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A fork in the road for access to


trust documents
Georgia Dawson*
Two recent NSW Supreme Court decisions have created confusion
concerning the circumstances and the basis upon which a beneficiary of a
strict trust can access trust documents. This article argues that until the
matter is resolved in an appellate court, the decision in McDonald v Ellis
should be followed as it provides trustees and beneficiaries of fixed trusts
with greater certainty as to their rights and obligations and does the least
damage to equitable precedent in New South Wales.

In two recent decisions the NSW Supreme Court has taken contradictory
approaches to the question of the basis upon which access to trust documents
should be granted to beneficiaries of a strict trust. The point of departure
between the two decisions was whether the court chose to apply the Privy
Councils obiter dicta in Schmidt v Rosewood Trust Ltd1 to cases involving
strict rather than discretionary trusts. Until the matter is resolved by an
appellate court, judges presented with similar cases will need to evaluate
which is the better road to travel.
In Schmidt v Rosewood Trust Ltd the Privy Council determined that access
to trust documents was no longer a right attaching to beneficiaries with a
proprietary interest in the trust, but was instead a matter to be determined in
the courts absolute discretion. Schmidt concerned a discretionary trust and so
its findings are obiter with respect to strict trusts. However, in Avanes v
Marshall2 Gzell J applied the Privy Councils conclusions, without
acknowledging that they were obiter dicta and without justifying why it was
appropriate or necessary to recast the law in this way. In McDonald v Ellis3
Bryson AJ rejected the approach in Avanes v Marshall and chose instead to
follow the established authority of a strict beneficiary having a proprietary
right of access to trust documents, subject to certain exceptions. This line of
established authority is widely understood and difficult to fault in terms of
principle or fairness when dealing with cases involving strict trusts.
Discarding the proprietary basis of access to trust documents may make
more sense in cases involving discretionary objects. But to do so for strict
trusts simply introduces debate and uncertainty in a previously settled area of
the law and therefore runs the risk of unnecessarily increasing the litigation
costs incurred by trustees and beneficiaries.
* BA, LLB (Hons) (Syd); M Phil (International Relations) (Cantab). Senior Associate,
Freshfields Bruckhaus Deringer LLP, London. The author acknowledges the helpful
comments of Mark Leeming SC and the anonymous referee.
1 [2003] 2 AC 709; [2003] 3 All ER 76.
2 (2007) 68 NSWLR 595; [2007] NSWSC 191; BC200701448.
3 [2007] NSWSC 1068; BC200708266.

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2 (2009) 3 Journal of Equity

Trustees duties in respect of trust documents and


disclosure of trust documents
It is well established that a trustee is under a duty to keep accounts and to
produce them to a beneficiary when required.4 In addition, and again when
required,5 trustees must give all reasonable information as to the manner in
which the trust has been dealt with and as to the investments representing it.6
As straightforward as these two statements appear there are a number of grey
areas. First, where is the dividing line between the documents or information
to which a beneficiary is entitled and those to which it is not? And secondly,
what is the test for determining whether a beneficiary is entitled to access trust
documents?
From the late nineteenth century onwards it was considered established law
that beneficiaries holding vested or contingent interests had a right to inspect
trust property, including trust documents, in which they were beneficially
interested.7 The right was not absolute but subject to a number of exceptions,
such as when the trustees owe a duty of confidence to a third party in
connection with a document8 or if the document reveals the trustees reasons
for a particular decision.9 The theoretical basis for the beneficiaries right of
access was said to be their proprietary interest in the trust property, which in
turn provided the beneficiary with a proprietary right to access the trust
documents. In essence, the argument was that the trust documents belonged,
in a sense, to the beneficiary and therefore the beneficiary was merely seeking
access to his or her own documents.10
Founding the right of access to trust documents on a beneficiarys
proprietary interest in the trust property necessarily raised difficulties for
beneficiaries who were potential objects of the exercise of a discretionary
power (whether a bare or trust power) as they had no such proprietary interest.
As a consequence, a lot of the case law in this area has focused on defining
the limits of access to trust documents for this class of beneficiary. Over time
the principle evolved such that discretionary objects can, in certain
circumstances, inspect trust documents to ensure the trustees are dealing with
trust property for the benefit of the class of potential beneficiaries.11 As with
beneficiaries with a vested or contingent interest, discretionary objects do not
4 J D Heydon and M J Leeming (Eds), Jacobs Law of Trusts in Australia, 7th ed, LexisNexis
Butterworths, 2006, para 1713 citing Re Craig (1952) 52 SR (NSW) 265 at 267 and Clarke
v Ormonde (Earl of) (1821) Jac 108 at 120; 37 ER 791 at 795. See also J McGhee, Snells
Equity, 31st ed, Sweet & Maxwell, 2005, para 27-20 citing Pearse v Green (1819) 1 Jac &
W 135 at 140 and Armitage v Nurse [1998] Ch 241 at 255 per Millett LJ; [1997] 2 All ER
705.
5 Note that there is no general duty on trustees to volunteer documents/information: see
Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 431; BC9203940.
6 Snells Equity, above n 4, para 27-20. See also Heydon and Leeming, above n 4, para 1715.
7 See Heydon and Leeming, above n 4, para 1716 and the cases in n 128 therein.
8 Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 433; BC9203940.
9 In Re Londonderrys Settlement [1965] Ch 918; [1964] 3 All ER 855
10 See, eg, Lord Wrenbury in ORourke v Darbishire [1920] AC 581; [1920] All ER Rep 1
at 17.
11 See, eg, Spellson v George (1987) 11 NSWLR 300; Randall v Lubrano (NSW SC,
31 October 1975, Holland J). It is not necessary for the discretionary objects to allege breach
of trust or mala fides: see Chaine-Nickson v Bank of Ireland [1976] IR 393.

