The Supreme Court has just released its decision in Lambie Trustee Limited v Addleman  NZSC 54, which sets out the rights of beneficiaries to access legally privileged trust documents. This provides useful clarity for lawyers providing advice to trustees as to which documents may be disclosed to beneficiaries when requested.
The Supreme Court first clarified that in relation to trusts, there are two different types of information:
- trustee information, being information generated or held for the purposes of a trust, and which a trustee would be required to hand over to a replacement trustee; and
- personal information, being information held by a trustee relating to a trust which is personal to the trustee, and paid for by the trustee.
There are also two different paths to a beneficiary of the trust obtaining this information. The first is disclosure of information by the trustees to the beneficiaries, either willingly or when ordered by the court. The second is discovery, the formal process for the exchange of documents during litigation.
Trustee information is susceptible to disclosure to beneficiaries. Personal information is not, but may become relevant and therefore be required to be included as discovery in a court proceeding. For each type of information, privilege may be able to be claimed to resist disclosure of documents. However, the test for privilege differs. This is because of section 66 of the Evidence Act 2006 which deals with joint interests in privileged material.
Lambie Trustee relates to a request for disclosure of three categories of trustee information:
- legal advice given to the trustees relating to the general administration of the trust, including a distribution to Mrs Addleman in 2002;
- legal advice given to the trustees as to what documents should be disclosed to Mrs Addleman when she made a request; and
- legal advice given to Lambie Trustee Ltd from June 2015 in connection with the litigation as to whether the trustees could withhold documents.
The trustees claimed that all categories of information were privileged, and declined to provide them to Mrs Addleman. The Supreme Court confirmed that the documents were privileged as they were legal advice privilege, but the question was whether the documents fell within the exception for joint interests.
If there is a joint interest in the trustee information, the beneficiary will be entitled to disclosure. This is because trustees administer the trust in accordance with the trust deed, and must account to beneficiaries. A beneficiary may need to access trustee information to assess whether the trustees have acted in accordance with their obligations.
The trustees would only be able to avoid providing disclosure of those documents where there is hostile litigation between them and the beneficiary:
“What is required for the joint interest exception not to apply is that the advice be sought for the dominant purpose of defending litigation. Given the obligations of a trustee to act appropriately and in the interests of the trust as a whole, the starting point for the courts should be the assumption that trustees seeking advice in respect of contemplated litigation are looking for guidance as to the right course of action (in respect of which the joint interest exception will apply). And the courts can expect trustees not to seek advice as to how to resist litigation without having first sought advice (to which the joint interest exception will apply) as to the appropriate stance to take on the point at issue.”
The Supreme Court went on to say that:
“The authorities generally support the view that once a beneficiary commences litigation concerning the administration of a trust, the litigating beneficiary is not entitled to disclosure of legal advice received by the trustees in relation to that litigation. The judgments on the point tend to be succinctly expressed but they must proceed on the basis that, from that point, the beneficiary and trustees no longer have a joint interest in the subject matter of the litigation.”
In this case, the Supreme Court decided that it is clear that Mrs Addleman is entitled to the first category of information (legal advice given to the trustees relating to the general administration of the trust, including a prior distribution to Mrs Addleman) and is not entitled to the third category (legal advice given to Lambie Trustee from June 2015 in connection with this litigation).
The second category (legal advice given to the trustees as to what documents should be disclosed to Mrs Addleman) is also covered by the joint interest exception, and must be disclosed to Mrs Addleman. Leave was granted for the trustee to revert to the Supreme Court if it could show that the advice received was obtained for the purpose of defending the litigation brought by Mrs Addleman, as opposed to generally ascertaining the trustee’s duties.
Beneficiaries and trustees share a joint interest in the due administration of a trust and therefore in legal advice as to that administration. A trustee is not entitled to assert privilege against a beneficiary in respect of advice on issues in which the trustee and beneficiary have a joint interest.
Trustees should assume that all trustee information could be disclosed to beneficiaries, unless it is created when there is contentious litigation between the trustee and the beneficiary and is for the dominant purpose of that litigation.
This decision confirms the longstanding position concerning advice to trustees in non-contentious cases, and provides useful guidance on when a joint interest ends. Clarity on the position from the Supreme Court should focus trustees on their obligations with respect to legal advice.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.