Hong Kong Lawyer | Lessons for Trustees from Dawson-Damer: The Critical Importance of Adequate Deliberation and Proper Documentation

The recent Privy Council decision in Ashley Dawson-Damer v Grampian Trust Company Ltd [2025] UKPC 32 serves as both a warning and a guide for trustees exercising discretionary powers. While the Privy Council ultimately dismissed Ashley’s appeal, the case reveals critical lessons about trustee duties that every professional trustee must understand and implement.

This landmark decision, involving a trust worth over US$400 million, demonstrates that even when trustees act with good intentions and achieve legitimate objectives, procedural failures can constitute serious breaches of fiduciary duty. For trustees, the case provides essential guidance on two fundamental areas: the duty of adequate deliberation and the vital importance of maintaining comprehensive records when exercising discretionary powers.

The case involved Grampian Trust Company’s decision to appoint approximately 98% of the Glenfinnan Settlement’s assets to new trusts that excluded Ashley Dawson-Damer as a beneficiary. While the Privy Council found that the trustee had breached its duty through inadequate deliberation, it refused to set aside the appointments because Ashley could not demonstrate that proper consideration would have led to a different outcome.

For trustees, this decision crystallizes two crucial legal principles that should guide every discretionary decision, while highlighting the paramount importance of thorough documentation in protecting both beneficiaries’ rights and trustees’ positions.

First Legal Significance: The Duty of Adequate Deliberation

Understanding the Pitt v Holt Standard

The Dawson-Damer decision reinforces and clarifies the principle established in *Pitt v Holt* [2013] UKSC 26 regarding trustees’ duty of adequate deliberation. This duty requires trustees to engage in a thorough and proper consideration process before exercising discretionary powers, particularly when making significant appointments that could affect beneficiaries’ interests.

The Privy Council’s analysis reveals that adequate deliberation encompasses several critical elements that trustees must satisfy:

• Current and Accurate Information: Trustees must obtain up-to-date information about all potential beneficiaries’ circumstances, needs, and wishes. The decision emphasizes that relying on outdated or potentially biased information constitutes a breach of duty, regardless of the trustee’s good faith intentions.
• Meaningful Consideration: Trustees cannot simply go through the motions of consideration. The deliberation must be substantive, involving genuine evaluation of each beneficiary’s position and how the proposed exercise of discretion might affect them.
• Proper Communication Channels: When relationships between beneficiaries and advisers break down, trustees have an affirmative duty to establish alternative means of obtaining current information. They cannot simply rely on historical data or third-party assessments.

The Grampian Trust Company’s Failures

The Privy Council identified several specific failures in Grampian’s deliberation process that trustees must avoid:

• Cursory Assessment: The Court found that Grampian’s assessment of Ashley’s circumstances was “very cursory/curt” and fell short of what a prudent and diligent trustee should have undertaken. This demonstrates that superficial consideration, even if documented, is insufficient.
• Reliance on Adverse Sources: Grampian relied on information from sources known to be adverse to Ashley, including newspaper reports about her circumstances. Trustees must be particularly careful about the reliability and potential bias of their information sources.
• Failure to Establish Communication: When Grampian became aware that Ashley’s relationship with the Family Advisers had deteriorated, they made no meaningful effort to establish direct communication with her or to obtain current information about her circumstances.
• Assumption-Based Decision Making: The trustee proceeded based on assumptions about Ashley’s financial position and the performance of other trust arrangements, rather than seeking current, verified information.

Practical Implications for Trustees

The adequate deliberation requirement has several practical implications for trustees’ day-to-day operations:

• Information Gathering Protocols: Trustees should establish systematic procedures for gathering current information about beneficiaries before making significant discretionary decisions. This should include direct communication with beneficiaries where possible, rather than relying solely on intermediaries.
• Documentation of Consideration: Every step of the deliberation process should be thoroughly documented, including what information was sought, what was obtained, how it was evaluated, and what factors influenced the final decision.
• Regular Review Procedures: Trustees should implement regular review procedures to ensure that their understanding of beneficiaries’ circumstances remains current, particularly in long-term discretionary trusts.
• Professional Advice Integration: When taking professional advice, trustees must ensure that all relevant aspects of that advice are properly communicated and considered, not just the elements that support a preferred course of action.

Second Legal Significance: Distinguishing Breach of Duty from Setting Aside Dispositions

The Critical Distinction

One of the most significant aspects of the Dawson-Damer decision is its clarification of the relationship between finding a breach of fiduciary duty and the remedy of setting aside trust dispositions. This distinction is crucial for trustees to understand, as it affects both their risk assessment and their approach to decision-making.

The Privy Council established that courts will apply a two-stage analysis:

1. Stage One – Breach of Duty: Did the trustee breach its fiduciary duty through inadequate deliberation or other failures in the decision-making process?
2. Stage Two – Remedial Consequences: If there was a breach, should the court exercise its discretion to set aside the disposition as a remedy?

