This being the essential nature of the position of a trustee, and the liability to account being an essential ingredient in it, it seems to me that it is inescapable that the cestuis que trust, or any one of the cestuis que trust, have, or has, a correlative right to approach the Court for its assistance in enforcing the personal obligation of the trustee, and, in particular, in enforcing the trustee's obligation to account.
44 His Honour went on to state, with reasons and references to authority, his view that the same right is available to a person whose status is only that of a potential object of the exercise of a discretionary power.
45 Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 related to the beneficiary's claim to see a memorandum of wishes provided by the instigator (not the settlor) of a discretionary trust for the use of trustees in exercising their powers. This case exposed the difficulties of identifying what are referred to as "trust documents". The beneficiary's interest was, as the object of a discretionary trust, potentially but not yet entitled if there should be a favourable exercise of the trustees' discretion. The solicitor for the trustees had given the explanation that no distribution could be made because "… there is no provision in Sir Norman's memorandum which would entitle the trustees to make any payment to you at this time" (at 408E). The facts were unlike those in In re Londonderry's Settlement in that there had been reference to the memorandum in an explanation given on behalf of the trustees. For reasons extensively stated, Kirby P (who dissented) did not regard In re Londonderry's Settlement as a decision which should be followed; the majority (Mahoney and Sheller JJA) did not take this view, although their reasons went far beyond a simple application of In re Londonderry's Settlement. The difficulty in the appeal and the division of opinion related to the application of the right of a beneficiary, including a discretionary beneficiary, to obtain information and inspect trust documents to the memorandum and to the trustees' discretionary decisions. Mahoney JA did not unqualifiedly endorse the extension of the right to all persons who are only possible beneficiaries under a discretionary trust or are one of a large number of possible beneficiaries (431E-432F), and discussed the difficulties of the limits of trust documents in this context (432F-433B). Mahoney JA's judgment contains a wide general and (I would respectfully say) orthodox survey of the law in this field; Sheller JA also made a wide survey. It should I think be said that the majority judgments do not depart from In re Londonderry's Settlement. Those judgments illustrate a number of difficulties which do not bear on the present case.
46 In my opinion judges at first instance in New South Wales should treat the majority judgments in Hartigan Nominees as authoritative. While not all matters susceptible of doubt are settled, the starting point, at which the beneficiary is entitled to see trust documents and have information about trust property, and that entitlement has a proprietary basis, is not open to question. The facts in the present case do not raise even the potential difficulties which might be thought to exist where the entitlement of the beneficiary is contingent or subject to a discretionary decision, or involve a decision of trustees which might raise a conflicting principle.
47 The subject under decision in Schmidt v Rosewood Trust Ltd was the appellant's claim for fuller disclosure of trust accounts and information about trust assets in which the appellant claimed discretionary interests or expectations in right of himself and of his deceased father. Under "Disclosure to discretionary beneficiaries: the recent cases" the Judicial Committee made a wide survey of case law, including New South Wales case law and (at 729 [52]) stated its general agreement with the approach adopted in the judgments of Kirby P and Shelley JA in Hartigan Nominees. The judgment of Kirby P, to which their Lordships referred at some length [52], was of course a dissenting decision and reached its conclusion on the basis of the beneficiary's right of inspection without examining or indeed referring to judicial decisions; the conclusion based itself instead on agreement with a view expressed by Professor H.A.J. Ford in "Principles of the Laws Of Trust, 2nd ed (1990) which included this sentence (at 425): "The equation of the right to inspect trust documents with the beneficiary's equitable propriety of rights gives rise to unnecessary and undesirable consequences." The consequences referred to included doubts cast on the rights of beneficiaries who cannot claim to have an equitable proprietary interest in trust assets, such as the beneficiaries of discretionary trusts. This was, I must respectfully say, a slight basis indeed for discarding an established right of beneficiaries with vested interests to inspection of documents of such primary importance as the accounts of the trustees. A decision that all access to trust documents should be in the discretion of the Court is a drastic solution to whatever problems might be perceived in supposing a proprietary basis for discretionary interests, and whatever problems may be perceived in delimiting which documents should be treated as trust documents and in protecting from access documents access to which involves some conflicting principle. Their Lordships alluded, twice but briefly, to the reasons given by Sheller JA which addressed difficulties relating to discretionary interests, not vested interests.
