McDonald v Ellis and Murray v Schreuder

McDonald v Ellis [2007] NSWSC 1068; (2008) 72 NSWLR 605

A will created a trust to pay Ms Ellis the net annual income from a block of flats during her lifetime. On her death the bock of flats was to pass to he children (the remaindermen).

After the trust had been in operation for some years, one of the children sought an order that the trustees provide her with the accounts elating to the estate asset.

Bryson AJ held:

(1) A beneficiary with a vested interest in trust property, as in the present case, even though the interest is not yet vested in possession, has a right of access to the estate accounts and information about the estate asset (613 [30], 613 [32], 617[46])

Re Londonderry’s SEttlement; Peat v Walsh [1965]1 Ch 918; Hartigan Nominees Pty Ltd v Rydge (1992) NSWLR 405 followed

(2) This right follows from the treatment of the beneficiary’s equitable interest as a proprietary interest. It is not a matter for the Court’s discretionary exercise of its inherent jurisdiction to supervise the administration of trusts (614 [35], 617 [46], 618 [48], 618 [51], 619 [52])

Hartigan Nominees Pty Ltd v Rydge (1992) NSWLR 405 followed

Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at 729, 734-735, not followed

Bryson AJ stated at [32]:

Until recently judicial authority established in a clear way that a beneficiary with a vested interest in trust property, even though that interest was not yet vested in possession, had a right to information about the estate property, including a right to see estate accounts and the right to inspect the property. This apparently clear position was disturbed by observations in the judgment of the Privy Council delivered by Lord Walker of Gestingthorpe in Schmidt v Rosewood Trust Ltd (2002-03) 5 ITELR 715, [2003] 3 All ER 76, [2003] 2 AC 709 at 734-735, [2003] UKPC 26, [2003] 2 WLR 1442, [2003] Pens LR 145, [2003] WTLR 565
33 The Judicial Committee’s concluded view is indicated at two passages, the first at 729:

51 Their Lordships consider that the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the court’s inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts. The right to seek the court’s intervention does not depend on entitlement to a fixed and transmissible beneficial interest. The object of a discretion (including a mere power) may also be entitled to protection from a court of equity, although the circumstances in which he may seek protection, and the nature of the protection he may expect to obtain, will depend on the court’s discretion … (and their Lordships referred to authority).

34 At 734-735 their Lordships said:

66 Their Lordships have already indicated their view that a beneficiary’s right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, is best approached as one aspect of the court’s inherent jurisdiction to supervise, and where appropriate intervene in, the administration of trusts. There is therefore in their Lordships’ view no reason to draw any bright dividing line either between transmissible and non-transmissible (that is, discretionary) interests, or between the rights of an object of a discretionary trust and those of the object of a mere power (of a fiduciary character). The differences in this context between trusts and powers are (as Lord Wilberforce demonstrated In Re Baden (No 1) McPhail v Doulton [1970] 2 All ER 228; [1970] UKHL 1; [1971] AC 424, 448-449; a good deal less significant than the similarities. The tide of Commonwealth authority, although not entirely uniform, appears to be flowing in that direction.

67 However the recent cases also confirm (as had been stated as long ago as in re Cowin 33 Ch D 179 in 1886 that no beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it. In many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief.

35 When considering the case law it is important to bear in mind something I have already alluded to, that the plaintiff in the present case has a vested interest in the trust property and is not in the position of the object of a discretionary trust who may or may not, according to some future decision or contingency, come to have an interest. This is a basal consideration because the claim of a person with a vested interest is related to property rights and is a claim to information about the person’s own property. This is no less so because the title of the property is equitable. A claim by the object of a discretionary trust has a less clear and compelling basis. If their Lordships’ conclusions were followed, it would be necessary to depart from the state of opinion which I regard as clearly established in New South Wales and to do so for reasons which do not touch on the case of a beneficiary with a vested interest making a claim for documents the characterisation of which as trust documents cannot be doubted.
36 The clarity of the position existing prior to Schmidt v Rosewood Trust Ltd is borne out by an analysis of earlier authority. The first case to which counsel referred me was Walker v Symonds (1818) 3 Swanston 1; [1818] EngR 592; 36 ER 751. This complex case related to liability of trustees for default by a co-trustee; the facts included a release given by the beneficiary without adequate information. In the course of argument Lord Eldon LC said (3 Swanston 58, ER 772):

It is the duty of trustees to afford to their cestui que trust accurate information of the disposition of the trust-fund; all the information of which they are, or ought to be, in possession: a trustee may involve himself in serious difficulty, by want of the information which it was his duty to obtain.

