Duty to Disclose Legal Opinion

Western Australia Court of Appeal in  Schreuder v Murray [No. 2] 41 WAR 169; 260 ALR 139 ;[2009] WASCA 145 stated at [10]:

10    A trustee is the trustee of property for the benefit of the beneficiaries of the trust. The trustee and beneficiaries have a correlative duty and interest in the proper administration of the trust. The duty of the trustee includes a duty to properly perform the trust by adhering to and carrying out the terms of the trust. The beneficiaries have an interest and, indeed, a right to compel proper administration of the trust. The trustee and the beneficiaries are in a ‘formal legal relationship‘ and if the trustee obtains legal advice concerning the proper administration of the trust, then any legal professional privilege attaching to the advice obtained is the joint privilege of both the trustee and the beneficiaries. As such, the trustee and the beneficiaries, being entitled to joint privilege, may not maintain the privilege against each other.

Harman LJ in Re Marquess of Londonderry’s Settlement [1965] Ch 918 ruled that beneficiaries had the right to inspect legal opinion obtained by the Trustee.

In general the letters of the trustee’s solicitors to the trustees do seem to me to be trust documents in which the beneficiaries have a property”……”I think that must be a document which any beneficiary must be at liberty to inspect”.

Australian Court’s have upheld this ruling In Murray v Schreuder [2009] WASC 51Newnes J stated at [45]:

“It was long regarded as the law that in the case of a non-discretionary trust, where a beneficiary had a vested or contingent interest, the beneficiary had a prima facie right to inspect any property forming part of the trust estate, including trust documents used by the trustee in the administration of the trust: see Re Tillott  [1892] 1Ch 86, 88 – 89.

46    In Fratcher WF, Scott on Trusts (4th ed, vol IIA, 1987), the relevant principle was stated as follows:

The trustee is under a duty to the beneficiaries to give them on their request at reasonable times complete and accurate information as to the administration of the trust. The beneficiaries are entitled to know what the trust property is and how the trustee has dealt with it. They are entitled to examine the trust property and the accounts and vouchers and other documents relating to the trust and its administration. Where a trust is created for several beneficiaries, each of them is entitled to information as to the trust. Where the trust is created in favour of successive beneficiaries, a beneficiary who has a future interest under the trust, as well as a beneficiary who is presently entitled to receive income, is entitled to such information, whether his interest is vested or contingent.

A beneficiary is entitled to inspect opinions of counsel procured by the trustee to guide him in the administration of the trust. (462 – 465)

47    That statement of the law was adopted by Kirby P in Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 422 – 423, and by Gummow J in Re Simersall; Blackwell v Bray [1992] FCA 221;(1992) 35 FCR 584, 587 – 588. It is supported by dicta in O’Rourke v Darbishire [1920] AC 581, 619 and 626. See also, Re Fairbairn [1967] VR 633, 635 – 640; Spellson v George (1987) 11 NSWLR 300, 315 – 316.

.Newnes J stated then continued at [58]:

“In the case of a non-discretionary trust, I take the law to be that a beneficiary has a right – subject to exceptions – to inspect trust documents used by the trustee in the administration of the trust. An exception will arise in the case of documents which are private to the trustee that may evidence the reasons that the trustee has made his or her decision or exercised a discretion, in circumstances where disclosure is not required and has not been made by the trustee: Hartigan v Rydge (434, 442, 445); or where the document is the subject of a duty of confidence owed to a third party: see, for example, Hartigan v Rydge (433, 446); Schmidt (734); Morris v Morris (1993) 9 WAR 150, 154; or where disclosure is not in the interests of the beneficiaries as a whole: Rouse v IOOF Australia Trustees Ltd [1999] SASC 181; (1999) 73 SASR 484, 499; or where the terms of the trust deed give rise to an express or implied limit on a beneficiary’s right of access to trust documents: Hartigan v Rydge (446).

59    In the present case, the trust is not a discretionary trust. During Mrs Murray’s lifetime, Professor Schreuder, as trustee, is simply to invest the funds in the Hackett Foundation and to pay the income to Mrs Murray. The trust involves no exercise of discretion which could found an exception to Mrs Murray’s right to inspect trust documents. Nor is there anything which might suggest a duty of confidence owed by Professor Schreuder to a third party or arising from the terms of the trust. Nothing has been put forward which could constitute a competing consideration which might entitle Professor Schreuder to decline to permit Mrs Murray access to the documents relating to the administration of the trust. In short, nothing has been advanced which might displace Mrs Murray’s prima facie right as beneficiary to inspect the trust documents.

60    In the circumstances, I am unable to see any basis upon which Professor Schreuder is entitled to maintain, as against Mrs Murray, a claim of legal professional privilege in respect of legal advice obtained by him in respect of the administration of the trust. Mrs Murray is entitled, as a beneficiary, to inspect such advice.”

The disclosure obligations under the general law have a statutory counterpart with respect to Government Regulated Superannuation Fund under Section 1017C of the Corporations Act 2001. Section 1017C requires Trustees to provide copies of documents to Members or Beneficiaries of the Fund (or allow photocopies to be taken) unless such documents are excluded by subsection 1017C(4).

The High Court of Australia in Finch v Telstra Super Pty Ltd [2010] HCA 36 ruled that Government Regulated Superannuation Funds are not discretionary trusts but are strict trusts. The High Court stated at [61]

Thirdly, superannuation funds are not in truth discretionary trusts.

 

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