Schmidt v Rosewood Trust Co [2003] 2 AC 709

Key Points

  • Beneficiaries do not have an entitlement as of right to disclosure of trust documents; the court may have to balance competing interests.
  • It is neither sufficient nor necessary to have a proprietary interest under a trust in order to be entitled to disclosure of trust documents.

Facts

  • Schmidt (deceased) was an oil tycoon who set up a shell company to disguise his ownership of property and he died without leaving a will.
  • There was a disagreement between Schmidt’s business partners and his son over how to distribute property.
  • The son wanted access to trust documents.
  • The son appointed himself administrator of the estate and applied to trustees for disclosure of trust documents, but he was not named as a beneficiary in the trust deed, so there was no capacity to entitlement of trust information under the Londonderry principle.

Issue

Does the right to disclosure depend on a proprietary interest in the trust property?

Held (Privy Council (Isle of Man))

Advice given that appeal should be allowed; S had a strong claim to disclosure in his personal capacity and as his father’s personal representative

Lord Walker

Nature of right of disclosure

  • In Re Londonderry’s Settlement [1965], only Salmon LJ expressly adopted the proprietary basis of the principle of disclosure of trust information: [49]
  • ‘the Board cannot regard it as a reasoned or binding decision that a beneficiary’s right or claim to disclosure of trust documents or information must always have the proprietary basis of a transmissible interest in trust property’: [50]
  • ‘Their Lordships consider that the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the court’s inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts. The right to seek the court’s 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 court’s discretion’: [51]
  • ‘In the Board’s view it is neither sufficient nor necessary [to have propietary interest]. … there may be circumstances (especially of confidentiality) in which even a vested and transmissible beneficial interest is not a sufficient basis for requiring disclosure of trust documents’: [54]

Approach to disclosure

  • Case law suggests that there are three areas where the court may use its discretion regarding disclosure: 1) whether a discretionary object should be granted relief at all, 2) what classes of documents should be disclosed, and 3) what safeguards should be imposed to limit the use of the documents: [54]
  • ‘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.’: [67]
  • ‘Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place.’: [67]

Current case

  • the appellant (as personal representative) seems to have a powerful case for the fullest disclosure:[67]
  • The appellant in his personal capacity as the object of a power also has a strong claim to be heard: [67]

Commentary

  • The New Zealand case Erceg v Erceg [2017] 1 NZLR 320 listed a number of relevant factors in deciding whether disclosure should be granted (at [56]).
  • Breakspear v Ackland [2009] Ch 32 later sets out a general rule that the contents of letters of wishes should not be disclosable.