The rights of beneficiaries to trust documents have been a
regular question before the Courts for many years. A new judgment
from the Court of Appeal, Erceg v Erceg  NZCA 7, provides
trustees with guidance when asked for copies of trust
Court confirms no automatic entitlement to documents –
disclosure is a discretionary decision
The Court of Appeal upheld the High Court's decision and
confirmed the established line of authority that:
"No beneficiary has an
entitlement as of right to disclosure of trust documents.
Consequently, there is no presumption favouring disclosure. But nor
is there a presumption against disclosure.
Whether to disclose, and, if so, the
extent of disclosure, are discretionary decisions for the
What a trustee should consider when deciding whether to
The Court of Appeal said that in deciding whether or not to
disclose trust documents to beneficiaries, trustees should
issues of personal or commercial confidentiality;
the nature of the interests held by the beneficiary seeking
the competing interests (and the impact thereon) of the
beneficiary seeking disclosure, other beneficiaries, the trustees,
and any affected third parties;
whether the documents can be withheld in full, or disclosed in
a redacted form;
whether safeguards (such as undertakings or inspection by
professionals) should be imposed on the use of the disclosed trust
whether (in the case of family trusts) disclosure is likely to
create or exacerbate disputes within the family, or affect the
relationship between the trustee and the beneficiary seeking
disclosure, to the detriment of the beneficiaries as a whole;
the nature and context of the application for disclosure (for
example, where there are concerns about a breach of trust).
The weight of each of these factors, when balanced against each
other, will be a matter for the trustees to determine. The Court of
Appeal confirmed that:
"A trustee should approach a
request by a beneficiary for disclosure of trust documents as one
calling for the exercise of discretion in discharge of the
fiduciary duty a trustee owes a beneficiary."
In the Erceg case, the Court of Appeal noted that the trusts
were set up on the basis that they would be administered in
confidence, and that the settlor did not want the beneficiaries to
have information regarding the trusts. This was held to have
"considerable significance" for the final decision not to
order disclosure in this case, particularly in light of the fact
that the likelihood of a distribution to Mr Erceg when the trust
was wound up was "remote" given that he was bankrupt.
First question – is this a request for trust
The first question a trustee should determine is whether or not
the documents requested are trust documents. A beneficiary is not
entitled to documents which are not "trust documents",
and belong to a settlor or trustee in a different capacity.
Exactly what constitutes a trust document is still not settled
law, and wasn't a matter to be decided in this case. However,
the Court of Appeal noted that trust documents do include "any
document recording wishes or instructions conveyed by the settlor
to the trustees – any so-called
What if the beneficiary is bankrupt?
The Court of Appeal decided that Mr Erceg had standing to ask
for disclosure of trust documents, even though he was an
undischarged bankrupt. Although any distribution by the trust
intended for Mr Erceg may have been claimable by the Official
Assignee, that did not alter his status as a beneficiary of the
The Court of Appeal confirmed that "having beneficiary
status is not itself property, even if some of the rights that come
with that status are", and that since it was not property, the
status had not vested in the Official Assignee.
This means that a bankrupt is entitled to request disclosure of
Appointment of independent person
If an application for disclosure is made to the Court, the Court
can order or refuse disclosure of documents on a discretionary
basis. In Erceg, the application for disclosure was refused. The
Court of Appeal went on to say that if it had been minded to allow
disclosure it would have done this via an "independent
person" who would provide a report back to the Court.
A trustee faced with a request for disclosure from a beneficiary
may want to consider whether this approach could be used without
requiring recourse to the courts. This may be appropriate where
there are matters of commercial or family sensitivity and is likely
to be both a useful cost saving measure, or a good defensive
strategy to an application by a disgruntled beneficiary. It may
also be a sensible position for a beneficiary to take if faced with
repeated refusals by trustees for information.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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To ensure that all possible problems are considered and addressed, the transactions must be appropriately documented.
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