It is a well-established English legal principle that trustees have a duty of disclosure to a beneficiary who has reached majority (Hawkesley v May (1956)). The trustee must inform the beneficiary of the existence of the settlement and the beneficiary's interest under it. If a trustee fails to do so, the beneficiary may recover compensation for the trustee's breach of its equitable duty, even if the trust suffers no loss.
A trustee's duty of disclosure is part and parcel of the trustee's duty to account to its beneficiaries. Beneficiaries must not be deprived of the information they need to hold the trustee accountable. In Armitage v Nurse (1997) Lord Justice Millett explained that “[t]here is an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by them which is fundamental to the concept of the trust. If the beneficiaries have no rights enforceable against the trustees there are no trusts." Cleary, a beneficiary cannot hold a trustee to account if he is not aware of his beneficial interest.
Notwithstanding these well-established principles, the Jersey Royal Court recently decided, in the Matter of the C Settlement (2017), that a 19-year-old beneficiary ("K") should not be informed of the size of his family's £75 million trust fund.
The trustee ("T") made a Beddoe application to the Court to obtain approval of a proposed settlement of a claim by a third party against a company wholly owned by the trust. The usual practice is for all adult beneficiaries to be convened to Beddoe hearings.
T had informed K of the existence of the trust, the fact of his beneficial interest in it, and about the claim. However T did not inform K of the value of the trust, the amount of the proposed settlement, or that the likely size of the trust following the settlement would be £75 million. K's mother, also a beneficiary, and T, believed that K should not be informed of the size of the trust given his young age. Therefore T did not convene K to the hearing.
The Court considered whether denying K the opportunity to provide his views on the settlement of the litigation was justifiable.
It concluded that K should be shielded from the matter and should not be informed of the value of the trust in order not to discourage him to continue his higher education and to seek employment. It held that "when exercising trustee discretions, the trustees frequently do not approach matters purely in terms of the legal age of capacity. They have regard to the best interests of the beneficiaries, and sometimes the beneficiaries may be of an age or character, or there may be some other special reason, why the trustees reach the conclusion that it is not in the interests of the beneficiaries to receive a distribution or to have knowledge of the terms of what might be their ultimate entitlement."
The Court noted that T's view was aligned with K's mother's view as to what was in K's best interests, and that such views should be respected. It is not clear from the judgment, what (if any) specific characteristics of K the Court took into account in balancing K's rights against his best interests.
No doubt individual cases will be considered on their own facts, but the case reveals that the Courts do not necessarily regard a trustee's duty to account and give disclosure as sacrosanct. It will be interesting to see if other jurisdictions follow a similar approach in the future.