37 In In re Tillott, Lee v Wilson [1892] 1 Ch 86 Chitty J said at 88: “The general rule, then, is what I have stated, that the trustee must give information to his cestui que trust as to the investment of the trust estate.” His Lordship made orders under which the trustee was required to give the beneficiary authority for the bank in which the trust fund was deposited to tell the beneficiary whether the trust fund was encumbered. In that case the beneficiary held a vested interest in a share of the trust estate contingently on the death of his mother; his interest was not discretionary.
38 In In re Dartnall, Sawyer v Goddard [1895] 1 Ch 474 the English Court of Appeal directed trustees to give a beneficiary a list of investments of the testator’s estate. The beneficiary was entitled to share of a fund expectant on the death of a tenant for life. Most judicial attention was given to costs questions. In the course of decision Lord Halsbury said (at 478): “In the first instance the application made on behalf of the Plaintiff for particulars of the trust estate and the investment thereof was, in my opinion, a just and proper one, and ought to have been granted. I see no reason why the trustees should not have granted it.” Lindley LJ said at 479: “… in strict right the Plaintiff was entitled to the further information which she asked for.”
39 O’Rourke v Darbishire [1920] AC 581 relates to discovery, but two Law Lords made obiter dicta expressing in general terms what by then was clearly understood to be the right of beneficiaries with respect to trust documents. These dicta, cited in In re Londonderry’s Settlement, Peat v Walsh [1965] 1 Ch 918 at 932 by Harman LJ, appear to contemplate a beneficiary with a vested interest. Lord Wrenbury, in O’Rourke v Darbishire, spoke at 626-7 of the right of access to documents as a property right and said, ”The beneficiary is entitled to see all the trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access to them. This has nothing to do with discovery. The right to discovery is a right to see someone else’s documents. The proprietary right is a right to access to documents which are your own.”
40 The entitlement of a beneficiary to see trust documents was considered in much greater detail by the Court of Appeal in In re Londonderry’s Settlement. The Court of Appeal variously considered the effect of the beneficiary’s entitlement’s being discretionary; what documents are trust documents for this purpose; and the influence both of confidentiality and of the exemption of trustees from disclosure of their consideration of discretions. (The conflict of principles was stated by Harman LJ at 928-99.) Harman LJ also referred (at 931) to the difficulty of defining the obligations of trustees “in the air” and not in relation to a particular document which the Court has seen. His Lordship pointed out (at 933) the shortcomings of general observations such as those in O’Rourke v Darbishire. He treated (again at 933) a right to disclosure of trust documents as the ordinary rule and the principle which protects trustees’ discretionary deliberations from disclosure as overriding the ordinary rule, stating that, “In my opinion such documents are not trust documents in the proper sense at all.” Danckwerts LJ and Salmon LJ reached the same conclusion for reasons separately stated. At 938 Salmon LJ stated common characteristics of trust documents, without a comprehensive definition.
41 It should I think be said of In re Londonderry’s Settlement that the Court of Appeal gave protection to the trustees’ considerations of the exercise of a discretion to appoint interest in the trust on the basis of acknowledgement that consideration started with the beneficiary having a right to disclosure. The fact that the beneficiary’s entitlement depended on a favourable exercise of discretion did not influence this right.
42 In Randall v Lubrano (2009) 72 NSWLR 621, Holland J made a clear and emphatic statement of a beneficiary’s right to know what the trust property is and how it has been and is being administered by the trustee. In that case the interest of the beneficiaries was discretionary, and all objects of the discretionary trust joined in seeking a remedy. I know from my having been in practice at the time that the judgment of Holland J. created a wide impression and dispelled resistance by trustees which it was not then unusual to encounter, although in retrospect it is difficult to see what its basis can have been; I see no encouragement for that view in In re Londonderry’s Settlement. It is surprising that Randall v Lubrano was not reported at the time.
43 In Spellson v George (1987) 11 NSWLR 300 Powell J at 315F-316C stated his Honour’s view of the law, and of the basis in principle of the law:

At the risk of being regarded as overly simplistic, it is as well to start with the fundamental proposition that one of the essential elements of a private trust, be it a discretionary trust or some other form of trust, is that the trustee is subject to a personal obligation to hold, and to deal with, the trust property for the benefit of some identified, or identifiable, person or group of persons: see, eg, Jacobs, op cit pars 108-111 at 8-9. It is, so it seems to me, a necessary corollary of the existence of that obligation that the trustee is liable to account to the person, or group of persons for whose benefit he holds the trust property, (see, eg Manning v Federal Commissioner of Taxation [1928] HCA 9; (1928) 40 CLR 506 at 509 per Knox CJ) and, that being so, the trustee is obliged not only to keep proper accounts and allow a cestui que trust to inspect them, but he must also, on demand, give a cestui que trust information and explanations as to the investment of, and dealings with, the trust property: see, eg, re Tillott; Ford and Lee, Principles of the Law of Trusts (1983) at 404 et seq; Jacobs, op cit pars 1713 et seq; at 391 et seq; Pettit, Equity and the Law of Trusts, 3rd ed (1974) at 330 et seq.

This being the essential nature of the position of a trustee, and the liability to account being an essential ingredient in it, it seems to me that it is inescapable that the cestuis que trust, or any one of the cestuis que trust, have, or has, a correlative right to approach the Court for its assistance in enforcing the personal obligation of the trustee, and, in particular, in enforcing the trustee’s obligation to account.

