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Trustees – duty to beneficiaries

Trustees cannot simply ignore beneficiaries’ request for information about a trust, the High Court has held. In this case, the trust property was a farm outside Cardiff.

It had been left by T under her will for the benefit of her six children (only two of whom are still alive) and their children.

The two surviving children, and one of their own children, are the trustees and beneficiaries – and three further grandchildren are also beneficiaries. These three (non-trustee) grandchildren believed distributions of trust money had been made to other trust beneficiaries but not to themselves as beneficiaries.

They therefore sought information from the trustees about their negotiations and dealings as to the potentially developable land, which was now worth around £10m. They also wanted to check that option agreements with potential buyers had been prudently entered into, and whether the land had been generating any income. At least one housing company was trying to buy it.

The beneficiaries sought disclosure of documents and other information from the trustees, on the basis of the trustees’ obligation to beneficiaries to account to them for their stewardship. The information they required was not forthcoming.

In the proceedings, there was a number of heads of claim relating to, for instance, the trustees’ distribution of income, breach of trust, and whether option agreements and the compulsory purchase arrangement were prudently entered into, and failures to take tax advice and act fairly and impartially.

The beneficiaries’ action succeeded. Matthews HHJ found that the claimants wanted the information for precisely the right reasons – to hold the trustees to account, and to vindicate their own beneficial interests – ‘by way of an action for breach of trust if need be’.

He was highly critical of the trustees, stating that they ‘have taken an extreme and in my judgement indefensible approach to disclosure in this case, first by denying (on a very weak basis) that the claimants were beneficiaries at all, and then by putting forward a series of hopeless arguments against giving information to the beneficiaries’. Furthermore, had they been less confrontational and more co-operative at the outset, this litigation could have been avoided.

It’s worth noting that the trustees had sought to rely on legal professional privilege for their communications with their lawyers. However, this stance was ‘wisely’ abandoned. As Matthews said: ‘where the advice is sought for the benefit of the Tamplin Trust as a whole, and the trustees pay for that advice out of Tamplin Trust funds, then such advice, even though it may be privileged as against third parties, is not privileged as against the beneficiaries…’. Lewis v Tamplin [2018] EWHC 777. Source: www.bailii.org.

 

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