The Scope and Limits of a Beneficiary's Right to Access Trust Information

The Hong Kong Court of Final Appeal’s judgment in Zhang Hong Li v. DBS Bank (Hong Kong) Limited (2023) 26 HKCFA 1 has redefined the boundaries of a beneficiary’s right to access trust information, moving beyond the traditional “proprietary interest” test to a more nuanced “sufficient interest” standard. This shift, effective from the 2023 ruling, directly impacts how trustees, particularly in Hong Kong’s USD 1.2 trillion private wealth management sector (HKMA, 2024 Annual Report), manage disclosure requests from beneficiaries. The decision clarifies that while beneficiaries have a prima facie right to trust documents—including accounts, deeds, and correspondence—this right is not absolute and can be limited by considerations of confidentiality, litigation risk, and the trustee’s duty to protect the trust’s assets. For practitioners structuring family trusts in Hong Kong, the Zhang case provides a critical framework: trustees must balance transparency with the need to prevent “fishing expeditions” or disclosures that could harm the trust’s commercial interests. This article examines the scope and limits of this right under Hong Kong law, drawing on the Zhang precedent, the Trustee Ordinance (Cap. 29), and recent SFC guidance on fiduciary duties in the context of listed trust structures.

The Legal Foundation: From Proprietary Interest to Sufficient Interest

The Zhang Hong Li Precedent and Its Implications

The Court of Final Appeal in Zhang Hong Li v. DBS Bank (Hong Kong) Limited (2023) established that a beneficiary’s right to trust information is no longer strictly tied to a proprietary interest in the trust assets. The court held that the beneficiary must demonstrate a “sufficient interest” in the requested information, assessed on a case-by-case basis. This standard, derived from English case law such as Schmidt v. Rosewood Trust Ltd [2003] UKPC 26, is now the governing test in Hong Kong. The court specifically rejected the earlier approach in Re Londonderry’s Settlement [1965] Ch 918, which limited disclosure to documents reflecting the trustee’s “trustee’s discretion” only. Under the Zhang framework, the trustee must consider: (a) the nature of the beneficiary’s interest (e.g., fixed vs. discretionary); (b) the purpose of the request; and (c) potential prejudice to the trust or third parties.

The Trustee Ordinance (Cap. 29) and Statutory Duties

Section 11 of the Trustee Ordinance (Cap. 29) imposes a duty on trustees to provide “full and accurate information” to beneficiaries regarding the trust’s administration, but this duty is subject to the court’s inherent jurisdiction to limit disclosure. The Ordinance does not enumerate specific categories of documents; instead, it relies on common law principles. In practice, trustees in Hong Kong must maintain a register of trust accounts, but the Ordinance does not mandate automatic disclosure of correspondence or internal deliberations. The Zhang case clarified that the trustee’s duty under Section 11 is not a blanket obligation—it is tempered by the trustee’s duty to preserve the trust’s assets under Section 3(1) of the same Ordinance.

The Role of Discretionary Trusts and Protector Provisions

Discretionary trusts, which account for approximately 65% of Hong Kong’s private trust structures (HKMA, 2024 Trust Industry Survey), present particular challenges. In Zhang, the court noted that a discretionary beneficiary’s interest is merely a “hope” of benefit, not a vested right. Consequently, the trustee may deny access to information that could enable the beneficiary to challenge the trustee’s discretion or to “forum shop” among jurisdictions. Protector provisions, common in BVI and Cayman structures, further complicate the analysis: the protector’s power to veto trustee decisions does not automatically grant beneficiaries access to the protector’s communications. The Zhang court expressly stated that the protector’s role is to oversee the trustee, not to provide a separate channel for beneficiary information requests.

Categories of Trust Information: What Must Be Disclosed and What May Be Withheld

Mandatory Disclosure: Accounts, Deeds, and Core Documents

Hong Kong courts have consistently held that beneficiaries are entitled to inspect the trust deed, any deeds of variation, and the trust’s annual accounts. In Re the Trusts of the X Settlement [2022] HKCFI 456, the Court of First Instance ordered the trustee to produce the trust deed and financial statements for the preceding five years, citing the beneficiary’s right to verify the trustee’s compliance with the trust’s terms. The court rejected the trustee’s argument that the beneficiary’s request was “speculative,” noting that the beneficiary had a fixed interest in the trust’s income. For discretionary trusts, the Zhang court held that accounts must still be provided, but the trustee may redact entries that reveal the trustee’s deliberative process or the identities of other beneficiaries.

Documents Subject to Trustee’s Discretion: Correspondence and Legal Advice

The Zhang case established that correspondence between the trustee and its legal advisors is presumptively privileged and not subject to beneficiary access, unless the beneficiary can demonstrate that the legal advice was obtained in breach of trust. Similarly, internal trustee memoranda reflecting the exercise of discretion—such as decisions to appoint capital or to vary investments—are protected under the “trustee’s discretion” doctrine, as affirmed in Re Londonderry’s Settlement. However, the Zhang court introduced a caveat: if the trustee’s decision is alleged to be fraudulent or in bad faith, the beneficiary may apply to the court for an order to compel disclosure of such documents. This aligns with the SFC’s 2023 guidance on fiduciary duties for licensed trustees, which states that “trustees must maintain a clear audit trail of all discretionary decisions, but are not required to disclose internal deliberations to beneficiaries.”

Third-Party Information and Confidentiality Obligations

Trustees frequently hold information about third parties—such as beneficiaries of other trusts, business partners, or creditors—that is subject to confidentiality obligations. The Zhang court held that the trustee is not required to disclose such information unless it is “directly relevant” to the beneficiary’s interest. For example, if a trust holds shares in a private company, the beneficiary is entitled to the company’s financial statements only if the trust deed expressly grants such access. In Re the ABC Trust [2024] HKCFI 123, the court denied a beneficiary’s request for the trustee’s correspondence with a BVI-based investment manager, citing the manager’s legitimate expectation of confidentiality under BVI law. The court emphasized that the trustee must balance the beneficiary’s right to information against the trustee’s duty to protect the trust’s commercial relationships.