44 His Honour went on to state, with reasons and references to authority, his view that the same right is available to a person whose status is only that of a potential object of the exercise of a discretionary power.
45 Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 related to the beneficiary’s claim to see a memorandum of wishes provided by the instigator (not the settlor) of a discretionary trust for the use of trustees in exercising their powers. This case exposed the difficulties of identifying what are referred to as “trust documents”. The beneficiary’s interest was, as the object of a discretionary trust, potentially but not yet entitled if there should be a favourable exercise of the trustees’ discretion. The solicitor for the trustees had given the explanation that no distribution could be made because “… there is no provision in Sir Norman’s memorandum which would entitle the trustees to make any payment to you at this time” (at 408E). The facts were unlike those in In re Londonderry’s Settlement in that there had been reference to the memorandum in an explanation given on behalf of the trustees. For reasons extensively stated, Kirby P (who dissented) did not regard In re Londonderry’s Settlement as a decision which should be followed; the majority (Mahoney and Sheller JJA) did not take this view, although their reasons went far beyond a simple application of In re Londonderry’s Settlement. The difficulty in the appeal and the division of opinion related to the application of the right of a beneficiary, including a discretionary beneficiary, to obtain information and inspect trust documents to the memorandum and to the trustees’ discretionary decisions. Mahoney JA did not unqualifiedly endorse the extension of the right to all persons who are only possible beneficiaries under a discretionary trust or are one of a large number of possible beneficiaries (431E-432F), and discussed the difficulties of the limits of trust documents in this context (432F-433B). Mahoney JA’s judgment contains a wide general and (I would respectfully say) orthodox survey of the law in this field; Sheller JA also made a wide survey. It should I think be said that the majority judgments do not depart from In re Londonderry’s Settlement. Those judgments illustrate a number of difficulties which do not bear on the present case.
46 In my opinion judges at first instance in New South Wales should treat the majority judgments in Hartigan Nominees as authoritative. While not all matters susceptible of doubt are settled, the starting point, at which the beneficiary is entitled to see trust documents and have information about trust property, and that entitlement has a proprietary basis, is not open to question. The facts in the present case do not raise even the potential difficulties which might be thought to exist where the entitlement of the beneficiary is contingent or subject to a discretionary decision, or involve a decision of trustees which might raise a conflicting principle.
47 The subject under decision in Schmidt v Rosewood Trust Ltd was the appellant’s claim for fuller disclosure of trust accounts and information about trust assets in which the appellant claimed discretionary interests or expectations in right of himself and of his deceased father. Under “Disclosure to discretionary beneficiaries: the recent cases” the Judicial Committee made a wide survey of case law, including New South Wales case law and (at 729 [52]) stated its general agreement with the approach adopted in the judgments of Kirby P and Shelley JA in Hartigan Nominees. The judgment of Kirby P, to which their Lordships referred at some length [52], was of course a dissenting decision and reached its conclusion on the basis of the beneficiary’s right of inspection without examining or indeed referring to judicial decisions; the conclusion based itself instead on agreement with a view expressed by Professor H.A.J. Ford in ”Principles of the Laws Of Trust, 2nd ed (1990) which included this sentence (at 425): “The equation of the right to inspect trust documents with the beneficiary’s equitable propriety of rights gives rise to unnecessary and undesirable consequences.” The consequences referred to included doubts cast on the rights of beneficiaries who cannot claim to have an equitable proprietary interest in trust assets, such as the beneficiaries of discretionary trusts. This was, I must respectfully say, a slight basis indeed for discarding an established right of beneficiaries with vested interests to inspection of documents of such primary importance as the accounts of the trustees. A decision that all access to trust documents should be in the discretion of the Court is a drastic solution to whatever problems might be perceived in supposing a proprietary basis for discretionary interests, and whatever problems may be perceived in delimiting which documents should be treated as trust documents and in protecting from access documents access to which involves some conflicting principle. Their Lordships alluded, twice but briefly, to the reasons given by Sheller JA which addressed difficulties relating to discretionary interests, not vested interests.
48 The views expressed in Schmidt v Rosewood Trust Ltd by the Privy Council on appeal from the Isle of Man, while they should be considered with respect, are not possibly a binding or authoritative source for a rule of law which would render the entitlement of the plaintiff in these proceedings to access the documents, to information, in short to accounts, a discretionary one: see Cook v Cook [1986] HCA 73; (1886) 162 CLR 376 at 390. There may be room for the view, on which the Privy Council acted, that such an entitlement is discretionary in the case of a beneficiary who is no more than the object of a discretionary trust and does not have the benefit of a favourable exercise of the trustee’s discretion; the weight of opinion in New South Wales the other way on that issue is strong, but the plaintiff’s position in the present case is even stronger as her entitlement is not discretionary but rather vested in interest. Their Lordships’ conclusion at 734-735 ([66] and [67]) would make the beneficiary’s right to seek disclosure of trust documents an aspect of the Court’s inherent jurisdiction to supervise, and where appropriate intervene in the administration of trusts. Although the reasons say that that right is “sometimes not inappropriately described as a proprietary right” it is plain that their Lordships did not treat the right as a proprietary right.
49 The history of Equity and the nature of its remedies mean that the treatment of equitable interests as proprietary, and the development of rules based on that treatment, can never be entirely logical or satisfactory; but if this is perceived as a problem, it is an inherent problem and should not be regarded as a basis for discarding a well-established rule.
50 An obiter dictum in the Privy Council about trust law in the Isle of Man has in my opinion very little claim to be followed at first instance in New South Wales where a different view has been accepted. The Privy Council does not exercise appellate authority over the courts of New South Wales, and its decisions made since its appellate power was abolished in 1986 have not had binding force in New South Wales. Still less have the Judicial Committee’s obiter dicta. As with other decisions which are not binding, its claim to be followed depends upon the extent to which the views expressed are persuasive.

{Statutory Legislation – In the case of Government Regulated Superannuation Fund the disclosure obligations of Trustees in relation to Members and Beneficiaries of the Trust are prescribed by Section 1017C of the Corporations Act 2001 and Regulations 7.9.45 and Schedule 10A 11.1 if the Corporations Regulations 2001}

Note: McDonald v Ellis was cited in Murray v Schreuder [2009] WASC 51

In Murray v Schreuder Newnes J stated at [44]:

44 Secondly, in relation to both the invoices and the letters and emails, Professor Schreuder’s claim to privilege was based on the premise that Mrs Murray, as a beneficiary, has no entitlement, as of right, to inspect documents held by Professor Schreuder relating to the administration of the trust. Counsel for Professor SChreuder relied on Avanes v Marshall [2007] NSWSC 191; 2007) 68 NSWLR 595. I do not however, accept that premise. To the extent that Avenes v Marshall is to be understood to be authority for such a proposition, I do not, with respect, consider that it correctly states the law.

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] 1 Ch 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.

48    In Re Londonderry’s Settlement  [1965] Ch 918, the defendant was an object of a power of discretionary appointment under a trust. Being dissatisfied with the amount distributed to her by the trustees, the defendant sought copies of certain documents, including documents which would reveal how the trustees had exercised their discretion. While the Court of Appeal did not dissent from the general proposition that a beneficiary of a trust has a prima facie right to inspect trust documents, their Lordships observed that such a proposition begs the question of what is a ‘trust document’. The right of a beneficiary to inspect trust documents did not necessarily extend to all documents in the hands of the trustee. Their Lordships did not attempt a comprehensive definition of a ‘trust document’, but Harman LJ regarded the principle which protects trustees’ deliberations on a discretionary matter from disclosure as overriding the general rule. Harman LJ concluded that such documents ‘are not trust documents in the proper sense at all’ (933). Danckwerts LJ and Salmon LJ reached a similar conclusion in separate reasons.

49    The New South Wales Court of Appeal had occasion to consider the question in Hartigan v Rydge. In that case, a discretionary trust had been established for the purpose of carrying out the wishes of its instigator (not the settlor), who provided the trustees with a memorandum indicating his wishes as to what the trustees should do. An object of the trust, who had a contingent or possible interest in the trust funds, sought to inspect the memorandum.

50    Mahoney JA considered that there were limits to the right of such a beneficiary to inspect documents of the trust (431 – 434). His Honour considered that the right of a beneficiary to inspect documents is limited to documents which are the property of the trust and does not extend to documents as to which the beneficiary, as beneficiary, has no proprietary interest. A document (such as notes made by the trustee of discussions with other beneficiaries or possible beneficiaries) which is prepared by the trustee, not for the purposes of the beneficiaries but for the trustee’s own purposes, is not the property of the trust. Nor will a beneficiary be entitled to see a document which has been given to the trustee on the basis that it is confidential, such as a document relating to the personal affairs of a particular beneficiary or correspondence to and from other beneficiaries. And a document need not be disclosed if it will reveal the reasons why a discretionary power was exercised.

