when dealing with an exercise of their discretion, article 29(4) confirms that, subject to the terms of the trust and to any order of the court, a trustee isn’t required to disclose its deliberations, reasons or materials upon which decisions may be based (e.g. letters of wishes).

Likewise, Guernsey has also codified its rules on disclosure of trust documents under section 26 of the Trusts (Guernsey) Law 2007 which states that:

“(1) A trustee shall, at all reasonable times, at the written request of – 
(a) any enforcer, or 
(b) subject to the terms of the trust – 
(i) any beneficiary (including any charity named in the trust), 
(ii) the settlor, or 
(iii) any trust official, 
provide full and accurate information as to the state and amount of the trust property. 

(2) Where the terms of the trust prohibit or restrict the provision of any information described in subsection (1), a trustee, beneficiary, trust official or settlor may apply to the Royal Court for an order authorising or requiring the provision of the information. 

(3) The person applying to the Royal Court for an order under subsection (2) must show that the provision of the information is necessary or expedient – 

(a) for the proper disposal of any matter before the court, 
(b) for the protection of the interests of any beneficiary, or 
(c) for the proper administration or enforcement of the trust.” 

In the recent decision of BX v T Limited [2024] GRC 036, the Royal Court of Guernsey ruled on whether trust information could be disclosed to individuals who might become future beneficiaries. The applicants, “B” and the “US Family,” sought details from the “W Trust” based on their potential beneficiary status. B sought an account from the trustees while the US Family sought relevant disclosure about the trust structures to address adverse tax consequences due to US regulations. The current beneficiaries of the trust opposed the disclosure, arguing that the applicants were not within the trust's proper purpose.

The court dismissed the applications, stating that non-beneficiaries must have an "overwhelmingly strong" claim to be treated as de facto beneficiaries. It found the purposes for which disclosure was sought were not sufficiently related to the proper administration of the trust. The decision confirms that, while the courts are willing to order disclosure for current beneficiaries, their supervisory jurisdiction over trusts does not easily extend to non-beneficiaries unless there are clear and compelling reasons.

And in the Isle of Man there has been the recent introduction of the Trusts and Trustees Act 2023 which added a new provision to the 2001 Trustee Act relating to the disclosure of trust information and the relevant parts of which state:

“(3) The following may request disclosure of trust information by a trustee –  

(a) a beneficiary of the trust which is not a charitable trust; 
(b) a charity which is referred to by name as a beneficiary of the trust; 
(c) a protector. 

This is subject to the terms of the trust and any order of the court. 

(4) A trustee may refuse a request referred to in subsection (3) where he is satisfied that it is in the interests of one or more specific beneficiaries, or the beneficiaries as a whole, to do so. This is subject to any order of the court. 

(5) A trustee shall not be required to disclose trust information in respect of – 

(a) his deliberations in respect of any power, discretion or duty he has; 
(b) the reasons for any decision of his in respect of the exercise or non-exercise of any such power, discretion or duty; 
(c) some other beneficiary or potential beneficiary of the trust where requested to do so by another beneficiary of that trust. This is subject to the terms of the trust and any order of the court. 

(6) Despite the terms of a trust, the court may upon the application of P make such order as it sees fit determining – 

(a) generally or in a particular circumstance, the extent to which any person may request and receive trust information; 
(b) whether any limitation on disclosure imposed by the terms of the trust is reasonable in all the circumstances. 

(7) Despite the above, a trustee must disclose trust information to a person having a supervisory, regulatory or enforcement function for the purposes of that function. This is subject to any order of the court. 

(8) P means – 

(a) a trustee of the trust; 
(b) a beneficiary of the trust; 
(c) a protector; and 
(d) with leave of the court, any other person. 

(9) This section applies to trusts whether created before or after its commencement.

Likewise, in the Cayman Islands, while case law has been remarkably light on the issue, the Schmidt decision appears to be the generally accepted rule. 

Prior to that, we had Lemos v. Coutts & Company (Cayman) Limited [1992-93] CILR 460 where it was held that a beneficiary has no absolute right to documents or categories of documents and disclosure would only be ordered where it would be just and proper or evidentially essential to the beneficiaries' case, so no room for the dreaded fishing expeditions! 

