Trustees are obliged to account to beneficiaries concerning the administration of trust assets. This obligation includes, firstly, maintaining documents and records concerning the trust and transactions implicating it and, secondly, making information about the trust and its transactions available to beneficiaries.
It may be argued that trustees have failed in their duty to keep accurate records if they do not keep sufficiently detailed minutes in support of the basis for their decisions. This may be because the duty to account:
- requires trustees not simply to maintain records but requires those records to be a sufficient and accurate reflection of the transactions in which the trustees have been involved and minimalistic minutes may offer insufficient explanation of the basis or nature of those transactions, and/or
- may extend further than making available documents that provide direct evidence as to the accuracy of the financial statements or trial balance made available by the trustees to the beneficiaries.
However, ordinarily the duty to account would require the trustees to provide evidence to substantiate the itemisation of income, gains, expenses and liabilities with respect to the trust fund as opposed to providing evidence to demonstrate that the trustees have exercised their discretions responsibly. This appears to be the approach adopted by Briggs J in Breakspear v Ackland
. If this is accepted, the duty to account invariably requires trustees to keep records to substantiate the account that is being provided. This obligation to account will generally be satisfied by the preparation of sufficiently detailed financial statements, including explanatory notes where required and, if necessary, providing ledgers and perhaps source documents to support the transactions. If the beneficiaries do not accept the account as accurate, the trustees may arrange, or the beneficiaries may require, an audit of the account or the beneficiaries may commence an action to falsify the account.
Be prepared, be organised and prepare annual financial statements, have regular trustee meetings and record decisions made.