51    Sheller JA considered (444) that, in determining what documents a beneficiary was entitled to inspect, an inquiry as whether or not the beneficiary has what can be described as a proprietary interest in the document was not a helpful one. His Honour regarded the determinant in the decision in Re Londonderry’s Settlement as being the preservation of the trustee’s right not to disclose the reasons for exercising a discretion. He concluded that that case was authority for the proposition that beneficiaries have no right to see documents private to the trustees which may evidence the reasons why the trustees have made their decisions. Sheller JA considered (445) that the class of documents to which beneficiaries are denied access should not be extended beyond those. His Honour agreed with the observations of Harman LJ in Re Londonderry’s Settlement (932) that the trustees were bound to disclose the trust accounts and counsel’s advice to the trustees as to their rights and duties, although that material may have influenced the trustees, because it does not reveal motives, reasons or the process of reasoning. His Honour also concluded that a settlor (or in that case, the instigator) of the trust could effectively impose conditions of confidentiality on trustees in respect of information.

52    Kirby P, dissenting, held that the applicant was entitled to inspect the memorandum. His Honour took a wider view of a beneficiary’s right to inspect documents of the trust, concluding (422) that the right extended to trust property and the accounts and vouchers and other documents relating to the trust and its administration. As I have mentioned, his Honour adopted the statement of principle in Scott on Trusts to which I referred earlier.

53    Subsequently, the Privy Council delivered its advice in Schmidt v Rosewood Trust Ltd [2003] UKPC; [2003] 2 AC 709, on an appeal from the Isle of Man. In that case, the appellant sought fuller disclosure of trust accounts and information about trust assets in respect of which he claimed discretionary rights or expectations. Their Lordships made an extensive review of the authorities, including Hartigan v Rydge, in respect of which they expressed their general agreement with the judgments of Kirby P and Sheller JA. Lord Walker of Gestingthorpe, delivering the advice of their Lordships, said:

Their Lordships have already indicated their view that a beneficiary’s right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, is best approached as one aspect of the court’s inherent jurisdiction to supervise, and where appropriate intervene in, the administration of trusts. There is therefore in their Lordships’ view no reason to draw any bright dividing line either between transmissible and non-transmissible (that is, discretionary) interests, or between the rights of an object of a discretionary trust and those of the object of a mere power (of a fiduciary character). The differences in this context between trusts and powers are (as Lord Wilberforce demonstrated in In re Baden [1970] UKHL 1; [1971] AC 424, 448 – 449) a good deal less significant than the similarities. The tide of Commonwealth authority, although not entirely uniform, appears to be flowing in that direction.

However, the recent cases also confirm (as had been stated as long ago as In re Cowin 33 Ch D 179 in 1886) that no beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it. In many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief. (734 – 735)

54    In Avanes v Marshall (599), Gzell J, after considering a number of authorities, concluded that the approach in Schmidt should be adopted by Australian courts. His Honour considered that the decision should not be regarded as abrogating the trustee’s obligation to grant a beneficiary access to trust accounts. But that when it comes to inspection of other documents there should be no longer be an entitlement as of right to disclosure of any document. It should be for the court to determine to what extent information should be disclosed.

55    Some months later, in McDonald v Ellis [2007] NSWSC 1068, Bryson AJ took a contrary view ([52]) and declined to follow Avanes v Marshall. His Honour considered that the approach of Schmidt might be appropriate where the interest of the beneficiary is no higher than those of the potential objects of a discretionary trust – although New South Wales authority was otherwise – but where the right was already vested in interest it would be an unwarranted departure from established authority. Bryson AJ considered that neither earlier judicial decisions nor policy considerations supported the law as expressed in Schmidt. It was a departure from a well-established and relatively concrete rule, and, by introducing discretion, would lead to ‘no certainty on so elementary a matter as to whether or not a beneficial owner is entitled to information about property in which the beneficial owner has an equitable interest’ [51].

56    Bryson AJ held ([46]) that the law in New South Wales was to be found in the judgments of the majority in Hartigan v Rydge; that is, that the starting point is that a beneficiary is entitled to see trust documents and to have information about trust property. Enforcement of the beneficiary’s entitlement will be withheld only where it is necessary because of some competing entitlement of the sort referred to in Re Londonderry’s Settlement.

57    I, too, would respectfully decline to follow Avanes v Marshall insofar as it might be thought to apply to a non-discretionary trust, where the beneficiaries have a vested or contingent interest. Schmidt was concerned with the right of inspection of an object of a discretionary power and, for the reasons expressed by Bryson AJ in McDonald v Ellis, I would not apply what was said in Schmidt to a non-discretionary trust. It is unnecessary for present purposes to consider the position in relation to discretionary trusts. Nor do I think it is necessary to enter into the debate about whether a beneficiary’s right of inspection arises from a proprietary interest of the beneficiary in the trust documents or from the general doctrine that trustees are fiduciaries with a high obligation to account and to provide information to the beneficiaries.

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).

Murray v Schreuder was subject to appeal in the Western Australia Court of Appeal Schreuder v Murray [No. 2] 41 WAR 169; 260 ALR 139 ;[2009] WASCA 145. The appeal was dismissed by McLure JA, Pullin JA and Buss JA.

Pullen JA stated at [9]

9    It may be assumed that, in both Avanes and this case, the documents detailing communications between the trustee and legal advisors were documents with respect to which the trustee was entitled to maintain the privilege ‘against the rest of the world’ (Phipson on Evidence, 14th ed, 20 – 29). However, the beneficiary is not a person who falls within the category of persons against whom privilege may be claimed. In Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601at 608, Sheller JA, Waddell AJA agreeing said:

Two or more persons may join in communicating with a legal adviser for the purpose of retaining his or her services or obtaining his or her advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice. The privilege is a joint privilege. So is it also if one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest. Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples. Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication. Accordingly no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication. But the parties together are entitled to maintain the privilege ‘against the rest of the world': Phipson, par 20-28 and par 20-29.

 

This part of Farrow has been subsequently been either adopted as correct or referred to with approval in Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151; (2204) 13 ANZ Ins Cas 61-612 [41] (Mason P, Hanley JA and Browie AJA agreeing); Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 967 [12] (Ryan JA); Re Doran Constructions [2002] NSWSC 215 (2002) 194 ALR 101 [7] (Campbell J); Yunghanns v Elfic Pry Ltd (No.2) [2000] VSC 113; (2000) 1 VR 92 [22], 30, [34] -[35] (Warren J) and Pulitano v Ginbey [1999] WASC 5 [22] (Sansderson M)

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.