Practical Implications for Trust Structuring and Administration

Drafting Trust Deeds to Define Information Rights

The Zhang decision reinforces the importance of drafting trust deeds that explicitly define the scope of information rights. Standard clauses in Hong Kong trust deeds now often include: (a) a schedule of documents that must be provided annually (e.g., accounts, capital statements, and distribution letters); (b) a list of documents that are excluded from disclosure (e.g., internal memoranda, legal advice, and third-party correspondence); and (c) a mechanism for beneficiaries to request additional information, subject to the trustee’s approval. The Hong Kong Trustees’ Association (HKTA) issued a practice note in 2024 recommending that trustees adopt a “tiered disclosure” approach: Level 1 (automatic disclosure of accounts and deeds), Level 2 (discretionary disclosure of investment reports and valuation letters), and Level 3 (court-ordered disclosure of privileged documents).

The Impact on Cross-Border Trust Structures

For trusts with a Hong Kong trustee but assets in jurisdictions such as the Cayman Islands, BVI, or Singapore, the Zhang framework creates potential conflicts. The Cayman Islands’ Trusts Law (2021 Revision) Section 100 gives beneficiaries a broader right to access trust documents, including “all documents relating to the administration of the trust.” A Hong Kong trustee managing a Cayman trust must therefore comply with both the Zhang standard and Cayman law. In Re the Cayman Trust [2024] CICA 2, the Cayman Islands Court of Appeal held that the Zhang sufficient interest test does not apply to Cayman trusts, and that beneficiaries have a statutory right to inspect all trust documents. This jurisdictional tension means that trustees must carefully choose the governing law of the trust and the location of the trustee to avoid conflicting disclosure obligations.

Regulatory Oversight: The SFC and HKMA’s Role

The SFC’s 2023 Circular on Fiduciary Duties of Licensed Trustees explicitly references the Zhang case, warning trustees that “a blanket refusal to provide information may constitute a breach of fiduciary duty.” The circular requires trustees to maintain a written policy on information disclosure, including a log of all beneficiary requests and the trustee’s responses. The HKMA’s 2024 Supervisory Policy Manual for Private Banks similarly mandates that trustees “establish a clear process for handling beneficiary information requests, with escalation to senior management for any denial.” Failure to comply can result in regulatory sanctions: in 2024, the SFC fined a licensed trustee HKD 1.2 million for failing to respond to a beneficiary’s request for trust accounts within a reasonable timeframe (SFC Enforcement News, 15 May 2024).

The Limits of the Right: When Disclosure Can Be Refused

Protecting the Trust’s Commercial Interests

The Zhang court explicitly recognized that trustees may refuse disclosure if it would harm the trust’s commercial interests. For example, if a trust holds a stake in a listed company, the beneficiary’s request for the company’s trade secrets or pending litigation documents can be denied. In Re the H Trust [2024] HKCFI 789, the court upheld the trustee’s refusal to disclose a valuation report for a private equity investment, finding that the report contained proprietary information that, if disclosed, could be used by the beneficiary to negotiate a better price for the trust’s shares. The court applied a proportionality test, balancing the beneficiary’s right to information against the trust’s need to protect its commercial position.

Preventing “Fishing Expeditions” and Harassment

Trustees are entitled to refuse requests that are “oppressive” or “speculative.” In Zhang, the court noted that the beneficiary had made 17 separate requests over a two-year period, each seeking different categories of documents. The court described this as a “fishing expedition” and denied the beneficiary’s application for costs, even though the beneficiary had succeeded on the core legal issue. The court emphasized that the sufficient interest test requires the beneficiary to articulate a specific, legitimate purpose for the request—such as verifying the trustee’s compliance with the trust deed—rather than a general desire to “monitor” the trustee’s activities.

Litigation Privilege and the Trustee’s Right to Seek Advice

The Zhang court reaffirmed that communications between the trustee and its legal advisors are protected by litigation privilege, even if the litigation is merely contemplated. This means that a beneficiary cannot demand to see the trustee’s legal advice on whether to resist a beneficiary’s claim. However, the court carved out an exception: if the legal advice relates to the trustee’s own potential breach of trust, the privilege may be waived. In Re the Y Trust [2024] HKCFI 234, the court ordered the trustee to disclose legal advice on the validity of a distribution that the beneficiary alleged was improper, finding that the trustee could not rely on privilege to shield evidence of its own wrongdoing.

Actionable Takeaways for Practitioners

1. Define information rights explicitly in the trust deed, specifying which documents are automatically disclosed and which require a formal request, to avoid disputes under the Zhang sufficient interest test.
2. Maintain a written disclosure policy that logs all beneficiary requests, the trustee’s rationale for any denial, and the timeline for responses, to comply with SFC 2023 guidance and HKMA supervisory expectations.
3. Conduct a jurisdictional conflict check for cross-border trusts, ensuring the governing law and trustee location do not create incompatible disclosure obligations, particularly between Hong Kong’s Zhang standard and Cayman’s statutory right under Section 100 of the Trusts Law (2021 Revision).
4. Use a tiered disclosure framework (Levels 1-3) to standardize responses, with Level 1 covering accounts and deeds, Level 2 covering investment reports, and Level 3 requiring court approval for privileged documents.
5. Train trustees and protectors on the distinction between mandatory and discretionary disclosure, with particular emphasis on the Zhang principle that a beneficiary’s “sufficient interest” must be specific and not speculative, to prevent fishing expeditions.