Beneficiary rights 

What a beneficiary has depends on the kind of trust, and the difference is one of kind rather than degree. Under a fixed trust the beneficiary holds a proprietary interest in the trust property; under a discretionary trust they usually hold no more than a right to be considered and to have the trust properly administered. Calling both of them "the beneficiary's rights" hides the distinction a problem question is usually built on.

The nature of the interest

Under a fixed trust, the beneficiary has a proprietary equitable interest in the trust property. It may be assigned, charged, devised, and it is protected on the trustee's insolvency because the trust property is not available to the trustee's creditors.

Under a discretionary trust, an object has no proprietary interest in any asset before the discretion is exercised in their favour. What they have is a right to be considered, a right to have the trust properly administered, and a right to restrain misapplication of the fund. That is why a discretionary interest is generally not property available to the object's own creditors or divisible in the object's bankruptcy, and why discretionary trusts are used as they are.

Under a unit trust the position is governed by the instrument, and unitholders' rights are commonly closer to those under a fixed trust.

Rights to information

A beneficiary is entitled to inspect the trust instrument and to have the trustee account for the administration of the fund. The right is an incident of the trustee's duty to account, not a discovery right, and it is exercisable without commencing proceedings.

Reasons for the exercise of a discretion stand differently. A trustee is generally not obliged to give reasons for a discretionary decision, and where no reasons are given the court will not compel disclosure merely because a beneficiary is dissatisfied. If reasons are given, they may be examined. The modern approach treats disclosure as an aspect of the court's inherent supervisory jurisdiction, to be exercised with regard to the interests of the beneficiaries as a whole, the confidentiality of others, and the nature of the interest asserted — so an object of a wide discretionary class may obtain less than a fixed beneficiary.

Ending the trust

Where all beneficiaries are of full age and capacity and between them absolutely entitled to the whole beneficial interest, the rule in Saunders v Vautier (1841) 4 Beav 115¹ lets them unanimously direct the trustee to transfer the property to them and bring the trust to an end, whatever the settlor intended about postponing enjoyment.

Australia retains this rule. The United States largely rejected it in favour of giving effect to a settlor's material purpose, so American commentary on the point is not a safe guide here. The rule cannot be used to control the trustee's exercise of a discretion short of termination: beneficiaries may end a trust, but they may not direct how it is administered while it continues.

Enforcing the trust

The primary right is against the trustee, for restoration of the fund or equitable compensation, and to have the trust properly administered.

Against third parties, a beneficiary may in general only sue where the trustee cannot or will not — because the trustee is the one holding the legal title — and the trustee is ordinarily joined. Three claims are distinct and should not be conflated:

• Following and tracing the trust property or its proceeds into the hands of a recipient, a proprietary claim defeated by a bona fide purchaser of the legal estate for value without notice.
• Knowing receipt — a personal claim against a stranger who receives trust property beneficially with the requisite knowledge of the breach.
• Knowing assistance — a personal claim against a stranger who assists in a dishonest and fraudulent design on the part of the trustee, with knowledge. Australian law has retained the traditional requirement of a dishonest and fraudulent design, rather than adopting the broader unconscionability-based formulations developed elsewhere; that difference is examinable.

Applying this in a problem question

1. Classify the trust, because the beneficiary's interest follows from it.
2. Distinguish a right to information from a demand for reasons.
3. For termination, check age, capacity, unanimity and absolute entitlement to the whole beneficial interest.
4. Sue the trustee first; explain why a third party claim is available before making one.
5. Keep proprietary claims separate from personal claims against strangers.

Where the authority sits

Case law, with Australian authority on trust information and on the knowledge required for third party liability, and the trustee legislation of each jurisdiction for the court's supervisory powers.