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A fork in the road for access to trust documents 3

have an absolute right of access to trust documents and certain exceptions


apply.12
In Australia, the proprietary basis for access to trust documents has
encountered direct criticism. For example, Kirby P in Hartigan Nominees Pty
Ltd v Rydge13 felt that the entitlement to inspect trust documents rested upon
a trustees duty of disclosure arising from the fiduciary duty to keep a
beneficiary informed and to render accounts, rather than some proprietary
right. In the same case, Sheller JA commented that an enquiry into whether or
not a beneficiary had a proprietary interest was if not false, an unhelpful
trail.14 The utility of the word proprietary as a descriptor for varying
relationships in the law has been the subject of significant debate in a range
of contexts outside trust law.15 As the High Court of Australia has noted to
characterise something as a proprietary right is not to say that it has all the
indicia of other things called proprietary rights.16 The fact remains, however,
that the term proprietary rights is regularly used when discussing the
differing rights of beneficiaries under a trust, with the broad conclusion that
proprietary rights are superior to other rights.
In light of this debate, it is therefore not surprising that the question of the
basis upon which access to trust documents should be granted has come up
again for debate. Faced with an opportunity to remove some of the grey area
surrounding the two questions posed at the start of this section, it is
disappointing that Avanes v Marshall chose to add to the grey area by leaving
the answer to both questions at the absolute discretion of the court. Rather
than bringing clarity, this approach introduces, in Bryson AJs words,
unnecessary resistance and debate17 to a situation that had been relatively
stable. McDonald v Ellis, on the other hand, attempts to provide hard and fast
answers to the two questions by building on existing lines of authority relating
to strict trusts. Consequently, McDonald v Ellis does more to clarify the rights
and obligations of trustees and beneficiaries of a strict trust and ought
therefore to be followed to minimise the disruption to a trustees operations
and to equitable legal principles.
To understand the differing approaches taken in the two recent NSW
judgments, it is necessary to review the reasoning of the Privy Council in
Schmidt v Rosewood Trust Ltd.

Schmidt v Rosewood Trust Ltd


In 2003 the UKs Privy Council turned the established rules of access to trust
documents on their head. In Schmidt v Rosewood Trust Ltd their Lordships
12
13
14
15

Hartigan (1992) 29 NSWLR 405 at 436; BC9203940.


