By Hayley Roberts - April 2018
The current Trustee Act 1956 is silent as to whether beneficiaries are entitled to disclosure of particular trust information and documents. When the law is not clear, the Courts determine what would have been intended by Parliament when passing that particular law. This is exactly what has happened in the recent Supreme Court case Erceg v Erceg  NZSC 28.
The appellant, Mr Ivan Erceg, was a class beneficiary of two trusts established by his late brother, Mr Michael Erceg. At the time the trusts were wound up, in December 2010, Ivan was an undischarged bankrupt. Ivan did not receive a distribution from either trust.
Ivan requested certain trust documents be provided to him which the trustees refused to do. The matter was then brought before the High Court, Court of Appeal and finally, the Supreme Court where a decision was reached regarding those trust documents.
After the High Court finding that Ivan did not have standing due to being an undischarged bankrupt at the time the trusts were distributed, and the Court of Appeal finding that Ivan had standing to request trust documents, Ivan appealed to the Supreme Court.
The Supreme Court held that the Court has to exercise its supervisory judgment regarding disclosure to beneficiaries in the given circumstance.
The Court said that basic trust information should be disclosed to a close beneficiary, dependant on a number of factors. It was not determined who would be considered a “close” beneficiary and this is likely to be different in every circumstance.
The Supreme Court established the following list of criteria for evaluating an application for disclosure:
The Court also noted that bankruptcy does not affect an individual's capacity to seek disclosure of trust information from either the Court or trustees of the trust to which they are a beneficiary.
The Court dismissed the appeal having determined that disclosure should not be ordered due to the potential threat to confidentiality, future litigation and lack of necessity.
The much anticipated Trusts Bill (the Bill), that has been in the pipeline for some time now, will re-master the current Trustee Act. The Bill is expected to incorporate elements of the Erceg finding.
The current Bill states that trustees will be required to disclose the following to beneficiaries:
Following on from the required disclosure above, the Bill sets out that trustees will then need to consider the following factors before disclosing trust information to the beneficiaries:
There has been no clear indication as to when the Trust Bill will be passed as legislation but the current Bill can be used as guide for current trustees regarding possible outcomes.
Trustees should become well acquainted with the disclosure elements of the Bill and implement these as a matter of practice going forward.
Hayley is a Solicitor in our Asset Planning Team and can be contacted on 07 958 7472.