Lewis v Tamplin ( EWHC 777 (Ch)) is a useful reminder to trustees and their advisers of the difficulty of resisting requests for disclosure of trust documents from trust beneficiaries, where the purpose of the request is to obtain information about the trust, its assets and the trustees’ stewardship of them, to enable the beneficiaries to hold trustees to account in their dealings with the trust assets.
The lay trustees (also beneficiaries themselves) had entered into various options over trust land with developers but some of the other beneficiaries were concerned that, while negotiations over the land were continuing, the land was not being used to generate an income (although one of the trustee-beneficiaries was using it) and distributions had been made to the trustee-beneficiaries only. The non-trustee group of beneficiaries sought a large amount of information from the trustees, including:
- copies of the professional advice sought about the option agreements;
- correspondence between the trustees’ solicitors and potential developers;
- information about conditional fee agreements entered into by the trustees and related professional advice;
- information about the use and occupation of the land, including the terms of any payment relating to the trustees’ use of the land;
- the basis on which distributions had been made to some of the trust beneficiaries;
- copies of tax advice; and
- full trust accounts.
The judgment contains the full list of documents requested and the list alone is worth a read simply because it is so extensive.
In authorising disclosure of all of the above documents to the beneficiaries, with some limited exceptions, HHJ Paul Matthews found that where trustees seek legal advice for the benefit of themselves personally and pay for it themselves, without recourse to the trust funds, that advice was privileged and need not be disclosed to the beneficiaries. However, advice sought for the benefit of the trust as a whole, and paid for out of the trust funds, is liable to be ordered to be produced to the beneficiaries, even if it would be subject to legal professional privilege.
The trustees were not obliged to explain their reasoning or create documents explaining why they took the views that they did about the beneficiaries when considering making distributions. However, if other producible documents revealed the trustees’ reasoning, the trustees could not refuse to disclose those documents on the grounds that their reasoning would be laid out. This is a warning to trustees and their advisers to be careful about where the trustees’ reasons are recorded. Inclusion of reasons in general correspondence with the trustees’ advisers could make the reasons more vulnerable to disclosure.
The judge regarded the trustees as having taken an indefensible approach to the beneficiaries’ requests, particularly in alleging that, because only some of the beneficiaries had requested the information, they were not entitled to have to provide it and, in their reasonable view, they had provided enough information already and the court was not able to disagree. However, the judge noted (at paragraph 71) that ‘if the trustees had taken a less confrontational and more co-operative approach at the outset, all this litigation could have been avoided and fewer documents (perhaps none at all) would now need to be disclosed’.