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Trustee Disclosure to Beneficiaries

Trustee Disclosure to Beneficiaries

Al-Sabah Estate 2020 BCSC 169 reviewed the law relating to how much information beneficiaries are entitled to receive when seeking to hold a trustee to account.

The jurisprudence in British Columbia does not set out a precise or even a general list of what a beneficiary to an estate is entitled to seek by way of disclosure from an administrator or trustee, apart from what is required by the Rules of Court in the context of an application to pass accounts.

The court in Al-Sabah firstly framed the duty to disclose within the two sides of a fiduciary relationship because the trust divides legal and beneficial title to property between a trustee and a beneficiary, respectively the hallmark characteristic of the trust is the fiduciary relationship between the parties.

The trustee is to hold the trust property solely for the beneficiaries’ enjoyment. As a matter of law, this fiduciary relationship in turn impresses the office of the trustee was certain duties.

In particular three duties recognizing Canadian law, as fundamental:

  1. A trustee must act honestly and with that level of skill and prudence, which would be expected of the reasonable person of business administrating his or her own affairs;
  2. a trustee cannot delegate the office to another;
  3. a trustee cannot profit personally from its dealings with the trust property, or if the beneficiaries of the trust.

Correspondingly the beneficiary of a trust has the right to hold the trustee to account for its administration of the trust property, and to enforce the terms of the trust.

In the Privy Council decision Schmidt v. Rosewood Trust ( 2003) JCJ 26, the Privy Council held that while the trustee has a fundamental duty to account for the trust property, a beneficiary simply by asserting a claim does not have an entitlement to disclosure as of right.

The strength of the claim must be assessed and balanced against competing interests, such as personal or, commercial confidentiality stated that the trustee has a fundamental duty to account for the trust property.

However, the extent of the trust information that will be ordered depends in the particular circumstances.

In Martin estate 2009 BCSC 1407 several beneficiaries made requests for information from the trustees of an estate is the parties prepared for a passing of the accounts. The beneficiaries in question were charities. The only remaining assets of the estate were corporate shares.

The trustees refused to provide some of the information sought by the beneficiaries because it was not available to them in their capacity as trustees, but as a result of confidential corporate relationship in the very Corporation, which comprise the remaining assets of the estate. They alleged that the information was commercially sensitive.

The court In re Martin estate concluded that the information sought by the beneficiaries ought to be provided. There was no unmanageable prejudice relating to an explanation for payment of sums to an individual and what was done to earn the money and in any event, the beneficiaries offered confidentiality agreements.

The court held that to order otherwise might also invite mischief in the trustees in future cases could concluded is open to them to incorporate companies to carry on estate business in order to shield themselves from scrutiny by the beneficiaries.

However, in McLean v. McLean Estate 2009 BCSC 292 the court held that a passing of accounts is not the forum for beneficiaries to embark in a “fishing trip” to find evidence of trustee bad faith or pursue other remedies against executors.

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