Ibid, at 422.
Ibid, at 444.
For example, in connection with the vesting of property in some fauna in the Crown (see
Yanner v Eaton (1999) 201 CLR 351; 166 ALR 258; BC9906413 at [17][20] per
Gleeson CJ, Gaudron, Kirby and Hayne JJ) and regarding the meaning of property in the
Australian Constitution (see Telstra Corporation Ltd v Commonwealth of Australia (2008)
243 ALR 1 at 44 per Gleeson CJ, Gummow, Kirby, Hayne, Heydon, Crennan and Kiefel JJ;
[2008] HCA 7; BC200801217).
16 Zhu v The Treasurer of the State of New South Wales (2004) 218 CLR 530; 211 ALR 159;
BC200407561 at [135].
17 McDonald [2007] NSWSC 1068; BC200708266 at [51].

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4 (2009) 3 Journal of Equity

considered the question of whether a beneficiarys right or claim to disclosure


of trust documents should be regarded as a proprietary right. The Privy
Council concluded that such a proprietary right is neither sufficient nor
necessary for providing a right to access trust documents. Instead, their
Lordships concluded:
the more principled and correct approach is to regard the right to seek disclosure of
trust documents as one aspect of the courts inherent jurisdiction to supervise, and
if necessary to intervene in, the administration of estates. The right to seek the
courts 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 courts discretion.18

Their Lordships went on to say 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.19 Previous authority
was therefore swept away and replaced with a finding that no beneficiary has
a right of access to trust documents and the court in its absolute discretion
would determine any claim to access. The door to access trust documents for
discretionary objects was therefore thrown wide open.
The apparent lack of theoretical integrity in the pre-existing case law seems
to have influenced the courts conclusion. Their Lordships commented that
since the decision in Re Cowin, Cowin v Gravett20 the courts have recognised
that the right of a vested or contingent beneficiary to access trust documents
was not absolute and that exceptions to such access may arise. The fact of such
exceptions was, in their Lordships view, an indication that the mere existence
of a vested or contingent interest was not always a sufficient basis for
requiring disclosure of trust documents and that since Re Londonderrys
Settlement21 the court had recognised it enjoyed a discretion in determining
whether to award access and had started to work out how to exercise that
discretion.22 The Privy Council went on to identify three principal areas in
which the court may have to form a discretionary judgment:
whether a discretionary object (or some other beneficiary with only a remote or
wholly defeasible interest) should be granted relief at all; what classes of documents
should be disclosed, either completely or in a redacted form; and what safeguards
should be imposed (whether by undertakings to the court, arrangements for
professional inspection, or otherwise) to limit the use which may be made of
documents or information disclosed under the order of the court.23

Implicit in the Privy Councils reasoning is a finding that the various


exceptions to the so-called right of access to trust documents so weakened
the substance of the right as to make it meaningless to continue to rely upon
it. In their Lordships view, it was better to formally recognise the pivotal role
18
19
20
21
22
23

Schmidt [2003] 3 All ER 76 at [51].


Ibid, at [67].
(1886) 33 Ch D 179.
[1965] Ch 918; [1964] 3 All ER 855.
Schmidt [2003] 3 All ER 76 at [54].
Ibid, at [54].

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A fork in the road for access to trust documents 5

played by the court in determining whether access should be granted and, in


doing so, their Lordships removed the perceived disadvantage to discretionary
objects, who were now placed on a more or less equal footing with vested or
contingent objects. Le Poidevin has commented that the decision is one of
many instances of the modern tendency of the court to prefer discretion to
hard and fast entitlements.24
Sir Gavin Lightman summarised the effect of Schmidt as follows in the
2003 Withers Lecture:
In summary (a) the right of a beneficiary is not a right to access to trust documents
or information, but an equity incident to his beneficial interest entitling him to
invoke the discretionary jurisdiction of the court to require the trustee to make
disclosure . . .; (b) a beneficial interest carries with it this incident whether it is
transmissible or non-transmissible (ie, discretionary) and whether it is the interest of
the object of a discretionary trust or that of the object of a power; (c) if the existence
of the interest is uncertain, eg, if it depends upon the resolution of an issue of
construction of the settlement by the court, the court will (at any rate in any ordinary
circumstance) defer any decision whether to give any direction to the trustees to
make disclosure until the issue of construction has been decided.25

