45 St. Clair Ave. West, Suite 600
Toronto, Ontario, M4V 1K9
Tel: (416) 925-7400

Information Trustees Must Disclose to Beneficiaries: The Joint Interest Exception

A year ago, I wrote a blog on the topic of disclosure of information by trustees. In it I argued that older cases, which held that beneficiaries hold a proprietary right to trust documents and are thus entitled to have them disclosed, have been superseded by more recent cases.[1] This is an issue that comes back before the courts on a regular basis. Such cases are, of course, restricted to their factual matrix. But a recent decision by the New Zealand Supreme Court, Lambie Trustee Limited v. Addleman,[2] provides a very helpful discussion of the general principles that apply when a beneficiary seeks disclosure of legal opinions and other advice obtained by the trustees.

I believe that the discussion and general principles will be helpful in many cases in which beneficiaries seek disclosure by trustees. So too, the list of factors to be considered in such cases that the court previously outlined in the leading case, Ercig v. Ercig,[3] which I reproduce later in this blog, will undoubtedly be of assistance to counsel in new cases.

The case arose out of a dispute between two sisters, Prudence Addleman and Annette Jamieson. It concerned a discretionary trust, the Lambie Trust, that was established in 1990.

The final beneficiaries of the trust were Ms Addleman, Ms Jamieson, and two companies controlled by Mr Jamieson. The trust was scheduled to end 80 years after it was created. The discretionary beneficiaries were the final beneficiaries, any child or remoter issue, wife, husband, widow or widower of any final beneficiary, and any lawful charitable object. The two younger Jamieson children, Anthony and Meredith, were not beneficiaries, but in Mr. Jamieson’s memorandum of wishes made in 2000, a fund of 2 million NZD was to be set aside for Anthony. Of the balance of the fund, 40%, but not more than 10 million NZD were to be set aside for charitable objects. And of the remainder, 50% was to be paid to Ms Jamieson and 25% each to Ms Addleman and Meredith.

The background to the case was that at age 19 Ms Jamieson suffered a catastrophic accident in 1972, when she dove into a public pool in Australia, hit the bottom with her head, and became a paraplegic. With her father’s assistance, she sued the local municipality for negligence and was awarded more that 1 million AUD in damages. Mr Jamieson then made a substantial investment in a property near Auckland, the Howick development, which became very profitable in due course. Title to the property was held nominally by Robert Palmer, a nephew of Mr Jamieson. He was also the nominal settlor of the Lambie Trust, and he transferred the shares in the Howick development to the trust in 1991. The original trustees, including Mr Jamieson and Mr Palmer, were replaced by others over the next decade and ultimately by Lambie Trustee Ltd in 2006. Ms Jamieson was the sole director and shareholder of Lambie Trustee Ltd. Mr Jamieson died in 2001 and his wife died in 2012.

Ms Addleman only learnt of the trust’s existence at the time of her father’s death but did not learn that she was a discretionary beneficiary until November 2002, when she received a letter from Mr Kemps, who was the trust’s solicitor. He told her that she would be receiving 4.275 million NZD in full payment of what she was entitled to from the trust.

Ms Addleman then wrote to Mr Kemps for information about the trust. He prevaricated, but eventually responded by sending her a copy of the trust deed and information about the appointment and removal of trustees. She again wrote to Mr Kemps in 2013 and 2014 for comprehensive information about the trust. In November 2014 Mr Kemps informed her for the first time that the trust was a ‘sole purpose trust’ that existed essentially for the sole benefit of Ms Jamieson, because it was her money from the damage award that funded the Howick development and consequently the trust when the Howick shares were transferred to the trust.

Ms Addleman finally commenced these proceedings in June 2015. In them she sought orders from the court requiring the trustee to disclose comprehensive financial statements, legal advice obtained by the trustees in the administration of the trust, and other trust documents.

In the High Court, Justice Woolford accepted the argument that the Lambie Trust had been funded by the damage award, that the trust had been set up substantially for the sole purpose of providing for Ms Jamieson, and that Ms Addleman was added solely as a ‘back stop’ to provide for the possibility that Ms Jamieson might die prematurely.

The Court of Appeal was sceptical of the argument that Trust was funded solely with Ms Jamieson’s damage award. On the evidence, the court found it implausible that the Howick development was funded by the damage award, since Ms Jamieson had used most of the award to purchase certain properties. And it held further that the facts did not support the ‘sole purpose trust’ argument. In any event, the arguments were inconsistent with the terms of the trust deed, with Mr Jamieson’s letter of wishes, and with the contemporaneous documents introduced in evidence in the Court of Appeal. The court considered its earlier decision, Erceg v. Erceg,[4] in which it outlined the factors to be considered when a beneficiary seeks disclosure from the trustee. They are these:[5]

(a) The documents that are sought. Where a number of documents are sought each document (or class of document) may need to be evaluated separately, given that different considerations may apply to basic documents such as the trust deed and more remote document such as the settlor’s memorandum of wishes.