However, where a beneficiary is making serious allegations against the trustees the courts will most likely order disclosure of accounts.

Trustees of Cayman Islands trusts also need to be mindful of the Confidential Relationships (Preservation) Law which deals with the disclosure of confidential information, including information relating to any property that the recipient is not authorised by the principal to divulge. Subject to certain exceptions, it is an offence to divulge or obtain confidential information.

In re Merrill Lynch [2006] CILR N33, it was held that the relevant principal in the case of trusts is the settlor. In many cases (such as where the settlor has died) it may not be possible to obtain the settlor’s consent to disclosure.

We are also seeing STAR (Special Trusts Alternative Regime) trusts being used as effective tools for restricting beneficiaries’ rights to information. These are also proving to be effective wealth planning tools particularly as part of a wider family office structure. 

STAR trusts are statutory trusts which provide for one or more “enforcers” which can be corporate entities or individuals. It is these enforcers who have legal standing to enforce the trust and to seek disclosure. As such, unless they are also enforcers, beneficiaries don’t have any enforceable right against a trustee or an enforcer to seek disclosure of trust information.

Disclosure and data protection
In recent years, we've also seen an increasing interplay between trust law and other legal domains. In the UK we had the 2017 case of Dawson-Damer v Taylor Wessing LLP [2017] EWCA Civ 74 which looked at the intersection of trust law disclosure and data protection rights. 

There, a beneficiary of a Bahamian proper law trust made a request of the trustee’s UK solicitors seeking information on appointments of $402 million out of the trust and into other discretionary trusts for the benefit of other beneficiaries. The firm in question refused to comply with the request and relied on the legal professional privilege exemption in Schedule 7, paragraph 10 of the Data Protection Act 1998. However, the Court of Appeal rejected this argument, holding that the Data Protection Act 1998 did not contain an exception for documents not disclosable to a beneficiary under trust law principles. The judgment appears to offer beneficiaries seeking information (including expressly for use in litigation) a means of circumventing both traditional trust law principles and, by addressing the request to a trustee’s English lawyers (as in this case), protections that may exist in local law. 

That said, this decision was slightly curtailed a month later in the joint hearings of Ittihadieh v Cheyne Gardens & Ors and Deer v University of Oxford [2017] EWCA Civ 121 which appears to give more comfort to data controllers by suggesting that: 

1. data subjects need to show a legitimate reason for making a Data Subject Access Request (even if there is also a collateral purpose, namely litigation);
2. data controllers can cite proportionality as a reason to legitimately limit the scope of their search; and 
3. the court will consider the broader facts when deciding whether or not to compel a data controller to respond to a Data Subject Access Request.

Over in Jersey, you have the Data Protection (Jersey) Law 2018. Article 47 contains a specific exemption in respect of Jersey proper law trusts, to the extent that the personal data consists of information which is permitted to be withheld by Article 29 of the Trusts Law or disclosure of which is prohibited under Jersey law. There is also an exemption in respect of trusts whose proper law is a jurisdiction other than Jersey, where withholding such information would be permitted under that foreign law, or disclosing such information would be prohibited under that foreign law.

Practical steps
So, what can be gleaned from all this? Well, if you’re faced with a disclosure request, consider:

1. The trust instrument.
2. Extent and rationale behind beneficiary’s interest.
3. If request is for accounts then, unless good reason to refuse, disclose those parts relevant to beneficiary's interest.
4. Likewise, reasonable to disclose trust instrument and any deeds of appointment.
5. Thereafter very much based on case-by-case basis mindful of interests of other beneficiaries, the trust as a whole and overriding duties.

Grounds for resisting disclosure can include:

1. Protection of commercial sensitivity;
2. Maintaining confidentiality of other beneficiaries;
3. Preserving trustee decision-making processes;
4. Preventing fishing expeditions by potential claimants;
5. Where the request is made by a non-beneficiary or someone without a present standing.

Ultimately, the key is to maintain clear record-keeping policies, establish protocols for responding to disclosure requests and seek legal advice early when facing potential litigation.