The recent decisions of the NSW Supreme Court


The Privy Councils preference for judicial discretion in lieu of clear-cut rules
has reignited debate surrounding access to trust documents in a number of
jurisdictions. It is therefore not surprising that the issue was raised in Avanes
v Marshall and McDonald v Ellis. In both cases, the judges considered the
extent to which the Privy Councils decision in Schmidt v Rosewood Trust Ltd
should be adopted by the Australian courts. Ultimately, Schmidt v Rosewood
Trust Ltd was followed in Avanes but not in McDonald. It is important to
recognise at the outset that Schmidt v Rosewood Trust Ltd concerned a
discretionary trust and therefore the Privy Councils conclusions are merely
obiter in relation to strict trusts.26 Both Avanes and McDonald concerned strict
trusts and yet it is only in McDonald that the court recognises the obiter nature
of the Privy Councils findings with respect to strict trusts and evaluated them
accordingly.
The introduction of a single rule applicable to all may have merit as the
position of the law prior to Schmidt v Rosewood Trust Ltd was not without its
critics. However, if that single rule is that the court has an absolute discretion
to determine access to trust documents, then debate and uncertainty (and
attendant legal and court costs) are introduced for all beneficiaries.
Pre-Schmidt there was limited uncertainty about the rights of beneficiaries
under a strict trust. Therefore, if Avanes v Marshall were followed, it would
result in an unwarranted introduction of debate where previously there was
none.
24 N Le Poidevin, The Elephants Child, referred to in the Withers Lecture given by
Mr[a0]Justice Lightman, see n 25 below.
25 G Lightman, The Trustees Duty to Provide Information to Beneficiaries, recorded in full in
Newsletter of Contentious Trust & Probate Specialists, Issue 58, 2004.
26 See Heydon and Leeming, above n 4, para 1716.

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Avanes v Marshall
This case concerned a beneficiary under a testamentary settlement seeking
access to documents in the course of disclosure which the trustees claimed
were subject to client legal privilege. The beneficiary challenged this claim to
privilege on the principal basis that the documents in question were trust
documents in which the plaintiff had a proprietary interest and relied on Re
Londonderrys Settlement27 in support of their right of access. Gzell J invited
further submissions from the parties on the impact of Schmidt v Rosewood
Trust Ltd on Re Londonderrys Settlement, having formed the view that the
former overruled some aspects of the latter.
Gzell J then undertook a review of the leading authorities in the area and
highlighted the various exceptions to the rule providing beneficiaries with
access and the different bases upon which such access was said to be granted.
Starting with Re Cowin28 Gzell J noted that the court in that case had
expressed the view that the plaintiff had a prima facie right to inspect trust
documents because the cestuis que trust were the beneficial owners of the trust
property, but noted that the court felt that this general rule did not extend to
granting access to documents concerning the reasons for the exercise of a
trustees discretion. The proprietary basis for the grant of access was again
referred to with reference to the decision in ORourke v Darbishire.29 Gzell J
moved on to note that in Re Londonderrys Settlement30 the rule that the
reasons for a trustees decision need not be disclosed meant that those
documents were not trust documents and therefore not documents in which
the beneficiary had any interest.
Gzell J then moved to look at the position in Australia and noted that the
proprietary basis for granting access to trust documents to beneficiaries had
not been followed. In Spellson v George31 Powell J had concluded that a
discretionary object had an interest in ensuring trust property was properly
managed and to have the trustee account for that management. The judgments
in Hartigan Nominees Pty Ltd v Rydge32 were then briefly surveyed with the
overriding conclusion by Gzell J that both Sheller JA and Kirby P had
criticised the notion that a beneficiarys entitlement to trust documents was
based upon a proprietary interest. The decisions of the judge at first instance
and Full Court in Rouse v IOOF Australia Trustees Ltd33 were also reviewed
and the conclusion drawn was that the mere status of a person as a beneficiary
of a trust did not give that person an unfettered right of access to the
documents in question, as confidentiality or legal professional privilege were
circumstances in which a discretion to refuse inspection might arise.34
His Honour then reviewed the Privy Councils decision in Schmidt v
Rosewood Trust Ltd with the conclusion that it had rejected the proprietary
27
28
29
30
31
32
33
34

[1965] Ch 918; [1964] 3 All ER 855.


(1886) 33 Ch D 179.
[1920] AC 581.
[1965] Ch 918; [1964] 3 All ER 855.
(1987) 11 NSWLR 300.
(1992) 29 NSWLR 405; BC9203940.
(1999) 73 SASR 484; BC9902313.
Avanes (2007) 68 NSWLR 595; [2007] NSWSC 191; BC200701448 at [9].

