A recent decision from the Royal Court of Jersey was recently discussed here with respect to a beneficiary’s right to disclosure from a trust. This blog by lawyers from Ogier is an insightful read on this particular area of trust law.
According to the authors at Ogier, M v W Limited and Others was a case that considered a beneficiary’s broad request for documents, such as copies of all trust instruments, latest accounts, financial statements for the corporations owned by the trust, and details about all past distributions from the trust. While Court’s decision was grounded in an interpretation of the relevant Jersey legislation, some of its commentary remains instructive for those of us who practice outside of Jersey.
In M v W Limited and Others, the nature and immediacy of the beneficiary’s interest is salient to the inquiry. For example, a contingent beneficiary may not be entitled to as much disclosure as a beneficiary who is entitled to the assets of the trust at that point in time. By extension, it is also relevant to consider whether the disclosure at issue would negatively affect another class of beneficiaries as well as the proportionality of the request.
As for the law in Canada, I have blogged on a recent Supreme Court of Canada decision about a trustee’s duty to disclose the existence of a trust to the beneficiaries. Justice Brown for the majority in Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, has stated the following at paragraph 19,
“In general, wherever “it could be said to be to the unreasonable disadvantage of the beneficiary not to be informed” of the trust’s existence,  the trustee’s fiduciary duty includes an obligation to disclose the existence of the trust.”
This notion of whether a beneficiary would be unreasonably disadvantaged by the non-disclosure is important to keep in mind because the right to disclosure is grounded in a beneficiary right to hold trustees accountable and to enforce the terms of the trust.
Practically speaking, issues of disclosure often leads to a request for the trustee to commence an application to pass accounts. While the trustee will have the benefit of a court order approving his/her administration for that period (if and when Judgment is obtained), an application to pass accounts must be served on all beneficiaries with a contingent or vested interest pursuant to Rule 74.18 of the Ontario Rules of Civil Procedure. In turn, these beneficiaries will have the right to object to the trustee’s accounts and seek relevant disclosure from the trustee in the course of this process.
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We all know that lawyers have a duty to hold client information confidential – it’s one of the foundations of our legal system. But estates are a special matter. If we follow the letter of the law regarding confidentiality, a drafting lawyer would be unable to release the testator’s will following their death.
To overcome this potential problem, the common-law has developed what is known as the “wills exception” to the rules regarding confidentiality between a lawyer and their client. The “wills exception” lets the drafting lawyer divulge the existence and contents of a will to those with an interest in the estate. Easy – problem solved.
Of course, not all estates are straightforward, and matters can get complicated if a will is contested. During an estate dispute, many third parties may request that a drafting lawyer divulge certain information about the deceased’s estate planning. The purpose is to find information that can help shed light on the deceased’s true intentions in relation to their estate.
Since deceased individuals can’t speak for themselves and explain intentions or waive their rights, caselaw has made it clear that the estate trustee may step into the shoes of the deceased and waive confidentiality or privilege. However, the group of individuals who may have the drafting lawyer waive privilege or confidentiality could be quite diverse, including beneficiaries, next of kin, and potentially even creditors of the deceased.
Since it’s unlikely that this group of individuals will speak with one mind in an estate dispute and collectively decide to waive privilege or confidentiality, a lawyer who is faced with the issue of releasing confidential information or documents should seek the consent of all parties with a financial interest in the estate before releasing such documents. And in some cases, the drafting lawyer may wish to seek the guidance of the court on the issue of what, if any, documents they should release.
For a detailed discussion of the issue of solicitor client privilege in an estate context, this paper reviews many of the key cases.
Disclosure rules for trusts
The cases related to trusts are many, but a few rules have emerged in relation to disclosure duties related to trust arrangements.
- Disclosure to a beneficiary: As a general rule, the beneficiaries of a trust may, on reasonable notice, require the trustees to produce for their inspection any trust document that the beneficiaries wish to see.
- Disclosure to a discretionary beneficiary: While a discretionary beneficiary is entitled to view trust documents, they are not entitled to see any documents or information pertaining to why the trustee did (or did not) exercise their discretion in the trust.
- Trustee obligation to inform: Generally, there is no positive obligation on the part of a trustee to give unsolicited information to beneficiaries. There are some exceptions however – most notably with minor beneficiaries. A trustee of a trust in which there are minor beneficiaries has a positive obligation to inform the minor beneficiary of the existence of the trust once they come of age, and to show the trust deed and any other relevant documentation that explains or sets out the basis of the trust.