48 The views expressed in Schmidt v Rosewood Trust Ltd by the Privy Council on appeal from the Isle of Man, while they should be considered with respect, are not possibly a binding or authoritative source for a rule of law which would render the entitlement of the plaintiff in these proceedings to access the documents, to information, in short to accounts, a discretionary one: see Cook v Cook (1986) 162 CLR 376 at 390. There may be room for the view, on which the Privy Council acted, that such an entitlement is discretionary in the case of a beneficiary who is no more than the object of a discretionary trust and does not have the benefit of a favourable exercise of the trustee's discretion; the weight of opinion in New South Wales the other way on that issue is strong, but the plaintiff's position in the present case is even stronger as her entitlement is not discretionary but rather vested in interest. Their Lordships' conclusion at 734-735 ([66] and [67]) would make the beneficiary's right to seek disclosure of trust documents an aspect of the Court's inherent jurisdiction to supervise, and where appropriate intervene in the administration of trusts. Although the reasons say that that right is "sometimes not inappropriately described as a proprietary right" it is plain that their Lordships did not treat the right as a proprietary right.
49 The history of Equity and the nature of its remedies mean that the treatment of equitable interests as proprietary, and the development of rules based on that treatment, can never be entirely logical or satisfactory; but if this is perceived as a problem, it is an inherent problem and should not be regarded as a basis for discarding a well-established rule.
50 An obiter dictum in the Privy Council about trust law in the Isle of Man has in my opinion very little claim to be followed at first instance in New South Wales where a different view has been accepted. The Privy Council does not exercise appellate authority over the courts of New South Wales, and its decisions made since its appellate power was abolished in 1986 have not had binding force in New South Wales. Still less have the Judicial Committee's obiter dicta. As with other decisions which are not binding, its claim to be followed depends upon the extent to which the views expressed are persuasive.
51 The opinion of Lord Walker does not to my reading identify any error in earlier opinion, or state any respect in which it might be said to be significantly unsatisfactory. No earlier judicial decisions adopting the basis on which the Privy Council reset the law were referred to, nor were any text writers. Nor to my reading were any significant policy considerations favouring departure from the previous rules set out; the only matter indicated was an opinion that the rule enounced was a better rule. It was not explained, with any significant reasoning, why it was a better rule. In my opinion it is not a better rule because it introduces discretion and promotes resistance and debate in substitution for a rule which is relatively concrete. The tendency will be that only the determined and litigious beneficiary will find out about his own affairs. Where there is a judicial discretion, there is room for litigious debate about the exercise of the discretion; there is no certainty on so elementary a matter as whether or not a beneficial owner is entitled to information about property in which the beneficial owner has an equitable interest. In the previous rule, in my interpretation Equity followed the law in treating as proprietary an equitable entitlement to trust property. Treating the equitable interest as proprietary brings with it an entitlement to information unless there is a conflict with some other principle which Equity must recognize, such as the principle protecting the trustee's discretionary considerations. Treating the entitlement to information as an aspect of the Court's discretionary exercise of its supervising power over trusts is a departure from the relatively concrete concept of equitable interests in trust property which has been adopted for some centuries.
52 In Avanes v Marshall [2007] NSWSC 191 Gzell J after review of authorities, including recent authorities in Australia in which Schmidt reference has been made to, expressed the view at [15] that the approach in Schmidt should be adopted by Australian courts. I respectfully do not agree. It might be that the approach of Schmidt is appropriate where the interest of the beneficiary is no higher than those of the potential objects of a discretionary trust, although opinion in New South Wales is otherwise. However that may be, in the present case where the plaintiff's right is already vested in interest, it would be a departure from clearly established opinion in New South Wales not to treat the claim to information as based on a proprietary interest, or to withhold enforcement of it except so as to enforce some competing entitlement, such as that of the trustees considered In re Londonderry's Settlement, which required such departure.