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A fork in the road for access to trust documents 7

interest theory and that [s]ince that right was not confined to proprietary
interests, the object of a discretion or a mere power might also be entitled to
protection.35 Gzell J went on to say:
The consequence is that according to Schmidt, there is no longer a general rule that
a beneficiary has a right to inspect trust documents that is subject to exceptions,
notably concerning the reasons for the exercise of the trustees discretion and
confidentiality in third parties. In each case it is a matter for the court to exercise its
discretion by balancing competing interests. At 730, Lord Walker suggested that in
Londonderry and more recent cases, including the Australian decisions of Spellson,
Hartigan and Rouse, the courts have begun to work out in detail the way in which
the court should exercise its discretion.

After completing a limited survey of the law in Australia and England, his
Honour concluded:
In my view, the approach in Schmidt should be adopted by Australian courts. The
decision should not be regarded as abrogating the trustees duty to keep accounts and
to be ready to have them passed, nor the trustees obligation to grant a beneficiary
access to trust accounts. But when it comes to inspection of other documents there
should 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.36

Unfortunately, judgment was given ex tempore and the reasoning is extremely


limited in light of the impact that the decision could have on the position of
beneficiaries under a strict trust, and possibly also for discretionary objects (as
to which see below). While the way in which Gzell J exercised his discretion
was ultimately uncontroversial (as the sacrosanct status of trustee discretion,
confidentiality and legal professional privilege remained at the core of the
courts balancing act),37 the decision fails to justify why it was appropriate to
discard existing authority and to introduce judicial discretion into an area that
had previously been considered extremely clear. Moreover, nowhere in the
judgment does Gzell J consider the significant practical implications of
applying Schmidt in this way.
Interestingly, and as is visible in the passage quoted above, Gzell J seems
to have distinguished Schmidt by drawing a distinction between the existence
of an absolute right of access to trust accounts and a discretionary right of
access to other documents. In view of the failure to identify the obiter nature
of Schmidt in the context of a strict trust, it is not clear whether Gzell J is
making these comments in respect of all beneficiaries or whether these
comments amount to obiter dicta for discretionary objects. This confusion
does little to enhance the weight that should be given to the reasoning in
Avanes v Marshall.

McDonald v Ellis
This case involved an acrimonious family dispute concerning the right of
access to trust documents of a remainderman under a will with a successive
35 Ibid, at [10].
36 Ibid, at [15].
37 P McAlister, Trust documents a redundant concept? (2007) 18(8) Aust Superannuation
Law Bulletin 103.

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equitable life estate in a block of flats. The remainderman was concerned


about the state of maintenance and repair of the flats and the general
administration of the estate and sought access to the trust accounts so as to
know whether there is any further matter on which to press for remedies.38
Bryson AJ found:
[the evidence of one of the trustees] shows that he has not yet kept estate accounts
and has not prepared any other documents, such as income tax returns, which may
show estate affairs. The only documents which exist now and can be produced are
copies of the monthly statements prepared by . . . the managing agents.39

The defendant argued that the way in which the estates affairs were conducted
and the net annual income derived are not matters in which a remainderman
has any interest. It was further argued that the remainderman had no interest
in the trust under which the trustees paid net annual income from the flats to
the life tenant; rather, the remainderman belonged to a different trust.
However, Bryson AJ rejected the argument concerning the existence of
separate trusts on the basis that it was not a correct interpretation of the
dispositions in the will and concluded that:
the will creates one trust of the block of flats with successive interests, and the
remaindermen including the plaintiff now have present interests in the block of flats,
vested in interest although not in possession. The remaindermen have at the present
time an economic interest in the state of repair of the block of flats. Whether it is in
or out of repair, whether some need for renovation at a future time is coming into
being and whether there are any reserves or provisions, are factors affecting the
money value of rights which the remaindermen now own.40

Bryson AJ went on to conclude that the trust was not discretionary and this
therefore removed any arguments about the protection from disclosure of the
discretionary decisions of trustees. He went on to say [d]ecisions of trustees
exercising choices in the performance of management duties, such as a
decisions [sic] whether or not to carry out some repair or other, or whether or
not to make a provision for a class of repairs in the future, are not the
discretions to which that body of case law relates.41
His Honour moved on to consider the law concerning a beneficiarys right
of access to trust documents and made his views quite clear at the start of his
analysis:
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 [2003]
2 AC 709 at 7345.42

His Honour went on to refer to the clarity of the position existing prior to
Schmidt v Rosewood Trust Ltd and, unsurprisingly, ultimately concluded that
38
39
40
41
42

McDonald [2007] NSWSC 1068; BC200708266 at [25].


