You may have a trust for a variety of reasons, whether for asset structuring or estate planning purposes, or perhaps to benefit a charitable cause or community group. You could be the beneficiary of a particular trust settled by somebody else.

Trustees of a trust now need to ensure they are meeting their obligations to disclose information to beneficiaries under the Trusts Act 2019 (the Act). Failure to comply with those obligations can result in messy disputes and might leave a trustee personally liable for loss or costs that may arise as a result.

Trustees’ disclosure obligations are detailed in sections 49 to 55 of the Act. The intention of those provisions is to ensure that beneficiaries of a trust know enough about the details of the trust to hold the trustees to account and to make sure that the trustees are acting reasonably and properly.

Section 51 of the Act imposes a presumption that “basic trust information” should be disclosed to every beneficiary of the trust (or their caregivers if the beneficiary is not yet 18 years old). The starting point is that disclosure should be made, but this can be rebutted in some circumstances.

The “basic trust information” is:

• The fact that a person is a beneficiary of the trust,
• The name and contact details of the trustee/s,
• Details about the appointment, removal, and retirement of a trustee as it occurs, and
• The right of a beneficiary to request a copy of the terms of the trust (Trust Deed) or other trust information.

If a beneficiary does request further trust information, section 52 of the Act creates a presumption that the trustees will provide that trust information within a reasonable period of time unless the trustees properly decide the presumption does not apply.

If a trustee considers that the presumption should not apply then they must act reasonably (in the legal, not ordinary sense of the word) and must consider the various factors set out in section 53 of the Act.

An example of trustees failing to properly disclose information and being found personally liable for related costs can be seen in the recent case of Lambie Trustee Ltd v Addleman [2023] NZSC 7. In that case, the Court determined that a trustee had unreasonably declined to provide information to a beneficiary of the trust and had instead “aligned itself entirely” with the interests of another beneficiary. In those circumstances the Supreme Court ordered the beneficiary’s significant litigation costs ultimately be paid by the trustees personally. The trustees were not entitled to be indemnified by the trust for these costs.

Another example of the perils of the new disclosure regime can be found in McGuire v Earl (Costs) [2021] NZHC 129. In that case, the failure to disclose information which the beneficiaries had requested was considered “indefensible” and the Judge ordered the trustees to personally pay two thirds of the beneficiaries’ court costs and two thirds of their own costs rather than being indemnified for these costs out of trust funds.

The Trusts Act disclosure regime requires the careful balancing of a multitude of factors, while being mindful of the trustees’ underlying fiduciary obligations. The cases outlined above show there can be a high price for trustees to pay personally if they do not meet their information disclosure obligations, even if they think they are doing the right thing at the time.

If you are a trustee of a trust and grappling with the issue of disclosure under the Act, or are a beneficiary unsure about your rights to information, the team at Mortlock McCormack Law can advise you on the right approach and the factors that you should (and should not) consider in making your decisions.

If you have questions regarding a trust you are a trustee or beneficiary of, please contact Andrew Logan, Principal (03 377 2900 / andrew@mmlaw.co.nz) or Jamie Stanton, Associate (03 343 8588 / jamie@mmlaw.co.nz).