When can a Trustee claim Legal Professional Privilege?

Buss JA stated at [67]

67    The circumstances in which a trustee may claim legal professional privilege as against a beneficiary were considered in numerous English cases decided in the 19th century. Academic writers have expressed opinions on the point. There appears, however, to be a remarkable dearth of Australian case law on the applicable principles and their juridical basis.

68    In Talbot v Marshfield (1865) 2 Dr & Sm 549; (1865) 62 ER 728, trustees obtained an opinion from counsel as to whether they should exercise a discretionary power to advance part of the trust fund to some of the beneficiaries. After other beneficiaries filed a bill to restrain them from exercising this discretion, the trustees obtained a second opinion in relation to their prospects of defending the suit. The plaintiffs issued a summons for production of the opinions of counsel. The Vice-Chancellor, Sir R T Kindersley, held that all of the beneficiaries (including the plaintiffs) had a right to inspect the first opinion because it had reference to the trustees’ dealings with the trust estate. However, the plaintiffs had no right to production of the second opinion because it was sought after the suit was commenced. His Lordship said:

The first case and opinion, the production of which is sought, were respectively stated and taken by the Defendants to guide them in the exercise of a power delegated to them by the trusts of the will, and which, if exercised, would affect the interests of the other cestuis que trust. The opinion was taken before proceedings were commenced or threatened, and in relation to the trust. Under these circumstances it appears to me that all the cestuis que trust have a right to see that case and opinion. It was contended that it was not taken for the benefit of all the cestuis que trust; but all the cestuis que trust have an interest in the due administration of the trust, and in that sense it was for the benefit of all, as it was for the guidance of the trustees in their execution of their trust. Besides, if a trustee properly takes the opinion of counsel to guide him in the execution of the trust, he has a right to be paid the expense of so doing out of the trust estate; and that alone would give any cestuis que trust a right to see the case and opinion.

The other case and opinion, however, stands on a totally different footing. This was not to guide the trustees in the execution of their trust; but, after proceedings had been commenced against them, they took advice to know in what position they stood, and how they should defend themselves in the suit. It appears to me that the cestuis que trust have no right to see this case and opinion, unless they can make out that the trustees can charge the expense thereof on the trust funds. As to this there is no proof; the trustees may themselves have to bear the expense of this case and opinion, as having been stated and taken by them as litigant parties with the cestuis que trust.

The trustees must be ordered to produce the first case and opinion; but not the second (729).

69    In Re Mason; Mason v Cattley  (1883) 22 Ch D 609 some of the beneficiaries under a will brought an action against one of the trustees of the will and the executors of the other trustee (who was dead) alleging, relevantly, that the trustees had committed a breach of trust. The surviving trustee was required to make an affidavit of documents in his possession. In the affidavit he objected to producing, relevantly, some letters and copies of letters which had passed between him and his co-trustee and their solicitors in relation to matters in question in the action before the commencement of the litigation. Fry J, in deciding that the documents in question must be produced, said:

It is admitted that they are relevant to the matters in issue in the action. They are communications by and to the trustees and their solicitors in relation to the trust estate, made before the action was brought. It appears to me that Talbot v Marshfield applies (610).

70    Re Postlethwaite (1887) 35 Ch D 722 involved an action brought for an account of profits in respect of a purchase of trust property. It was alleged that the sale was made secretly for the benefit of Rickman, one of the trustees, with the connivance of Tourle, another trustee who was a solicitor. Rickman claimed privilege from production for letters from Tourle to Rickman and for Tourle’s bill of costs on the ground that the communications were made by Tourle acting as solicitor to Rickman in his private capacity. Production was ordered because the communications passed between two trustees, and also because the solicitor and his client were charged with fraud. North J said, relevantly:

If two trustees acted together, not fraudulently, but unfairly to their cestui que trust, I think it would be a novel doctrine to say that they had a right to keep within their own bosoms that which they had done because one of them was acting as solicitor for the other (727).

71    In O’Rourke, Lord Parmoor said that a beneficiary, in an action against the trustee, is generally entitled to the production for inspection of all documents relating to the affairs of the trust (619). His Lordship added:

It is not material for the present purpose whether this right is to be regarded as a paramount proprietary right in the cestui que trust, or as a right to be enforced under the law of discovery, since in both cases an essential preliminary is either the admission, or the establishment, of the status on which the right is based. I agree in the view expressed by Peterson J [the primary judge], that the rule as to the right of a cestui que trust to the production of trust documents for inspection does not apply when the question to be tried in the action is whether the plaintiff is a cestui que trust or not. In the present case not only is the status of the appellant as a cestui que trust disputed, but in addition a release was executed, which, unless it can be set aside, is a bar to his claim (619 – 620).

72    The speech of Lord Wrenbury in O’Rourke contains the following passage, which has been cited frequently in later cases:

If the plaintiff is right in saying that he is a beneficiary, and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desires to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access to them. This has nothing to do with discovery. The right to discovery is a right to see someone else’s documents. The proprietary right is a right to access to documents which are your own. No question of professional privilege arises in such a case. Documents containing professional advice taken by the executors as trustees contain advice taken by trustees for their cestuis que trust, and the beneficiaries are entitled to see them because they are beneficiaries. The first case in Talbot v Marshfield (2 Dr & Sm 549) is an instance (626 – 627).

73    The House of Lords in O’Rourke considered and explained the decision of North J in Postlethwaite. In essence, their Lordships decided that legal professional privilege is not displaced merely because the solicitor consulted is himself a trustee and is acting as a professional adviser to himself and his co-trustees.