53 On the facts of the present case there is nothing in the nature of a discretionary ground on which any withholding of the plaintiff's entitlement to information could reasonably be based. While I repeatedly sought in the course of argument to establish what discretionary ground was relied upon, nothing was referred to higher than Mrs Ellis' objection to any information about her affairs being given to the plaintiff, expressed to Mr Ellis some years ago before incapacity overtook her. This is in the nature of a claim of confidentiality, but it is not supported by any underlying reason of greater strength than her expressed wish that the plaintiff should not know her affairs. A person who accepts benefits under a trust of which there are other beneficiaries does so on the basis that other beneficiaries also have rights in the trust, including rights to information. I characterise what is put forward as a claim to privacy, and not as a claim to confidentiality; in substance nothing was advanced as a reason for the Court to enforce Mrs Ellis' confidentiality by withholding the rights of some other person. There is no competing principle such as protection of the position of trustees in the exercise of discretion, which was protected in In re Londonderry's Settlement.
54 Notwithstanding my repeated enquiries counsel was not able to refer to any adverse impact on the interests of Mrs Ellis or of anyone else or any particular harm that would be done by giving the plaintiff the information she seeks. Counsel informed me that the information contained in the managing agents' documents relating to the maintenance which has taken place is not itself the subject of any claim that it should not be produced; but production to the plaintiff herself of those documents was resisted because they disclose Mrs Ellis's income, for which confidentiality is claimed. This is not a case where confidentiality relates to the interest of a third party. Mrs Ellis, when taking advantages under the trust, necessarily also incurs any disadvantage to her, actual or perceived, which arises out of administration of the trust.
55 On behalf of Mr Ellis it was contended to the effect that it was shown by communications in correspondence that the plaintiff's case was presented as justified by or based on a concern to see that the interests of Mrs Ellis are properly protected, that she receives income, what income it is that she receives and how her income is disbursed. It is clear that the plaintiff in correspondence by her former solicitor did put forward in strong terms a concern relating to Mrs Ellis's interests as the ground on which she claimed relief. However it is in my opinion plain, as discussion elsewhere in this judgment shows, that the plaintiff had a right herself to see the trust documents and obtain information about the trust asset. A wish to protect the interests of her mother is not a ground on which she could base a claim, but her claim is well based on her own interests, and the presence of the other asserted basis in correspondence does not justify resistance to her claim. Advance by the plaintiff of grounds which were unnecessary, or even quite wrong, in support of a claim which she has on other grounds cannot prejudice that claim or dispose the Court against granting it on those other grounds.
56 Correspondence on behalf of the second defendant asserted readiness to give the plaintiff information about expenditures on maintenance of the block of flats:
"We take the position that a beneficiary's entitlement to view estate accounts extends only to the interest the beneficiary has in relation to the estate. For instance a beneficiary who receives a specific legacy is not entitled to be given the accounts that relate to residue. Similarly our clients are willing to satisfy your client that her interest in remainder is maintained but will not provide details of the income and outgoings on the trust property to which the income beneficiary is entitled. Accordingly we will provide to you a statement from the managing agents acting out that there are no outstanding rates or taxes on the property, the report obtained from the structural engineer and the certification relating to the fire rating of the property. If your client requires a valuation of her interest, please confirm that she will meet the cost of obtaining it and that the provision of this information will satisfy your client's concerns."
57 The plaintiff did not accept this limitation on the information to be given to her, either before or at the hearing. In my view there is no justification for limiting information to be furnished to the plaintiff in this way. Notwithstanding the position taken in that letter, it was maintained on behalf of Mr Ellis during the hearing, and in final submissions, to the effect that the plaintiff does not and cannot have any interest in aspects of management, including maintenance, because she as a remainderman has very limited rights of recourse against the trustee with respect to maintenance.
58 Whether or not such rights exist and whether or not the trustees have incurred any liability in respect of such rights, and the condition of block of flats, are questions which it is not necessary to consider fully and to answer for the purpose of disposing of Claim 1. In my view those questions should only be addressed and answered when and if the Court is presented with a live issue relating to some clearly expressed and comprehensible basis upon which it is said that the trustees ought to be charged with some liability. Decision on the responsibility of trustees can only be addressed on a clear basis. An attempt to give answers in the abstract may fail to meet the difficulties presented by some actual attempted impeachment of the trustees, when and if one ever eventuates.
59 Mr Ellis's counsel contended that the present litigation is an exercise in futility because the plaintiff is not entitled to compel the life tenant or the trustee to repair the premises, let alone make a capital investment, and cannot compel the creation of a sinking fund. It would indeed be surprising if the plaintiff obtained an order compelling the trustees to take any such course, even more so, the life tenant; any judicial remedy is much more likely to take the form of imposing liability for some failure on the part of the trustees.
60 My Orders are: