UK/COMMONWEALTH - A landmark ruling by the UK's Privy Council has resolved "almost a century of conflicting case law" over members' right to see trust documents.
It decided that scheme members and pensioners do not have the right to see trust documents and they must approach the courts for further guidance.
Lawyers believe the decision in Schmidt v Rosewood Trust “goes some way” to clear up confusion that exists in case law in the UK and throughout the Commonwealth.
But they warn that the ruling may be a mixed blessing to trustees as it will drive scheme members to the courts at a potential cost to the scheme.
Vatin Schmidt appealed to the High Court of the Isle of Man (the Privy Council) after he was refused disclosure of documents relating to two settlements – the Angora Trust and the Everest Trust – of which his father had been a co-settler.
The trustee, Rosewood Trust, had opposed the disclosure of trust documents on the grounds Schmidt was not a named beneficiary under the settlements – a view the court held.
London-based MacFarlanes partner Hugh Arthur explained that, under the new ruling, members and pensioners can no longer be regarded as having rights to see particular documents.
But the extent to which they will be able to see particular documents will now depend on the court’s discretionary power to grant inspection of information relating to the trust.
Arthur described the case as a “milestone on the long and winding road towards certainty over the disclosure of trust documents” to scheme members and pensioners.
But he warned that the ruling would not make trustees’ lives “any easier”.
“A refusal to grant disclosure at an early stage could result in the trustee having to bear the costs of a successful application to court by an aggrieved beneficiary or death benefit claimant.”
Arthur added: “[The ruling] creates considerable uncertainty in the pensions context as to what should be disclosed, and in what form and subject to what conditions.”
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