For a more detailed examination of disclosure rules relating to trusts, this paper discusses many of the leading cases in this area. Thanks for reading.
The composition of assets held by a trust can be complex. In situations wherein a significant amount of wealth is held in a trust, the trust can often be composed of various corporate entities (whether numbered companies or otherwise), which in turn can often hold interests in other corporations. The administration of such corporate entities can have wide ranging implications, with the trusts perhaps only owning a portion of any shares in the overall structure. But what right, if any, does a beneficiary of the trust have to view the backing corporate documentation for such corporations? Does a beneficiary of a trust have an automatic right to view all backing corporate documentation, or do the trustees have the authority to refuse the request in certain circumstances?
Although there is little jurisprudence in Canada on the subject, the English case of Butt v. Kelson,  Ch. 197, has been cited as a leading authority. In Butt v. Kelson, Justice Romer provides the following commentary in confirming that beneficiaries of a trust have certain rights to compel the release of backing corporate documentation:
“What I think is the true way of looking at the matter is that which was presented to this court by Sir Lynn Ungoed-Thomas, that is that the beneficiaries are entitled to be treated as though they were the registered shareholders in respect of trust shares, with the advantages and disadvantages (for example, restrictions imposed by the articles) which are involved in that position, and that they can compel the trustee directors if necessary to use their votes as the beneficiaries, or as the court, if the beneficiaries themselves are not in agreement, think proper, even to the extent of altering the articles of association if the trust shares carry votes sufficient for that purpose… I would propose, accordingly, that the declaration which has been made be discharged, but that there should be inserted into the order liberty to [the beneficiary] to apply in these proceedings in relation to any document which he may hereafter desire to see and of which [the trustees] decline to give him inspection.“ [emphasis added]
Justice Romer’s commentary suggests that at minimum a beneficiary of a trust is entitled to the same disclosure rights regarding any corporation owned by the trust as if the beneficiary were the shareholder of the shares which the trust owns. Whether such disclosure rights go beyond that of a shareholder, and whether the beneficiary can compel the release of any documentation available only to the directors, will need to be determined on a case by case basis, with Justice Romer suggesting that it may even be possible in circumstances where the trust is the majority shareholder for the beneficiaries to compel the trustees (as shareholders) to alter the articles of incorporation to provide for the release of certain documentation which otherwise may not have been available to them. Whether the beneficiaries would be entitled to receive such documentation would need to be determined by the court on a case by case basis.
Thank you for reading.
Accessing a Testator’s digital assets can be fraught with difficulty. Part of this difficulty involves the service agreements between the Testator and the service provider. These agreements often prevent the service provider from disclosing the Testator’s personal information.
Recently, Florida, following a trend in the United States, passed Bill SB 494, now known as the Fiduciary Access to Digital Assets Act (the ‘Act’). The legislation defines a digital asset as “……an electronic record in which an individual has a right or interest. The term does not include an underlying asset or liability unless the asset or liability is itself an electronic record.” It also provides of a definition of a fiduciary, which means “an original, additional, or successor personal representative, guardian, agent, or trustee.”
The Act appears to have two main purposes. It confers authority upon appointed fiduciaries to access and manage both digital assets and electronic records. The legislation also allows custodians of this information to disclose it to appointed fiduciaries where the procedural requirements have been met.
The Act includes a priority system for an individual to control the disclosure or non-disclosure of any or all of their digital assets or electronic communications. Depending on the circumstances, a direction for disclosure given through the use of an online tool may override a direction embodied in a Testator’s estate planning documents.
This Act incorporates model legislation drafted by the Uniform Law Commission. The draft legislation is currently being considered by a number of other state legislatures. The Act is effective in Florida as of July 1, 2016 and may apply retroactively to some individuals in certain capacities.
Thanks for reading.
A testator may decide to appoint a corporate estate trustee were:
- an estate is complex and he or she feels a trustee with special expertise or competence in financial matters is required to administer the estate;
- he or she is concerned there might be conflicts or disputes between the beneficiaries of his or her estate; or
- he or she simply does not want to burden family members with the responsibility of having to administer his or her estate.
A corporate trustee may also be appointed by the court to act as an Estate Trustee During Litigation where there is a dispute or litigation between the appointed Estate Trustees, or between the appointed Estate Trustees and other interested parties, such as the beneficiaries of an estate.
A recent decision of the Supreme Court of Nova Scotia, Re Creighton Estate, 2016 NSSC 136, highlights the obligation of a corporate trustee to provide co-trustees with copies of their internal notes, emails and working papers.