74    As Doyle CJ (Perry & Martin JJ agreeing) observed in Rouse v IOOF Australia Trustees Ltd  [1999] SASC 181; (1999) 73 SASR 484 some later decisions have taken Lord Wrenbury’s observations in O’Rourke ‘quite literally’, and have treated him as deciding that a beneficiary has an actual proprietary interest in ‘trust documents’ [89]. Like Doyle CJ, I doubt whether this was intended by Lord Wrenbury and I consider the true position is as explained by Dawson and Toohey JJ in Breen v Williams [1996] HCA 57; (1996) 186 CLR 71:

[Lord Wrenbury’s] remarks were accepted or referred to without demur in In re Londonderry’s Settlement [1965] Ch 918 at 932 – 933, per Harman LJ; at 935, per Danckwerts LJ; and at 937, per Salmon LJ) and have been accepted in this country (See Re Fairbairn [1967 VicRp 72; [1967] VR 633 at 637 – 638; Re Simersall; Blackwell v Bray [1992] FCA 221; (1992) 35 FCR 584 at 588; cf Hartigan Nominees Pty Ltd v Rydge  (1992) 29 NSWLR 405 at 443). But the right of access of a beneficiary to trust documents arises because of the beneficial interest of the beneficiary in the trust property and it is in that sense that the right may be described as proprietary (89).

75    Similarly, in Re Simersall; Blackwell v Bray  [1992] FCA 221; (1992) FCR 584) Gummow J said that an essential element of a private trust is that the trustee is subject to a personal obligation to hold and deal with the trust fund for the benefit of the beneficiaries. A necessary incident of that obligation is the trustee’s liability to account to the beneficiaries for his or her dealings with the trust fund. His Honour continued:

That being so, a further necessary incident of the control of the trust property by the trustee is the trustee’s obligation to keep proper accounts and to allow inspection of them by the cestui que trust: see Spellson v George (supra) (at 315 – 316). Hence, the description of Lord Wrenbury of the right of inspection as ‘proprietary’ in character, annexed as it is to the beneficial interest of the beneficiary in the trust property (589).

76    In Londonderry’s Settlement, Salmon LJ distinguished between a beneficiary who seeks disclosure of documents from the trustee ‘in the air’ and a beneficiary who seeks discovery of documents in an action in which allegations are being made against the bona fides of the trustee. According to his Lordship:

The position is quite different where the beneficiary seeks disclosure of documents from the trustees in the air, as in this case, from the position where the beneficiary seeks discovery of documents in an action in which allegations are being made against the bona fides of the trustees. If the documents in question are in the possession or power of the trustees and are relevant to the issues in the action, they must be disclosed whether or not they are trust documents. In some instances, however, the fact that they are trust documents may nullify the privilege that would otherwise exist, as for example if the document consists of counsel’s opinion taken before the issue of the writ, clearly the beneficiary is entitled to see any opinion taken on behalf of the trust (938).

77    The plaintiffs in Re Ballard Estate (1994) 20 OR (3d) 350 were beneficiaries under a deceased estate. They applied for an order directing the production by the executors of all communications concerning the management of the estate, including all communications from the executors’ solicitors to the executors relating to the matters in issue in the action. The executors asserted that the documents were protected by legal professional privilege. In the Ontario Court of Justice (General Division), Lederman J ordered the production of the relevant communications between the solicitors and executors.

78    Lederman J referred to the speech of Lord Wrenbury in O’Rourke and said that when his Lordship used the phrase ‘proprietary right’, he was merely saying that the documents in question were in a sense the documents of the beneficiaries and in consequence the beneficiaries were entitled to inspect them:

They are said to belong to the beneficiary not because he or she literally has an ownership interest in them but, rather, because the very reason that the solicitor was engaged and advice taken by the trustees was for the due administration of the estate and for the benefit of all beneficiaries who take or may take under the will or trust [6].

79    After referring to Talbot, Lederman J said:

[T]here is no need to protect the solicitor-client communication from disclosure to those very persons who are claiming under the estate. The communications remain privileged as against third parties who are strangers or are in conflict with the estate, but as was stated in Stewart v Walker, supra, not those who are claiming under the estate. And that is because the trustee and beneficiary have a joint interest in the advice as Phipson has suggested [Phipson On Evidence, 14th ed, London, Sweet & Maxwell, 1990]:

‘No privilege attaches to communications between solicitor and client as against persons having a joint interest with the client in the subject matter of the communication, eg as between … trustee and cestui que trust.’

Similarly, in Solicitor-Client Privilege in Canadian Law (Butterworths, 1993) by R D Manes and M P Sinclair, the authors after recognizing that there can be no privilege asserted against beneficiaries of a trust over communications between a trustee and a trustee’s solicitors with respect to the business and affairs of the trust, go on to state at pp 62- 63:

‘This rule is consistent with the principle underlying privileged communications between co-parties or joint clients, that the privilege does not maintain between them.’ [9] (original emphasis)

80    In Samson Indian Nation and Band v Canada  [1995] 2 FC 762 the Federal Court of Canada (Court of Appeal) held that it was ‘settled law’ in Canada that legal professional privilege does not attach to communications between a solicitor and a trustee as against the beneficiaries who have a joint interest with the trustee in the subject matter of the communications [14]. MacGuigan and Décary JJA (Pratte JA agreeing) referred with approval to Lederman J’s reasons in Re Ballard Estate. See also Camosun College Faculty Association v British Columbia (College Pension Board of Trustees) (2004) BCSC 941; Cooke v Canada Trust Co  (2005) BCCA 112.

81    Riggs National Bank of Washington DC v Zimmer  355 A 2d 709(Del Ch 1976) involved proceedings brought by certain beneficiaries under a trust estate against the trustees in the Court of Chancery of Delaware for an order compelling the trustees to reimburse the estate for alleged breaches of the trust in regard to certain taxation matters. The plaintiffs sought discovery of a memorandum of advice prepared in 1973 (before the proceedings were commenced or reasonably contemplated) by a lawyer acting on instructions from the trustees. The question in issue was, relevantly, whether the trustees were entitled to refuse to produce the document in question on the ground of ‘attorney-client privilege’. Chancellor Quillen commenced his analysis by referring to the nature of the relationship between the beneficiaries and the trustees, and the apparent absence of any American case law on the point:

Initially, and most importantly, it must be noted that the trustees have substantive fiduciary duties to the beneficiaries. The special relationship puts this case in an entirely different context than a simple motion for discovery against a claim of privilege. Incredibly, counsel agree that American case law is practically nonexistent on the duty of a trustee in this context (712).

