Duty to Advise the Beneficiaries

“A “beneficiary”, in ordinary language, is a person for whose benefit a trust is to be administered and who is entitled to enforce the trust according to its terms”

Kafataris  v The Deputy Commissioner of Taxation [2008] FCA 1454 at[42].

A trustee who conceals the existence of a strict trust from a beneficiary commits a serious breach of duty not only because the beneficiary might be unable to show locus standi to approach the Court: Wynne v Humberston (1858) 27 Beav 421; 54 ER 165, but also because it would amount to the denial of the Court’s Jurisdiction.

By concealing the existence of a trust the trustee prevents the beneficiary from enforcing the trust according to its terms. Palmer J in Chang  v Tjiong & Ors [2009] NSWSC 122 stated at [45]:

“ It is the duty of a trustee to ensure that beneficiaries are made aware of their rights: see In re Emmet’s Estate (1881) 17 Ch D 142, at 149; Hawkesley v May [1956] 1 QB 304, at 322. A trustee can hardly comply with this duty unless he or she keeps the terms of the trust readily available so that they may be explained, or produced, to beneficiaries and made known to successor trustees: see Ford & Lee Principles of the Law of Trusts [9150].”

Geraint Thomas in Thomas on Powers (2nd Ed) states at [11.41]:

“Trustees are obliged to inform adult beneficiaries of the existence and terms of a trust (which will indicate the interests and rights of the beneficiaries created by the trust instrument), whether or not those beneficiaries have requested the information1.

(1) Hawkesley v May [1956] 1 QB 304; Re Emmet’s Estate (1881) 17 Ch D 142; Burrows v Walls (1855) 5 DE GM & G 233,235; Brittlebank v Goodwin (1868) LR 5 Eq 545,550; Re Lewis [1904] 2 Ch 656; Re Mackay [1906] 1 Ch 25

The New South Wales Court of Appeal considered the duty of a Trustee to advise beneficiaries of their actual entitlement to benefits in a superannuation fund SAS Trustee Corporation v Arthur Cox [2011] NSWCA 408.

The Court stated at [117]:

Hawkesley v May , Hartigan Nominees (per Mahoney JA) and Scally support the proposition that a trustee and/or an employer is obliged to advise persons with actual entitlements to benefits of their rights in this respect – even if ( Scally ) those rights are recorded in public documents.

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