In this case, the deceased died leaving a Last Will and Testament (the “Will”) appointing three Estate Trustees, namely, two of the deceased’s children (the “Creightons”), and a private trust company (the “Trust Company”).
The terms of the Will stated that the Trust Company was to “assume the burden of the administration” of the Estate. However, following the deceased’s death, the Creightons advised the Trust Company that they wanted to participate in the administration of the Estate.
During the course of its administration of the Estate, the Trust Company sought a legal opinion from the Estate’s solicitor. The Creightons were not allowed input as to the facts that would form the basis of the opinion nor were they provided a copy of the opinion once obtained. The Creightons subsequently requested document disclosure, namely production of the Trust Company’s complete file.
While the Trust Company produced some documents, it claimed that its notes, working papers, internal emails, both in paper form or created electronically, which had been created in the furtherance of decision making of the Trust Company, were not subject to disclosure to the Creightons as co-trustees.
Justice Arnold disagreed, and held that the Corporate Trustee was required to provide the Creightons with copies of its notes, working papers and internal emails. At paragraphs 15 and 16 of his decision Justice Arnold states:
“It would be impossible for the Creightons to fulfill their obligations as co trustees without being fully informed by the Trust Company. Clearly, in relation to all aspects of the administration of the estate, the Creightons have a right to know how and why the Trust Company did what it did. Only full and complete disclosure by the Trust Company would allow this to occur. Co-executors … have a duty to oversee and correct each other’s conduct. This duty cannot be abdicated by a natural trustee in favour of a professional corporate trust company. Therefore, it is necessary for co-trustees to have all information that relates to the administration of the estate. This may include internal correspondence and memoranda, emails and other electronically stored information.”
Thank you for reading.
Earlier this year, the Ontario Court of Appeal released a lengthy decision in respect of a party’s obligation to disclose surveillance evidence throughout the litigation process if one intends to rely on such evidence at trial.
The factual background of Iannarella v. Corbett arose from a personal injury claim relating to a rear-end collision that occurred on a snowy winter evening. The Plaintiff claims that he suffered a rotator cuff injury to his left shoulder when the Defendant failed to stop in time before he collided with the Plaintiff’s vehicle. According to the Defendant’s testimony,
“there was nothing further he could have done to avoid the collision and repeatedly said that the accident was caused by “mother nature”. He told Mr. Iannarella at the scene: “Sorry, but I don’t control mother nature.”
While the Defendant may not be in control of mother nature, he was in control of his conduct throughout the proceedings.
In defence of the Plaintiff’s claims for damages, the Defendant retained private investigators to conduct surveillance on the Plaintiff over various time periods between 2009 and 2012. As the result, 130 hours of surveillance was recorded after the accident on February 19, 2012. However, the existence of the surveillance was not disclosed to the Plaintiff in an affidavit of documents nor were its particulars made known to him.
At trial, the Defendant sought to use the surveillance footage as evidence of the functionality of the Plaintiff’s left arm after the accident. Ultimately, the Court of Appeal found that the use of surveillance evidence at trial to be improper as “a form of trial by ambush”. The Court of Appeal was adamant that the disclosure obligations required by the Rules of Civil Procedure must be followed to ensure fairness and prompt settlement discussions.
In essence, as a general rule of thumb, a party may not rely on surveillance evidence if it is not disclosed through an affidavit of documents. Disclosure must be made either in full or as a privileged document, depending on whether the evidence is relied upon substantively or for impeachment purposes.
Thanks for reading!
Listen to Accounting Under the Powers of Attorney
This week on Hull on Estates, Diane and Paul discuss accounting under the powers or attorney, the duty to account after the guarantor has passed away and the De Zorzi Estate v. Read case (2008, O.J. No. 944).
Listen to the deemed undertaking rule.
This week on Hull on Estates, Paul and Allan discuss the deemed undertaking rule and its application to estate matters.
Listen to "Tips for Hiring an Estate Lawyer"
Read the Transcribed Version of "Tips for Hiring an Estate Lawyer"
During Hull on Estate and Succession Planning Episode #48, Ian Hull and Suzana Popovic-Montag speak with Jordan Atin, co-author of a recently published book on avoiding Estate litigation, The Family War. The three succession planning experts discuss considerations when hiring an estate lawyer to draft your will.
The necessary processes are reviewed including getting a referral, answering questions regarding your specific needs and assets, full disclosure, confidentiality and finally the importance of reviewing and signing your completed will.