Beneficiary Access to Trust Information
Rauch & Ors v Maguire & Anor  2 NZLR 845
The days when trustees of a trust could operate on the basis that beneficiaries are excluded from trust information have been gone for some time. That was reinforced recently by a decision in the Auckland High Court in Rauch & Ors v Maguire & Anor, although the Judge declined the application before him.
The case involved an application by the residuary beneficiaries (Messrs Rauch) of a deceased estate against the executors and trustees (Mr Maguire and Mr Ward) of that estate. The applicants sought documents relating to past transactions of the deceased, including any prior wills he may have made, and files held by his solicitors dealing with his affairs and finances while he was alive.
The fundamental concern of the Rauchs was that certain properties had been placed in joint tenancy by the deceased with the executor Mr Maguire, prior to the deceased’s death. As a result, those properties had been excluded from the residuary trust created under the deceased's will, in which the Rauchs participated. Instead they to Mr Maguire by survivorship. The properties were of considerable value.
The Rauchs were clearly contemplating a testamentary promises claim and a challenge to the transfers into joint tenancy. They sought access to the information relating to these transactions on the basis that it bore upon the true trust estate. The executors and trustees refused to provide it because they said it related to property which was not part of the trust residue which they administered.
Asher J reviewed the rights of the applicants against the respondents, both as executors and trustees, saying that the position was different for each. As against executors residuary beneficiaries had no greater rights to access the documents being sought than they would have had against the deceased during his lifetime. Fiduciary duties aside, executors could not be compelled to disclose documents in the manner the application proposed.
Assuming, however, that the transition to a testamentary trust had occurred, the Judge held that different considerations applied as against the trustees. He began by citing the leading authority in the Privy Council decision, Schmidt v Rosewood Trust Limited  2 AC 709, and went on to hold that the obligation on trustees to disclose arises from the duty to carry out their trusts properly. This gives beneficiaries (including potential beneficiaries) a correlative right to enforce that duty. Information was required to give effect to that right of enforcement. The right to receive information was not absolute but then neither was there an absolute right on the part of trustees to withhold it.
Asher J canvassed the differing views about Court ordered disclosure: whether it is to be seen as the exercise of the Court’s discretion in the oversight of trust administration or reflective of a beneficiary property right. He noted that in the case of a discretionary beneficiary no property right exists (until the trustee exercises a discretion which vests property in the beneficiary). Although arguments might be made based on the contingent interests of a discretionary beneficiary, the Judge preferred the view that under New Zealand law the issue of disclosure was a matter of the Court intervening to enable vested and discretionary beneficiaries a meaningful opportunity to ensure proper administration of the trust, ie to enforce the trustees' duty to account.
The Judge noted:
As part of that duty to account, the trustee must on a reasonable request, disclose trust documents to a vested or discretionary beneficiary, unless there are good reasons not to do so. On this basis the accounts of a trust would be generally disclosed on the direct request, as would documents relating to the assets of the trust and the trustee’s actions in relation to those assets. However, a confidential memorandum of wishes might not be disclosed if an intention on the part of the settlor that they not be disclosed may be discerned, or viewed objectively, such disclosure may not be in the interests of the beneficiaries as a whole. If a trustee is in doubt, it can apply to the court for a direction under s 66 of the Trustee Act 1956.
None of this availed the applicants, however, because the Court declined to intervene in matters that were outside the scope of the trust which the respondents had actually been administering. The Trustees had never conducted themselves on the basis that the properties in question had formed part of the residue held in trust. The application sought access to documents that were unconnected at all with the administration of the residuary trust. The documents related to transactions by the testator which had occurred well before his death and so they were not trust documents at all.
Trustees can be expected therefore to provide beneficiaries and potential beneficiaries with reasonable information about the trust when asked to do so, but that expectation does not extend to information that relates to non trust assets or dealings, even when there may be a pending dispute over whether the assets ought to have been taken into trust.