(b) The context for the request and the objective of the beneficiary in making the request. The case for disclosure will be compelling if meaningful monitoring of the trustee’s compliance with the trust deed in the administration of the trust could not otherwise occur. In this regard, it may be relevant that disclosure has been made to other beneficiaries. However, assuming no improper motive on the part of the beneficiary seeking information, the fact that disclosure has previously been made to other beneficiaries will rarely be a decisive factor against disclosure.

(c) The nature of the interests held by the beneficiary seeking access. The degree of proximity of the beneficiary to the trust (or likelihood of the requesting beneficiary or others in the same class of beneficiaries benefitting from the trust) will also be a relevant factor.

(d) Whether there are issues of personal or commercial confidentiality. Recognition should be given to the need to protect confidential matters of a personal or commercial nature. The Court should also take into account any indications in the trust deed itself about the need for confidentiality in relation to commercial dealings or private matters in relation to particular beneficiaries.

(e) Whether there is any practical difficulty in providing the information. If the information sought by the person requesting the information would be difficult or expensive to generate or collate, that may be a factor against requiring its disclosure.

(f) Whether the documents sought disclose the trustee’s reasons for decisions made by the trustees. It would not normally be appropriate to require disclosure of the trustees’ reasons for particular decisions.

(g) The likely impact on the trustee and the other beneficiaries if disclosure is made. In particular, would disclosure have an adverse impact of the beneficiaries as a whole that would outweigh the benefit of disclosure to the requesting beneficiary? In the case of a family trust, this may include the possibility that disclosure would embitter family feelings and the relationship between the trustees and beneficiaries to the detriment of the beneficiaries as a whole. However, on the other hand, non-disclosure may have a similar effect.

(h) The likely impact on the settlor and third parties if disclosure is made. The impact that disclosure will have on the settlor and/or on third parties will need to be considered.

(i) Whether disclosure can be made while still protecting confidentiality. This may require that copies of documents supplied to a beneficiary are redacted to ensure non-disclosure of confidential information.

(j)  Whether safeguards can be imposed on the use of the trust
documentation. Examples would include undertakings and inspection
by professional advisers only and other safeguards to ensure the
documentation is used only for the purpose for which it was disclosed.

By reference to factor (c) of the Ercig criteria, the Court of Appeal in Lambie concluded that Ms Addleman was a close beneficiary. It allowed the appeal and directed Lambie Trust Ltd to disclose all documents in its possession or power relating to the trust, including financial statements, minutes of meetings, and any legal opinions and other advice obtained by the trustees and funded by the trust.

Lambie Trustee Ltd sought leave to appeal to the Supreme Court. The court granted leave, but only on the question whether the Court of Appeal was correct in ordering the trust to disclose any legal opinions and other advice obtained by the trustees and funded by the trust. On the face of it, that order might be considered excessively broad. Hence, the approved question was, ‘whether the Court of Appeal was correct to order the applicant[6]  to reject the applicant’s claims of legal privilege and litigation privilege respectively’[7]

The court asked counsel to provide such general information about the nature of the legal opinions and other advice to give the court ‘a proper context in which to consider the privilege issue’.[8] The trustee responded by claiming ‘legal advice privilege in relation to advice / opinions obtained either by the trustee company or by a former trustee’, as well as ‘litigation privilege in respect of communications between the appellant, its legal advisors which were made etc [sic] for the dominant purpose of a proceeding (from 16 June 2015, when Mrs Addleman filed her statement of claim) or for the dominant purpose of an apprehended proceeding (from 24 September 2014, when the respondent’s former solicitors threatened proceedings)’.[9] ‘Legal advice privilege’, and ‘litigation privilege’ are subsets of the broader concept of ‘legal professional privilege’ and the court chose to use the latter term, rather than its subsets.[10]

The court was of opinion that Ms Addleman’s statement of claim should be understood most naturally as referring to advice in existence when she filed her claim and on that basis the Court of Appeal’s rejection of legal professional privilege as against Ms Addleman was clearly appropriate. Thus, the court interpreted the order as not extending to legal advice given to Lambie Trust Ltd. after June 2015. Nonetheless, it addressed the trust’s arguments on this point.[11]

The court noted that it was not directly concerned with rights of discovery in litigation, although the joint interest exception sometimes also arises in discovery.[12] Similarly, ‘[a] document which is subject to legal professional privilege for disclosure purposes will be likewise subject to the same privilege when it comes to discovery and vice versa. In contradistinction, information that is personal to trustees … and is not privileged is subject to discovery but is not susceptible to court-ordered disclosure’.[13]

The court noted that information generated or held for the purposes of a trust (‘trustee information’), is not the personal property of the trustees and it should be distinguished from information held by trustees that is personal to them (‘personal information’).[14] The court went on to state:

[44] Trustee information is susceptible to court-ordered disclosure to beneficiaries. But disclosure will only be required by the courts if appropriate to ensure trustee accountability. Under equitable principles, disclosure will not normally be ordered in relation to information bearing on discretionary decisions by trustees…. More importantly for our purposes, trustees who have legal professional privilege as against a particular beneficiary in relation to particular information may not be compelled to disclose that information to that beneficiary.

The court referred to information that should be disclosed as ‘disclosable  information’.

