I have advised settlors and trustees throughout my career and in recent years I have taken on quite a few trusteeships where independent trustees are required to act. Through this work I have often faced difficult decisions about disclosure of trust information to particular beneficiaries. There has been an article published in the November edition of the New Zealand Law Journal regarding the provision of trust information (and another piece touching on the topic in a recent LawNews edition.). This has given me pause for thought.
I have decided to write this letter (and similar ones to NZLJ and NZ Lawyer) simply to provide my practical perspective on the very real difficulties encountered by trustees in relation to disclosure of trust information. I would hope these elements are not overlooked as the debate on this challenging aspect continues.
In my experience, there is certainly no “one size fits all” when it comes to the best interests of the body of beneficiaries, or in serving the interests of the trusts created. This is especially so when it comes to information distribution. There are circumstances where the best interests of the trust and beneficiaries are considered and disclosure is not appropriate. With some trusts, the settlor has been concerned to ensure the trust’s existence is not disclosed to beneficiaries. These settlors are anxious to ensure knowledge of the existence of wealth does not de-motivate beneficiaries in making their own way in life. In others, it is necessary to withhold information from particular beneficiaries to protect sensitive commercial information, other beneficiaries, the settlor’s aims or the beneficiary themselves. In some situations it has been the guardians of beneficiaries who have been the concern. In my time as a professional trustee, I have encountered beneficiaries with all sorts of incapacities and difficulties. This is sometimes in circumstances of divided families, particularly extended families. I’m sure my experience is not unusual.
I interpret the article in the November NZLJ as suggesting that beneficiary requests for information should not be dealt with on a discretionary basis. The author seems to me to be suggesting there should be no reservation of discretion to trustees to withhold or limit disclosure even where there is good reason to do so. In my respectful view there is a clear and compelling reason for the discretion. It acknowledges that every trust is unique in terms of purpose, the identity of beneficiaries, the trust property, the circumstances of each beneficiary and the relationships between them. Additionally, many of these factors constantly evolve, requiring frequent reconsideration by trustees. As I’ve touched on above trustees often face challenging circumstances. While I am not for a moment suggesting that trustees’ fiduciary obligations should in any way be diminished (to the contrary), diligent and responsible trustees should not in my view be constrained by prescriptive rules as to the way they deal with trust information.
It would concern me if the discretion was removed in favour of a desire for more certainty. The High Court’s inherent jurisdiction to supervise trusts provides a safeguard to ensure the discretion is not misused. While we don’t live in a perfect world this is a jurisdiction which in my view is working pretty well. It is noteworthy that the new Trusts Bill reserves for trustees the discretion to withhold information where the circumstances justify it. I support this approach. I hope the difficulties faced by trustees in this context are understood by Parliament in debating the Bill.