What is a Statement of Wishes?
Statement of Wishes (sometimes called Memorandum of Wishes or Letter of Wishes) is a non-binding document that provides guidance as to the object and purpose of Estate Planning documents and also allow the formal documents (such as a Will or Trust instruments) to remain flexible and broad.
Common uses include:
- Wills – to provide guidance to the Executors and the Trustees of Trusts established under the Will.
- Minor children – to provide guidance to Guardians of minor children appointed under a Will.
- Potential contentious Estates – to provide reasoning to the Executor as to why a certain beneficiary is not named in a Will.
- Discretionary Family Trusts – to provide guidance to the Appointors, Guardians and Trustees.
- Charitable giving – to provide named Beneficiaries of a Will with an understanding that the Testator intended them to pass gifts left in their names to certain preferred charities.
What should a Statement of Wishes contain?
A Statement of Wishes should:
- be addressed to the correct person (e.g. the executor or the trustee of a relevant trust);
- contain a statement to the effect that the maker understands that it is unenforceable;
- state that it is not to be read as a formal testamentary document; and,
- be marked as private and confidential.
What shouldn’t a Statement of Wishes contain?
Care must be exercised when drafting Statements of Wishes so that they are not deemed to be “informal wills”, as if drafted incorrectly, they may conflict with the main Will and expose the estate to litigation.
A Statement of Wishes should not:
- fetter a trustee’s discretion;
- contain directive language; and,
- impose any legal repercussions if it is not followed or if it is disregarded.
What does the current case law say about Statements of Wishes?
Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 remains the seminal case on Statements of Wishes.
What were the facts of the case?
This case involved Sir Norman Rydge, a prominent businessman, who instigated the establishment of a family trust in 1971 for the benefit of his children and grandchildren. When two of Sir Norman’s grandchildren approached the trustees (apparently for a distribution), the trustees wrote to them, referred to a memorandum of wishes that had been prepared by Sir Norman and, “with regret”, indicated they could not distribute to them because there was “no provision in the memorandum which would entitle the trustees to make any payment to you at this time.”
A discretionary beneficiary brought an application for a declaration that he was entitled to inspect the memorandum and that the trustees ought not take it into account in the exercise of their discretions.
What was the legal issue?
The issue was whether a beneficiary of a discretionary trust, who was the grandchild of its creator, could compel its trustee to disclose a memorandum of wishes provided by the creator.
What was held?
In the Court of Appeal of the New South Wales Supreme Court, Mahoney and Sheller JJA, the majority, with Kirby J dissenting, held that a memorandum of wishes provided by the instigator of a discretionary trust, for the use of the trustees in exercising their powers, was not a document which the trustees were obliged to disclose to a beneficiary, if the memorandum was provided on a confidential basis.
Mahoney JA affirmed the Re Londonderry’s Settlement test and held that the right of a beneficiary to obtain on request documents or disclosure of information in relation to the trust is limited to documents which are the property of the trust. The right did not extend to the property of the trustee – material prepared by the trustees for their own purposes such as to administer the trust or discharge their duties. Information need not be disclosed if the result of disclosure would be to make known reasons why a discretionary power has been exercised and would be likely to give rise to family difficulties. Further, if information is given to a trustee in confidence then it will not be available to beneficiaries. Even if such documents were the property of the trust, because they were confidential, they could not be disclosed.
Mahoney JA stated (at 438C):
“The law allows trustees to act without detailing their reasons, not to encourage the secrecy, but to avoid litigation…”
Sheller JA stated (at 446G):
“That Sir Norman Rydge did not disclose his wishes in, or in a document attached to, the deed of settlement, but delivered a separate memorandum of wishes to the trustees, leads to the conclusion that it was his, and thus the settlor’s, intention that his wishes should remain confidential, and consequently that the contents of the memorandum were obtained by the trustees in circumstances of confidence, which bound the trustees not to disclose them to the respondent and to withhold the memorandum from him.… “Nor do I see any specific or amorphous public interest which requires, in the circumstances of this case, the revelation of the wishes of Sir Norman Rydge expressed privately and, I am satisfied, confidentially to his trustees.”
Kirby J would have allowed access to the memorandum of wishes, for the following reasons:
- If the correct rule is that beneficiaries are allowed access to trust documents, the memorandum of wishes is a trust document – “an essential component of, or companion to” the trust deed. Further the beneficiary has a proprietary interest in the document. His Honour did not consider it imperative to decide this as both the trust document approach and the proprietary approach were unsatisfactory in his view.
- Londonderry’s Settlement is an unsatisfactory decision and does not represent the local law.
- To accept that as a prerequisite to access that a beneficiary should be able to show misconduct or wrongdoing on the part of the trustee, would be to impose an unreasonably high barrier to the effective supervision by the court of the actions of trustees ostensibly subject to that supervision.
- The trustee was a professional trustee, had access to advice, was paid fees and should be accountable.
- The rule of secrecy which the trustees urge is one which may effectively deny the beneficiaries access to relevant information. “Only by securing access could the beneficiary fully exercise his rights. Those rights included the rendering of the trustees accountable before the law for the discharge of their duties as trustees.”
- The trustees need not fear undue harassment by beneficiaries or the courts as the courts will uphold the discretion reposed in trustees by the trust deed so long as they perform their duties bona fide and without malice.
- There had been no express request that the memorandum of wishes be kept secret by the trustees. If there was an express statement as to secrecy the position may well be different.
- It is inappropriate to follow Re Beloved Wilke’s Charity and Re Londonderry’s Settlement in Australia. Australian society accepts a generally greater level of accountability than has been accepted by the law of England. There are different attitudes to the role of the individual and the citizen in society; the proper function of the courts; and the accountability of one person to another before the law. In discretionary trusts in Australia what is more likely to be at stake is money and fiscal obligations than the reputation of the family name. The anxiety about washing “dirty linen” in public is less likely to concern an Australian family caught up in a dispute about a discretionary trust than it is in the different social milieu of a noble family in the United Kingdom.
What was the outcome?
The Court determined that the trustees were not obliged to provide the memorandum of wishes to the beneficiaries.
Later cases
Stansfield v National Australia Trustees Ltd [2004] NSWSC 1107
In obiter dicta, Master Macready said “Hartigan’s case shows that even if there is a memorandum of wishes, there is no obligation on the trustee to take that into account. Furthermore, even though the trustees say that they intend to follow the wishes, they are not bound to do so, and indeed, circumstances may change in such a way that they feel it is not proper to continue to follow the memoranda of wishes and carry out the spirit of what the deceased intended.”
Monaghan v Monaghan; Monaghan v Monaghan [2016] NSWSC 1316
Slattery J noted that “the Trustee is entitled to take into account this memorandum of wishes in exercising its discretions conferred under the Trust Deed, just as the Trustee is entitled to take into account the views of beneficiaries”.
If you have any questions about any of the above, please do not hesitate to get in touch with a member of Coleman Greig’s Wills & Estates Planning team, who would be more than happy to assist you.