The court accepted that the jurisdiction to order disclosure is not a proprietary right of beneficiaries in copies of the documents of which disclosure is sought. Rather it is founded on the obligation of trustees to account for their administration of the trust. On this point it cited[15] Schmidt v. Rosewood Trust Ltd,[16] Re Londonderry’s Settlement,[17] and Erceg v. Erceg,[18] and quoted the following paragraph from the latter case:

[51] We see the starting point as being the obligation of a trustee to administer the trust in accordance with the trust deed and the duty to account to beneficiaries. A beneficiary who seeks such an account may seek access to documentation necessary to assess whether the trustee has acted in accordance with the trust deed.[19]

The court also noted that this approach is substantially the same under the Trusts Act 2019,[20] which came into force after the hearing but before judgment in this case. Section 49(b) of that Act expressly excludes ‘reasons for trustees’ decisions’ from disclosure. In that respect it differs from the common law. The common law normally also excludes the reasons for such decisions from disclosure, but not necessarily in all cases.

All of the legal advice sought by Ms Addleman was covered by legal professional privilege, so that the trust was entitled to assert privilege in it. However, if and to the extent that Ms Addleman had a joint interest in the advice, the trust could not claim privilege against her.[21] and that point was confirmed by s. 66 of the Evidence Act 2006.

Ms Addleman and the trustees did not jointly commission the legal advice and therefore they did not enjoy joint privilege in it. However, under the joint interest exception beneficiaries of a trust are entitled to disclosure of legal advice given to trustees about the administration of the trust. And the court held that it was ‘beyond argument’ that the exception clearly applied to legal advice given to the trustees relating to the general administration of the trust, including the distribution to Ms Addleman in 2002, and legal advice given to the trustees about the documents that should be disclosed to Ms Addleman. The sole question therefore was whether the joint interest came to an end when Ms Addleman began this litigation in June 2015.[22]

The court held that advice received before litigation is contemplated is subject to the joint interest exception but accepted that it may end before litigation has been commenced if the parties have reached the stage where the commencement of litigation is imminent. It stated, ‘What is required for the joint interest exception not to apply is that the advice be sought for the dominant purpose of defending litigation’.[23]

The court then found that while the possibility of proceedings had been mentioned in correspondence in 2004 and September 2014, the primary focus of that correspondence was whether the proper administration of the trust demanded disclosure of the relevant documents. Consequently, the court held that Ms Addleman’s joint interest in the advice continued until she began these proceedings in June 2015.[24]

In contrast, the authorities are clear that once litigation commences, the beneficiary is no longer entitled to disclosure of legal advice the trustees have received in relation to the litigation. And that is so even if the litigation is not hostile in the sense that it concerns a breach of trust.[25] Accordingly, the court clarified the orders for disclosure made by the Court of Appeal by providing that they did not extend to legal advice given since June 2015 in connection with this litigation. It did permit Lambie Trust Ltd to return to the court if it wished to persist in its claim of privilege in respect of advice received after 7 November 2014 and before June 2015. In other respects, the court dismissed the appeal.

[1]    Albert H. Oosterhoff, ‘What Information Must a Trustee Disclose to Beneficiaries?’ http://welpartners.com/blog/2020/08/what-information-must-a-trustee-disclose-to-beneficiaries/, posted 6 August 2020.

[2]    [2021] NZSC 84 (‘Lambie’), in which the Supreme Court clarified part of an order of the New Zealand Court of Appeal in Addleman v. Lambie Trustee Limited, [2019] NZCA 480, but otherwise it dismissed the appeal. In its decision, the Court of Appeal allowed an appeal from a decision of Woolford J [2017] NZHC 2054. I am grateful to Joel Nitikman for drawing this case to my attention.

[3]    [2017] NZSC 28.

[4]    Footnote 3, supra.

[5]    Ibid., para [56], internal citations omitted.

[6]    I.e., Lambie Trustee Ltd.

[7]    Lambie, footnote 2, para. [6].

[8]    Ibid, para. [7].

[9]    Ibid.

[10]   Ibid., para. [10].

[11]   Ibid., paras. [39]-[40].

[12]   Ibid., para. [41].

[13]   Ibid., para. [42].

[14]   Ibid., para. [43].

[15]   Ibid., para. [55].

[16]   [2003] UKPC 26, [2003] 2 AC 709.

[17]   [1965] Ch 918 (CA).

[18]   Footnote 3, supra.

[19]   It is, however, interesting that in Lambie, para. [79], the court questioned ‘whether references in the pre-Schmidt judgments to the proprietary interests of beneficiaries in the documents recording legal advice given to trustees were intended to be taken literally’.

[20]   Ss. 49 and 50

[21]   Lambie, paras. [64]-[68].

[22]   Ibid., par. [74], with reference back to para. [63].

[23]   Ibid., paras. [91]-[92

[24]   Ibid., para. [94].

[25]   Ibid. paras. [95]-[99]

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Previous Post:
Next Post:
Click here or on top Blog logo to return to Blog front page.

Search Blog by Keyword(s)

Site Search

Site Map