Ibid, at [26].
Ibid, at [30].
Ibid, at [31].
Ibid, at [32].

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A fork in the road for access to trust documents 9

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 in New South Wales. Bryson AJ
readily identifies the obiter nature of the Privy Councils comments with
respect to strict trusts and robustly points out:
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 persons
own property . . . 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.43

Similar statements about the obiter nature of the Privy Councils advice appear
elsewhere in the judgment.44 However, Bryson AJ does consider whether,
even though not strictly binding on the NSW courts, the obiter dictum should
be followed because it is persuasive. His Honour concludes that the Privy
Council did not identify any error in previous authority or point out that the
existing law was significantly unsatisfactory, nor did it base its reset of the
law on any earlier judicial decision, academic writings or compelling public
policy considerations. Rather the only matter indicated was an opinion that
the rule enounced was a better rule45 without any significant reasoning for
why that was so. Bryson AJ objected to the Privy Councils approach and
stated:
In my opinion it is not a better rule because it introduces discretion and promotes
resistance and debate in substitution for a rule which is relatively concrete. The
tendency will be that only the determined and litigious beneficiary will find out
about his own affairs. Where there is a judicial discretion, there is room for litigious
debate about the exercise of the discretion; there is no certainty on so elementary a
matter as whether or not a beneficial owner is entitled to information about property
in which the beneficial owner has an equitable interest . . . Treating the entitlement
to information as an aspect of the Courts discretionary exercise of its supervising
power over trusts is a departure from the relatively concrete concept of equitable
interests in trust property which has been adopted for some centuries.46

In his judgment Bryson AJ surveys the case law in the area and considers the
same authorities as those cited in Avanes v Marshall as well as the cases of In
re Tillott, Lee v Wilson,47 In re Dartnall, Sawyer v Goddard48 and Randall v
43
44
45
46
47
48

Ibid, at [35].
Ibid, at [48] and [50].
Ibid, at [51].
Ibid, at [51].
[1892] 1 Ch 86.
[1895] 1 Ch 474.

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10 (2009) 3 Journal of Equity

Lubrano.49 In surveying these cases Bryson AJ points time and again to the
fact that the case law illustrates beneficiaries with vested interests and
discretionary objects approaching the court for assistance in enforcing the
personal obligation of the trustee to account.
Particular attention is paid to Hartigan Nominees Pty Ltd v Rydge as
Bryson AJ ultimately concludes that judges at first instance in New South
Wales should treat its majority judgments as authoritative.50 Bryson AJ points
out that the majority judges in that case (Mahoney and Sheller JJA) did not
simply apply In re Londonderrys Settlement. Rather, 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 . . ., and discussed the difficulties of the limits of trust
documents in this context.51 His Honour then concludes that the starting point
for ascertaining whether a beneficiary is entitled to see trust documents is
whether a proprietary interest exists52 and notes that in the case under
consideration it is not necessary to consider the position of discretionary
objects as the question does not arise. However, having said that, Bryson AJ
does permit some musings on the position of discretionary objects. He
criticises the Privy Councils reliance on Kirby Ps dissenting judgment in
Hartigan Nominees on the basis that Kirby Ps decision did not examine or
refer to judicial decisions but relied instead on a view expressed in a legal text
that the proprietary basis for permitting access to trust documents gives rise
to unnecessary and undesirable consequences.53 Bryson AJ concluded:
[t]his 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.54

Bryson AJ also notes the inherent problem of treating equitable interests as


proprietary but states that this should not be regarded as a basis for discarding
a well-established rule. Having made these remarks Bryson AJ concedes that
there may be a place for the Privy Councils reasoning in Schmidt v Rosewood
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 trustees
discretion while at the same time noting the law in New South Wales runs
strongly counter to this position.
Occurring as it did some six months after Avanes v Mitchell, the judge in
McDonald v Ellis also had an opportunity to consider the views of Gzell J. In
49
50
51
52
53

NSW SC, 31 October 1975, unreported.


