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Can a beneficiary see trust documents?

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7/02/2012

Summary

A decision from the NSW Supreme Court last year adopted a limited view of when a beneficiary is entitled to see the records of the trust.

What’s changed?

A line of authority in UK and Australian decisions had suggested that each beneficiary of a trust had a limited ownership right over trust document. This right existed automatically and did not depend on a court order.
The NSW Supreme Court, however, followed an alternative line of reasoning and held that beneficiaries have no automatic right of access to records of the trust. Instead, it is only if the beneficiary makes an application to a court, and the court is satisfied that it should make an order, that the trustee is compelled to provide documents to a beneficiary.

What are the benefits?

This decision effectively means that the onus is on the beneficiary to show that documents should be provided, rather than the trustee to show that they shouldn’t. This may be a good thing for trustees of widely-held investments trusts whose members want anonymity, even from each other.

What are the problems?

From a beneficiary’s point of view, he, she or it still has the right to ensure the proper administration of the trust, however an application to a court may be needed first. Obviously, this means time and money.
In the case of an uncooperative trustee, however, this may have been needed anyway, to resolve the common dispute about whether the records requested are ‘documents of the trust’ – this has never been interpreted to mean simply all trust records.

How can Fleming Muntz help?

In most trusts, the risk of dissatisfied beneficiaries is best managed by openness and transparency. In the case of unit trusts, corporate governance principles provide a good model for what the investors should receive.
However, as with just about all aspects of trust administration, the situation is subject to the trust deed. We prefer to include a provision in the trust deed or unitholders agreement setting expectations and specifying what the beneficiary is entitled to receive and when.

Important fine print

This update is for general information only. It is not a complete guide to the area of law. Competent advice should be obtained before taking any action.

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