Trustees and Disclosure
The recent decision of HJJ Matthews in the case of Lewis & Ors v Tamplin & Ors (2018) EWHC 777 Ch has clarified the rules surrounding the rights of beneficiaries to demand disclosure of documents and information from trustees.
The case concerned land held on trust by the Defendants for nine extended family members, including themselves and the Claimants. A number of requests were made to the trustees for information about the trust. This had been denied. For a period of time the trustees had denied that the claimants and others were beneficiaries, although by the time the case was heard beneficial status had been established. The Claimants sought disclosure through an Application under CPR r 31.16 and a subsequent Claim on trust grounds. The remaining beneficiaries came to support the Claimants during proceedings.
Some ten months after the Application was launched and two months after the Claim was issued, the Defendant’s disclosed a 12-page document stated to be “the trust accounts”. However, the Claimants considered this inadequate, in part because it did not cover the first 12 years of the trust.
The Defendants argued that: (i) the beneficiaries already had sufficient information; (ii) disclosure might reveal the reasons for the trustees’ decisions (contra Re Londonderry’s Settlement  Ch 918); and (iii) only some of the beneficiaries sought disclosure (distinguishing the case from Saunders v Vautier). It was argued that a trustee’s decision could only be reviewed by a court on the basis that “no reasonable trustee could come to that conclusion” (Wednesbury unreasonableness) and that the “Londonderry exception” only allowed the court to interfere if the beneficiaries showed grounds for “real suspicion” that the trustees had a made a wrong decision. Importantly, it was argued that this extended to “administrative” as well as “dispositive” decisions.
The Claimants argued that: (i) the use of the public law Wednesbury principle was inappropriate in a trust context, and even if it were not the absence of an explanation amounted to unreasonableness; (ii) the beneficiaries did not need to act collectively to obtain a document; (iii) suspicion was not necessary and in any case there were (numerous) grounds here; (iv) any request for files from solicitors could be restricted to obtaining trust documents and there was no risk of damage to trust interests; (v) it was paradoxical to demand that beneficiaries show a case to answer prior to disclosing the material that were potentially needed to show the case; and (vi) the beneficiaries were not “troublemakers” and had made requests for information for a long period.
The court held that the Claim was successful. The court did not accept the “sufficient information” argument, because beneficiaries have the right to hold trustees to account for their stewardship and accepted obligations. It is for the court in its supervisory role to decide whether information should be disclosed. Regarding the need for beneficiaries to act collectively, the court held that the Defendants were relying on a false analogy with voting within a company. To hold otherwise would mean that a Saunders v Vautier application would fail whenever there was an unborn or minor beneficiary (the court considered this “absurd”).
The court denied that the Londonderry principle applied to administrative powers. If that were the case, trustees would never be obliged to disclose information or professional advice about trust management. Dispositive powers should be treated differently as they can produce different treatment for different beneficiaries, meaning that there are practical considerations for trustees withholding information. The same considerations do not apply to mere information about the trust.
After initially writing up the judgment, the court’s attention was drawn to the case of Wilson v Law Debenture Trust Corporation  2 All ER 337, which appeared to demonstrate the Londonderry principle applying to administrative powers. However, the court determined that the actual facts and arguments of the case actually concerned a dispositive power. The court accepted that had they been wrong on this point, the judgment could be modified. Even so, the court considered that there would still be a material distinction between powers affecting or not affecting “the respective interests of beneficiaries as between themselves”, meaning that this case would still be decided in the same way as no beneficiary’s entitlement would be changed by the provision of information.
The notion that a suspicion threshold was required was also dismissed. In any case, the court considered that at least some of the grounds for suspicion raised by the Claimants were sufficient. Whilst the allegations of the Claimants were denied and unproven, it was established that there was evidence of suspiciousness.
The Claimants had sought the disclosure of a range of documents. The court considered that only some could be disclosed. The documents had to be restricted to actual trust documents. In the case of a solicitor’s ledger, only the (relevant) information needs to be disclosed, not the ledger itself. Legal professional privilege applied to communications with the trustees’ lawyers. This does, though, only apply to legal advice sought for the benefit of trustees personally. Where advice is sought for the benefit of the trust, it is not privileged against beneficiaries even where it is privileged against third parties. Otherwise, professional advice is not protected.
Non-documentary information is more complex. Beneficiaries not the trust must pay for the cost of assembly. Beneficiaries can ask trustees what they have done with trust assets but not (in general) why, although this cannot be used as grounds for withholding a document that would otherwise be disclosed.
Given the success of the Claim, the court did not need to deal with the Application but did so nonetheless. As a rule concerning pre-action protocol, CPR r 31.16 was unrelated to the trustee-beneficiary relationship and concerned the relationship of the two parties in the context of actual litigation. Unlike trust disclosure, this rule only applies to documents (not information) that would form the subject of standard disclosure in litigation. Applicants need not demonstrate merits beyond showing a prima facie case. Given the court’s acceptance of the grounds of suspicion, the Claimants had a prima facie case. Therefore, had it been necessary, the court would have ordered pre-action disclosure of documents that would be subject to standard disclosure in substantive proceedings. As it was unclear whether there were any such documents that would also not have been producible under the Claim, the court adjourned the Application.