On 1 June 2021, the Supreme Court gave Judgment in Lambie Trustee Limited v. Addleman  NZSC 54 settling whether and when trustees must disclose their legal advice to beneficiaries of the trust.
The underlying dispute in Addleman was between two sisters, who I will call AB and CD and a Trust whose sole trustee was a company controlled by AB. The sisters were both beneficiaries of the Trust. CD requested information about the Trust, which in part, AB resisted. AB sought legal advice in regard to her sister’s requests both before and after CD issued proceedings seeking orders from the court to oblige AB to make the requested disclosure, including disclosure of the legal advices that had been given to AB.
The Judgment leads me to the following key takeaways:
1. Although legal privilege applied to the legal advice given to the trustees – which would bar any outsider from seeing them – there exists a “joint interest exception” to the privilege that entitled the beneficiaries to see them. The underlying reason for this is an assumption that the advice was obtained for the beneficiaries’ benefit.
2. But the “joint interest exception” has a limitation. It ceases to apply where the trustees and challenging beneficiary have reached the point where their positions so conflict that the trustees are now taking advice for the purpose of resisting the claims or demands against them.
3. How does a trustee know when the “joint interest exception” ceases? The test is whether the “dominant purpose” for why the advice was defending the litigation or imminent litigation.
To illustrate: That litigation may be a possibility or even a likelihood at the time advice is taken is unlikely to meet the “dominant purpose”test. And advice sought, even where litigation is contemplated, that is aimed at looking for guidance as to the right course of action (as compared with seeking advice as to how to resist actual or imminent litigation) means that the “joint interest exception” will most likely still apply.
The safe approach is probably to consider two alternatives: Was the advice given before or after litigation was imminent or had commenced? If it was before it is likely to be disclosable to the beneficiary, if after it is unlikely to be disclosable.
4. Hitherto it had been argued by some, that if the legal advice was paid for by the trustee out of the own money (i.e. not from trust property), then it is ‘personal information’ belonging to the trustee and not likely to be subject to court-ordered disclosure. The Court gave weight to this argument, but did not conclusively decide it. Caution is therefore required before a trustee relies on such a course believing it will avoid the obligation to disclose the advice to the beneficiary. Also:
a. The Judgment addresses the common law rights of disclosure to beneficiaries and not discovery in litigation as between beneficiaries and trustees.
b. Secondly, the Judgment was decided on common law principles before the Trusts Act 2019 came into force. The wide definition of ‘trust information’ in section 49 of the Act may well include ‘personal information’ of the trustee about the trust or its administration.
This Judgment gives much needed guidance on a particularly unclear but important area of trust jurisprudence. While the “dominant purpose” test will be well utilised by trustees and their advisors, I expect many will be sad to let go of the more colloquial test espoused in by the High Court inEaston v Guardian Trust  NZHC 519 where the Court at para  described the test for the loss of the common interest (the equivalent of cessation of the joint interest exception) was when the point had been reached where the trustee could regard the beneficiary who wishes to sue them as ‘outside the tent’.
Author - Andrew Steele, Barrister, Princes Chambers