In re Londonderry’s Settlement (Peat v Walsh)

Trustees exercising a discretionary power in good faith need not disclose their reasons, deliberations or the material upon which those reasons were or might have been based. A beneficiary’s right to inspect trust documents is subject to that protection and does not extend to confidential communications between trustees, appointors or individual beneficiaries.

Documents containing both trust information and protected deliberative material may be disclosed with the protected material withheld. Written legal advice obtained for the trust about the lawful exercise of the power remains available for inspection. Different considerations govern discovery in proceedings which impeach the trustees’ good faith.

The trustees of a family settlement exercised discretionary powers to distribute income and capital among a closed class of descendants. A beneficiary who considered her proposed share inadequate sought the trustees’ minutes, agendas and correspondence so that she could examine their reasons and motives.

Plowman J declared that the trustees were bound to disclose broad categories of documents. The trustees appealed. The central question was how to reconcile a beneficiary’s right to inspect trust documents with the rule protecting the reasons and deliberations underlying trustees’ exercise of discretionary powers.

Appeal allowed unanimously. Harman LJ delivered the leading judgment. Danckwerts and Salmon LJJ agreed that Plowman J’s declaration was too broad.

1. Trustees exercising a discretionary power in good faith are not obliged to disclose their reasons. The protection would be ineffective if reasons, deliberations and relevant confidential information became disclosable merely because they had been recorded in writing. The settlement entrusted the discretion to the trustees, not the court.

2. The general proposition that beneficiaries may inspect trust documents does not itself determine which papers are trust documents or whether special circumstances justify withholding them. Minutes, agendas and other documents were protected to the extent that they disclosed the trustees’ deliberations, reasons or the material upon which those reasons were or might have been based.

3. Harman LJ considered that communications between individual trustees and appointors, and correspondence between trustees or appointors and individual beneficiaries, were not documents in which every beneficiary had a proprietary right. Danckwerts LJ emphasised the trustees’ confidential role and the disruption that unrestricted disclosure could cause. Salmon LJ considered that material containing information which beneficiaries were not entitled to know could be excluded from a document’s character as a trust document or covered before inspection.

4. Written advice from solicitors or counsel about the manner in which the trustees were legally entitled to exercise their powers was disclosable. Such advice was obtained for the trust and paid for from trust property.

5. The protection was subject to proceedings in which a beneficiary challenged the trustees’ good faith. In such an action, relevant documents within the trustees’ possession or power might be discoverable whether or not they were trust documents.

The relevant part of Plowman J’s order was discharged. A declaration reflecting these distinctions was substituted. Leave to appeal to the House of Lords was refused.

1. Court of Appeal: The trustees’ appeal was allowed unanimously. The relevant declaration made by Plowman J was discharged and replaced by a narrower declaration protecting deliberative and confidential material while requiring disclosure of written legal advice concerning the lawful exercise of the discretionary powers.
2. High Court: Plowman J had declared that the trustees were bound to disclose specified minutes, agendas and correspondence. He considered himself constrained by authority to make that order.