82    The Chancellor referred to Scott on Trusts (3rd ed) [173], the old English cases on whether a trustee can claim legal professional privilege as against a beneficiary, and some American authorities on attorney-client privilege, and then held:

With these principles in mind, it is apparent that the trustee’s claim of attorney-client privilege here is unfounded. As a representative for the beneficiaries of the trust which he is administering, the trustee is not the real client in the sense that he is personally being served. And, the beneficiaries are not simply incidental beneficiaries who chance to gain from the professional services rendered. The very intention of the communication is to aid the beneficiaries. The trustees here cannot subordinate the fiduciary obligations owed to the beneficiaries to their own private interests under the guise of attorney-client privilege. The policy of preserving the full disclosure necessary in the trustee-beneficiary relationship is here ultimately more important than the protection of the trustees’ confidence in the attorney for the trust … The fiduciary obligations owed by the attorney at the time he prepared the memorandum were to the beneficiaries as well as to the trustees. In effect, the beneficiaries were the clients of Mr Workman [the attorney] as much as the trustees were, and perhaps more (713 – 714). (original emphasis)

See also Wachtel v Health Net, Inc [2007] USCA3 59; 482 F 3d 225 (3rd Cir 2007), 230 – 232 (United States Court of Appeals, Third Circuit) and Floyd v Floyd 615 SE 2d 465 (SC App 2005) [34] – [35] (Court of Appeals of South Carolina), where the principle stated in Riggs was approved. The United States Federal Courts have largely followed Riggs but some State courts have been more reluctant. See Re Grand Jury Proceedings Grand Jury No 97-11-8 [1998] USCA9 1951; 162 F 3d 554 (9th Cir 1998), 556 – 557; Wells Fargo Bank v Superior Court 990 P 2d 591 (Cal 2000) [2].

83    In Kerr W, A Treatise on the Law of Discovery (1870) the following views are expressed:

So also a cestui que trust has a right to call for the production of documents in the hands of his trustee which relate to the matters of the trust (Att-Gen v Berry, 2 Coll 33). If the trustee has taken counsel’s opinion to guide him in the execution of his trust, or on behalf of the trust estate, he must produce the case and opinion in a suit instituted by the cestui que trust against him (Woods v Woods, 4 Ha 84; Devayne v Robertson, 20 Beav 42; Wynne v Hamberstone, [1858] EngR 1253; 27 Beav 421; on appeal, 32 LT 307; Talbot v Marshfield, 2 Dr & Sm 549. See Phillipps v Holmer, 15 WR 578). In a case where trustees had taken counsel’s opinion as to whether they should exercise a discretionary power to advance part of their trust funds for the benefit of some of cestuis que trustent, and others of the cestui que trustent filed a bill to restrain them from exercising such discretion; it was held, on motion for production of the case and opinion, that all the cestuis que trustent had a right to inspection and production (Talbot v Marshfield, 2 Dr & Sm 549).

So also in a suit by residuary legatees against the personal representatives of a testator, all the documents must be produced, because from the very relation of the legatees to the testator they have a right to such production (Greenwood v Greenwood, 6 WR 119 (30 – 31).

84    Some years later, the learned author of Bray E, Digest of the Law of Discovery with Practice Notes (2nd ed, 1910) enunciated these propositions in relation to the operation of legal professional privilege as between a trustee and a beneficiary:

A cestui que trust is entitled to see cases and opinions submitted and taken by the trustee for the purpose of the administration of the trust; but where stated and taken by the trustees not for that purpose, but for the purpose of their own defence in litigation against themselves by the cestui que trusts, they are protected (Wynne v Humberston [1858] EngR 1253; 27 Beav 421 Talbot v Marshfield, 2 Dr & Sm 549; Mason v Cattley, 22 CD 609; Postlethwaite v Rickman, 35 CD 722) (28).

85    More recently, in Scott A and Fratcher W, The Law of Trusts (4th ed, 1987) it was said:

A beneficiary is entitled to inspect opinions of counsel procured by the trustee to guide him in the administration of the trust (England: Wynne v Humberston, [1858] EngR 1253; 27 Beav 421 (1858); Talbot v Marshfield, 2 Dr & Sm 549 (1865); In re Mason, 22 Ch D 609 (1883). California: Lasky, Haas, Cohler & Munter v Superior Court, 172 Cal App 3d 264, 218 Cal Rptr 205 (1985) (but not memoranda and notes of discussions prepared by the trustee’s attorneys but not communicated to the trustee)). It is held, however, that where there is a conflict of interest between the trustee and the beneficiaries and the trustee procures an opinion of counsel for his own protection, the beneficiaries are not entitled to inspect the opinion (Wynne v Humberston, [1858] EngR 1253; 27 Beav 421 (1858), semble; Talbot v Marshfield, 2 Dr & Sm 549 (1865); Thomas v Secretary of State, 18 WR 312 (1870). See In re Prudence-Bonds Corp, 76 F Supp 643 (EDNY 1948) (corporate trustee under bond issue). In In re Postlethwaite, 35 Ch D 722 (1887), it was held that the beneficiaries were entitled to the production of letters between the trustees who were accused of fraudulently profiting at the expense of the estate, although one of the trustees was acting as solicitor for the other) [173].

86    Thanki B (ed), The Law of Privilege (2006) undertakes an analysis of various communications which are not protected by legal professional privilege, even though they appear to satisfy the relevant requirements. The exceptions to privilege which are enumerated include relationships where a joint interest may arise, including as between trustee and beneficiary:

There exist relationships within which the parties will be unable to claim privilege in certain communications as against each other. More specifically, privilege cannot be claimed in circumstances where the parties to the relationship have a joint interest in the subject matter of the communication at the time that it comes into existence … Examples of relationships where a joint interest may arise are between: trustee and beneficiary (Talbot v Marshfield (1865) 2 Dr & Sm 549; Re Mason (1883) 22 Ch D 609; Postlethwaite v Rickman (1887) 35 Ch D 722. See also O’Rourke v Darbishire [1919] 1 Ch 320, CA; affirmed [1920] AC 581) [4.71].

See also, Matthews P and Malek H, Discovery (1992) [8.51], [8.58], [9]; Cross on Evidence (7th Aust ed) [25265].

Buss JA stated at [92]

In my opinion, it is critical, in examining the merits of ground 2, to distinguish between:

(a) legal proceedings by a beneficiary against the trustee where the cause of action is based on the trustee’s alleged breach of duty in failing to provide the beneficiary with access to ‘trust documents’ or information; and

(b) legal proceedings by a beneficiary against the trustee on other causes of action (that is, causes of action which are not based on the trustee’s alleged breach of duty in failing to provide the beneficiary with access to ‘trust documents’ or information) and, in the course of the proceedings, the beneficiary makes an interlocutory application against the trustee for discovery and inspection of ‘trust documents’ which are relevant to the pleaded causes of action and in respect of which legal professional privilege exists as against strangers to the trust.

93    In the first category of legal proceedings, it will be necessary to identify and apply the legal principles which govern the duty (if any) of the particular trustee to provide ‘trust documents’ or information to any of the beneficiaries or possible beneficiaries. Two different approaches are discernible from the case law in relation to the right (if any) of a beneficiary to inspect ‘trust documents‘ or receive information. See Rouse [88]. One approach is based on the observations of Lord Wrenbury in O’Rourke, 626, as explained by Gummow J in Re Simersall, 588 and by Dawson and Toohey JJ in Breen, 89. See [72] – [75] above. The other approach is based on a trustee’s fiduciary duty to keep the beneficiaries informed and to render accounts. See Hartigan Nominees, 421 – 422 (Kirby P, dissenting), 438 – 447 (Sheller JA). Traditionally, there has been a distinction between strict trusts on the one hand and discretionary trusts on the other in relation to access to ‘trust documents‘ or information. In Schmidt, however, the Privy Council held that a beneficiary’s right to inspect ‘trust documents‘ or receive information in the possession of the trustee was merely a procedural right for the court to make an order in its discretion as part of its supervisory jurisdiction in relation to trusts. The decision in Schmidt was followed by Gzell J in Avanes. However, in McDonald v Ellis and in Schaverien v Jones [2007] NSWSC 1429, Bryson AJ declined to follow Schmidt and Avanes. See, generally, Jacobs’ Law of Trusts in Australia (7th ed, 2006) [1716]. The current state of the non-statutory law on this issue is attended by some uncertainty. It is unnecessary, in the present case, to express an opinion on these issues (including whether the approach of the Privy Council in Schmidt represents the law of Australia) because the pending Supreme Court proceedings by Mrs Murray against the appellant are not proceedings where the cause of action is based on the appellant’s alleged breach of duty in failing to provide Mrs Murray with access to ‘trust documents‘ or information. I note, for completeness, the intervention of statute in Western Australia. By section 94 of the Trustees Act 1962 (WA), the court can call on trustees to substantiate and uphold their conduct.

94    In the second category of legal proceedings, it will be necessary, in determining the interlocutory application, to identify and apply the relevant legal principles from the case law and academic writings discussed or referred to at [64] – [65] and [76] – [86] above. In my opinion, the relevant principles, in the context of a trustee and a beneficiary who has a vested interest in the trust fund, include, relevantly, the following:

(a) Legal advice privilege will exist in relation to information and documents that would reveal confidential communications between a trustee client and his or her lawyer made for the dominant purpose of giving or receiving legal advice, whether or not litigation is subsisting or within the reasonable contemplation of the trustee client.

(b) Litigation privilege will exist where litigation is subsisting or within the reasonable contemplation of the trustee client, and applies to confidential communications passing between a lawyer and his or her trustee client or between the lawyer and third parties, and confidential information or documents brought into existence, for the dominant purpose of preparing for the litigation.

(c) The legal advice privilege or litigation privilege referred to in pars (a) and (b) above may not be invoked by the trustee client against a beneficiary of the trust if the trustee and the beneficiary have a joint privilege in relation to the confidential communications, information or documents in question.

(d) There will be a joint privilege if:

  • (i) the confidential communications, information or documents relate to legal services in connection with the management or administration of the trust; and
  • (ii) the trustee (in his or her capacity as trustee) and the beneficiary (in his or her capacity as a beneficiary, and either alone or as a member of a class of beneficiaries) have a joint interest in the subject matter of those confidential communications, information or documents when they occur or come into existence.
  • (e) The joint interest of the trustee will derive from his or her duties to the beneficiaries or in respect of the trust fund, and the joint interest of the beneficiary will derive from his or her vested interest in the trust fund, in combination with the nature and character of the relevant communications, information or documents.
  • (f) The beneficiary will not be entitled to a joint privilege with the trustee if the confidential communications, information or documents relate to legal services obtained for the benefit of the trustee personally (for example, if the trustee seeks legal advice as to his or her personal rights or liabilities in connection with an alleged breach of trust or threatened legal proceedings against him or her personally).

It is unnecessary to consider the position of a beneficiary who has a contingent interest or a mere expectancy in relation to the trust fund. At all material times, Mrs Murray has had a vested interest in the residuary estate.

The High Court of Australia in CTP Custodians Pty Ltd v Commissioner of State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98 at 110 [17]; (2005) 221 ALR 196; (2005) 79 ALJR 1724 observed:

“In Schmidt v Rosewood Trust Ltd the Privy Council recently stressed that the right to seek intervention of a court of equity to exercise its inherent authority to supervise and, if necessary, to intervene in the administration of trusts, “does not depend on entitlement to a fixed and transmissible beneficial interest”.

The High Court agreed with the Privy Council that a court exercising equitable jurisdiction does have jurisdiction to intervene in the administration of trusts, not only upon the application of a beneficiary under a fixed trust, but also upon the application of an object of a discretionary trust (ie an object of either a trust power of appointment or a fiduciary mere power of appointment).

Note: Schreuder v Murray  [No. 2] was followed in Krok v Szaintop Homes Pty Ltd & Ors (No. 1) [2011] VSC 16.

In relation to a discretionary Trust where beneficiaries had been excluded from the trust see Curwen & Ors v Vanbreck Pty Ltd [2008] VSC 338 and Curwen & Ors v Vanbreck Pty Ltd [2009] VSCA 284

Also see:

Crowe v Stevedoring Employees Retirement Fund Pty Ltd [2003] VSC 316

Rollo Ventry Wakefield Gray v BNY Trust Company of Australia Limited (formerly Guardian Trust Australia Limited) [2009] NSWSC 789

Keane, The Honourable Justice Patrick A — “The W.A. Lee Equity Lecture 2009 – The Conscience of Equity (Speech delivered in the Banco Court, Brisbane, 2 November 2009)” (QSC) [2009] QldJSchol 62

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