[2007] NSWSC 1068; BC200708266 at [46].
Ibid, at [45].
Ibid, at [46].
Kirby P relied on the views of Professor H A J Ford in Principles of the Laws of Trust, 2nd
ed, Law Book Co, Sydney, 1990. See McDonald v Ellis [2007] NSWSC 1068;
BC200708266 at [47].
54 McDonald [2007] NSWSC 1068; BC200708266 at [47].

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A fork in the road for access to trust documents

11

a fairly short passage Bryson AJ unequivocally dismisses Gzell Js conclusion


that Schmidt should be adopted in Australian courts. He notes again that
Schmidt may have some place in the case of potential objects of a
discretionary trust but roundly rejects the view that Schmidt has any role to
play with respect to beneficiaries with vested interests.

The approach in other jurisdictions


Schmidt v Rosewood Trust Ltd has been applied in a number of
Commonwealth jurisdictions. The approach in each jurisdiction has differed
somewhat, with Jersey taking the most flexible approach to when and how to
apply the Privy Councils authority. In the main, Schmidt has been applied
strictly to cases involving discretionary trusts but it would appear that a case
involving a strict trust has not yet arisen, so it is difficult to anticipate from the
existing judgments whether the courts would seek to extend Schmidt to strict
trusts or whether a more constrained approach would be taken.
Schmidt v Rosewood Trust Ltd was recently considered for the first time in
England in the High Court decision of Breakspear v Ackland.55 This case
concerned an application by the beneficiaries of a discretionary trust for access
to several categories of documents, including in particular a letter of wishes.
Briggs J concluded that it was correct to approach the question of disclosure
as one of discretion and not as an adjudication of a proprietary right, and that
this conclusion arose from the decisions of ORourke v Darbishire and Re
Londonderrys Settlement both of which were, in Briggs Js view, endorsed
rather than criticised by Schmidt v Rosewood Trust Ltd.56
In Guernsey, Schmidt v Rosewood Trust Ltd has been followed in the case
of an excluded beneficiary seeking access to trust documents to understand
how or why she was excluded when she had been named as a beneficiary
under a discretionary trust.57 The Royal Court applied Schmidt strictly,
holding that no beneficiary of a trust, whether or not his interest had vested,
and no object of a discretionary power, had any entitlement as of right to
disclosure of trust information. The test was whether or not it was appropriate,
in all the circumstances, for the court under its inherent jurisdiction to
supervise and intervene in the administration of trusts, to exercise its
discretion by ordering disclosure. The Royal Court further held that that
jurisdiction still applied where a beneficiary had been excluded and the trust
terminated and could extend to ordering disclosure of the settlors letters of
wishes.
In Jersey, Schmidt v Rosewood Trust Ltd has been applied on a number of
occasions58 and referred to without adverse comment on at least one other.59
When applied, it was in the context of cases where:
(a) litigation was ongoing in another jurisdiction to ascertain whether the
parties seeking disclosure remained beneficiaries of the trust. The
55
56
57
58

[2008] EWHC 200 (Ch).


See ibid, at [52][57].
Countess Bathurst v Kleinwort Benson (Channel Islands) Trustees Ltd [2007] WTLR 959.
In the Matter of the Internine and the Azali Trusts 2004 JLR 325; In the Matter of the
Bastiaan Broere Trust and the Cornelis Broere Trust 2004 JLR Note 2.
59 In the Matter of the Internine and the Azali Trusts 2006 JLR 195.

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12 (2009) 3 Journal of Equity

