Advocate David Dorgan, from Crill Canavan's trusts and foundations team, considers why keeping accurate minutes is best practice for trustees.
It is in the interests of trustees and beneficiaries that accurate minutes and records are kept.
Not only is it a statutory obligation, but it is best practice and common sense too. Keeping accurate minutes helps to prevent future mismanagement of trusts and protects present and future trustee from negligence claims.
Trustees have a statutory obligation "to keep accurate accounts and records" of their trusteeship. While it is arguable whether "records" extends to trustees' minutes, trustees should minute their deliberations and decisions as evidence that their decisions were lawfully taken in the proper discharge of their fiduciary duties.
Thus, if the need arose, trustees could demonstrate through the provision of accurate records to a court, and/or any financial services regulator, that their deliberations - which might include reviewing expert advice, or discussing contrasting views of complex matters or high risk investments - and the decisions that then followed, were consistent with their fiduciary duties and/or compliant with financial services regulation
Trustees have a statutory obligation "to keep accurate accounts and records" of their trusteeship. Whilst it is arguable whether the word "records" extends to trustees' minutes, trustees should minute their deliberations and decisions as evidence that their decisions were lawfully taken in the proper discharge of their fiduciary duties. Thus, if the need arose, trustees could demonstrate through the provision of accurate records to a court, and/or any financial services regulator, that their deliberations - which might include reviewing expert advice, or discussing contrasting views of complex matters or high risk investments - and the decisions that then followed, were consistent with their fiduciary duties and/or compliant with financial services regulation.
Keeping accurate minutes allows for effective administration. Firstly, trustees retire, resign or are removed from office and in the case of a corporate trustee, personnel change over time. To enable future trustees or personnel to carry out effective administration, records of deliberations and decisions can allow future trustees not only to know what previous decisions were, but also to understand why they were reached. This is one reason why the obligation to minute and record ensures prudent and diligent trusteeship.
Another reason is that professional trustees are busy people who may be dealing with multiple trusts and structures at one time. Their memory for specific details will become fainter as time goes by, and the passing of time may or perhaps will distort their memories. For these reasons, a trustee giving evidence as a witness before a court, however honest, will find it difficult to withstand a challenge in cross-examination to his recollection of events if he has not kept a full, contemporaneously taken minute, but is merely basing his evidence on what he remembers of events of years ago. Apart from anything else, the court will see him as a disorganised person – so why would his mind be any more organised than his files? Contemporaneous minutes (or indeed any documents from the time in question) are always of the utmost importance to the court when deciding if trustees have acted in breach of trust.
Disclosure of Minutes
Trustees are accountable to their beneficiaries. This means that beneficiaries have a right to have disclosed to them certain pieces of information about the trust. Does this right of disclosure include trustee minutes? Jersey law provides trustees with some comfort in this regard, namely that subject to the terms of the trust and any court order, trustees are not required to disclose any document which either: (a) discloses trustees' deliberations or reasons (including the material upon which reasons are based) in respect of the exercise of any power, discretion or performance of duty; or (b) relates to the exercise or proposed exercise of a power, discretion or performance or proposed performance of a duty.
The rationale for allowing confidentiality of trustee minutes is to allow trustees to be able to weigh conflicting considerations between different beneficiaries and to judge the merits and demerits of particular courses of action without being exposed to minute examination as to their motives and processes of reasoning at the instance of disaffected beneficiaries. It is recognised by courts that trustees are entrusted with a confidential role and should therefore, in general, whilst acting in good faith, be permitted to exercise their functions without being subject to the glare of scrutiny.
However, the confidentiality of minutes is subject to the terms of the trust. Trust provisions do not ordinarily contain terms as to the requirement of trustees to keep minutes, let alone as to their disclosure. Nonetheless, it is remotely conceivable that the settlor might require the disclosure of minutes in certain specific circumstances. As trustees have a duty to carry out and administer the trust in accordance with its terms, they should be mindful of the trust's terms when it comes to disclosure of any trust documents.
Notwithstanding the terms of the trust, a beneficiary can request disclosure of minutes. Upon such a request, trustees may voluntarily disclose their minutes. Alternatively trustees may refuse disclosure and/or apply to the Court for directions. There may be compelling reasons for trustees voluntarily to disclose their deliberations and/or the reasons recorded in their minutes. Trustees might wish to ensure beneficiaries do not wrongly conclude that a refusal to disclose means that they are hiding something or that decisions have been improperly made. They might also wish, or need, to ensure that a foreign court hearing a case in which the subject-matter of the trust is in some way at issue, does not proceed on an erroneous basis. Any voluntary disclosure of minutes can be provided in redacted form and/or under the terms of a confidentiality agreement providing for the uses to which the information can be put and limiting the onward disclosure to third parties. This would safeguard the disclosure of any commercial or other sensitive information.
Finally, the general rule that minutes are confidential is subject to order of the court. If trustees are asked for disclosure but refuse to give it, a beneficiary who does not like the decision may apply to the Court for an order requiring the trustees to disclose. In deciding the question of disclosure, the Court will exercise its general supervisory jurisdiction to balance the competing interests of different beneficiaries, the trustees and third parties whilst taking into account the purpose for which the beneficiary intends to use the information. In the typical case, the result of the "balancing exercise" is usually that the Court will continue to protect trustees from disclosure of their deliberations, unless there is some question of bad faith, as this is likely to be in the best interests of the beneficiaries as a whole.
It is certainly in the interests of trustees and beneficiaries that accurate minutes and records are kept. It may well be the case that trustees take the view they should only record their final decisions in the trust's records, and record their deliberations separately in a confidential memorandum or other document to protect against disclosure and possible attack. But trustees should not allow their apprehension about disclosure of minutes to prevent the recording of deliberations in full enough form to allow for continued effective administration in the future. After all, professional trustees are paid professional fees at a level which takes into consideration the risk factor of being a trustee.
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.