Jersey Court of Appeal concluded that it was not necessary to wait


until the status of the parties as beneficiaries had been determined,
but that in exercising its discretion it could take the interests of these
disputed beneficiaries into account, amongst other matters, and
award disclosure;60 and
(b) a beneficiary of a trust was ordered to provide disclosure of
documents in his possession and relevant to a family trust but held by
him in his capacity as the settlor of another related family trust and
of the family charitable foundation, or as the chairman of a
family-controlled company.61
These are both quite novel applications of the authority and, particularly in
the second example, extend well beyond the scope of what was anticipated by
the Privy Council in its judgment. Whether the courts of Jersey will continue
to take such a creative approach in the future, and what approach they would
take when presented with a case involving a strict trust, remains to be seen.
The High Court of New Zealand has also adopted the approach in Schmidt
v Rosewood Trust in its decision in Foreman v Kingstone.62 In that case the
plaintiffs were named as members as a class of potential beneficiaries of a
number of related discretionary trusts. The plaintiffs sought disclosure of a
number of documents relating to the trust, including financial information,
correspondence and internal working documents of the trusts. Potter J held
that the potential beneficiaries had a mere expectancy but, following the line
of authority in Spellson v George, Randall v Lubrano and Chain-Nickson v
Bank of Ireland, concluded that they had rights against the trustee which
extended to a right to have the trust property managed and to have the trustee
account for his management:63
A fundamental duty of trustees is to account to beneficiaries for the administration
of the trust. There is nothing in the Schmidt decision that suggests a departure from
that fundamental obligation. Indeed it would be an extreme result if in confirming
the same rights of access to trust documents for beneficiaries with a transmissible
interest and those with a discretionary interest or as objects of a mere power, a
fundamental trustee obligation was in any way diminished or varied.64

Potter J went on to say that the circumstances which might exclude a person
named or included by definition as a discretionary beneficiary from access to
documents would be limited, because to decline disclosure of accounts and
information would be in direct conflict with the trustees fundamental
obligation to be accountable to the beneficiaries.65 However, Potter J also
noted that a beneficiarys entitlement to disclosure must be measured against
the principle that the trustees autonomy in the exercise of their discretion
must be ensured therefore ensuring that trustees are not obliged to disclose
their reasons for the exercise of a discretionary power.66
60
61
62
63
64
65
66

See In the Matter of the Internine and the Azali Trusts 2004 JLR 325 at 3334.
In the Matter of the Bastiaan Broere Trust and the Cornelis Broere Trust 2004 JLR Note 2.
[2004] 1 NZLR 841.
Ibid, at [85] and [88].
Ibid, at [85].
Ibid, at [88].
Ibid, at [89] following Re Londonderrys Settlement.

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A fork in the road for access to trust documents 13

Closer to home, in Victoria Harper J in Loughran v Perpetual Trustees WA


Ltd67 referred to but had no need to apply Schmidt and Rosewood Trust Ltd
and seemingly confused its scope as extending to cases involving strict
trusts.68 The Privy Councils decision has again been referred to in the
Victorian decision of SC Land Richmond Pty Ltd v Dura (Australia)
Constructions Pty Ltd and Khor69 without any discussion of the circumstances
in which the decision should apply. Therefore there is no helpful guidance
available from other Australian jurisdictions concerning the approach that
might be adopted in New South Wales.
In accordance with the rules of judicial precedent, judges in New South
Wales will be obliged to follow the decision in McDonald v Ellis, unless they
are convinced that Bryson AJ was wrong not to follow the reasoning of
Gzell J.70 For the reasons stated above, Bryson AJ was right to reject the
courts approach in Avanes v Marshall and to follow the road of established
equitable precedent in New South Wales.

Conclusion
The present state of confusion concerning the circumstances and the basis
upon which a beneficiary of a strict trust can access trust documents is highly
unsatisfactory. Trustees are left in doubt as to when they should agree to meet
requests for documents and in the circumstances it is hard to see how trustees
can be expected to fulfil their duty to make a full rather than a reluctant
response71 when information is requested of them. Unfortunately, neither of
the two decisions has yet been appealed and so uncertainty will prevail until
the matter is resolved in an appellate court.72 In the interim it would appear the
reasoning in McDonald v Ellis is least likely to cause damage to equitable
precedent in New South Wales while at the same time providing trustees and
beneficiaries of fixed trusts with greater certainty as to their rights and
obligations.

67
68
69
70
71
72

[2007] VSC 50; BC200701193.


See ibid, at [32].
[2007] VSC 272; BC200705854 at [11].
Colchester Estates (Cardiff) v Carlton Industries plc [1986] 1 Ch 80 per Nourse J.
Re Whitehouse [1892] Qd R 196 at 201.
This will include the decision of a court in another state following the decision of Farah
Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 236 ALR 209; 81 ALJR 1107;
BC200703851 at [135].