The Causation Test

The second stage involves a causation analysis that trustees must understand. The Privy Council clarified that even where a breach of duty is established, dispositions will only be set aside if the beneficiary can demonstrate that the decision would have been, or might have been, different absent the breach.

This test has several important elements:

• Burden on the Beneficiary: The beneficiary challenging the disposition bears the burden of showing that proper consideration would have led to a different outcome. Trustees do not need to prove that they would have made the same decision.
• “Would” or “Might” Standard: There was debate in the case about whether the test should be “would have been different” or “might have been different.” The Privy Council applied the higher “would” standard, making it more difficult for beneficiaries to succeed in having dispositions set aside.
• Compelling Factors Analysis: Courts will consider whether there were compelling factors that would have influenced any reasonable trustee’s decision, regardless of the procedural failures.

Why Grampian’s Appointments Were Upheld

Despite finding a clear breach of fiduciary duty, the Privy Council refused to set aside Grampian’s appointments for several reasons that provide guidance for trustees:

• Alignment with Settlor’s Intentions: The appointments were consistent with the settlor’s primary intention that the trust benefit future generations rather than the current generation.
• Beneficiary’s Financial Position: Ashley was already a very wealthy woman with substantial resources from other sources, including her late husband’s estate.
• Provision Made: The trustee had retained 2% of the trust fund (worth approximately US$14 million) as a safety net for Ashley, demonstrating some consideration of her position.
• Legitimate Objectives: The appointments achieved genuine tax advantages and repositioned assets for emerging family members, representing compelling factors that would have influenced any reasonable trustee.

Strategic Implications for Trustees

This distinction between breach and remedy has several strategic implications:

• Process vs Outcome: Trustees must focus on both proper process and substantive justification. Good process alone may not prevent a breach finding, but strong substantive reasons may prevent dispositions being set aside.
• Risk Assessment: When trustees identify procedural shortcomings in past decisions, they should assess not only whether a breach occurred but also whether the substantive decision was appropriate given the trust’s purposes and beneficiaries’ circumstances.
• Remedial Action: If trustees discover procedural failures, they may be able to avoid having dispositions set aside by demonstrating that the decisions were substantively correct and that proper consideration would not have led to different outcomes.
• Documentation Strategy: Trustees should document not only their deliberation process but also the compelling factors that support their decisions, as these may be crucial if the decision is later challenged.

The Paramount Importance of Good Record-Keeping

Why Documentation Matters More Than Ever

The Dawson-Damer case demonstrates that comprehensive record-keeping is not merely an administrative convenience but a fundamental aspect of trustee protection and beneficiary rights. The decision reveals how inadequate documentation can transform what might have been defensible decisions into clear breaches of fiduciary duty.

The case shows that courts will scrutinize not only what trustees decided, but how they reached those decisions and what evidence exists of their deliberation process. In an era of increasing trust litigation, proper documentation serves multiple critical functions for trustees.

Essential Elements of Proper Record-Keeping

• Contemporaneous Documentation: Records must be created at the time decisions are made, not reconstructed later. The Dawson-Damer case relied heavily on contemporaneous attendance notes and meeting minutes to understand what actually occurred during the decision-making process.
• Complete Information Gathering Records: Trustees should document what information they sought about each beneficiary, what they obtained, and any difficulties encountered in gathering current information. This includes recording attempts to contact beneficiaries directly when intermediary relationships break down.
• Deliberation Process Documentation: The records should show not just the final decision but the reasoning process that led to it. This includes documenting what factors were considered, how different beneficiaries’ interests were weighed, and why particular courses of action were chosen or rejected.
• Professional Advice Integration: When trustees receive professional advice, they should document not only the advice received but how it was considered and applied. The Dawson-Damer case revealed that crucial elements of legal advice were not properly communicated to the trustee.

Documenting the Reasons for Each Exercise of Discretionary Power

The case emphasizes that trustees must document the specific reasons for each exercise of discretionary power. This documentation should address several key areas:

• Beneficiary Analysis

For each potential beneficiary, trustees should record:

• Trust Purpose Alignment

The documentation should demonstrate how the proposed exercise of discretion aligns with:

• Competing Considerations

Trustees should document:

• Risk Assessment

The records should include:

Practical Documentation Strategies

• Meeting Minutes and Attendance Notes: All trustee meetings should be properly minuted, with particular attention to recording the deliberation process for discretionary decisions. Attendance notes from meetings with advisers should be comprehensive and circulated to all relevant parties.
• Beneficiary Information Files: Trustees should maintain current files for each beneficiary containing recent financial information, personal circumstances, and any communications with or about the beneficiary.
• Decision Memoranda: For significant discretionary decisions, trustees should prepare formal memoranda setting out the background, considerations, and reasons for the decision. These should be signed and dated by all trustees involved.
• Advice Documentation: All professional advice should be properly documented, including not only the formal advice received but any informal discussions or clarifications. Trustees should ensure they understand and document how advice applies to their specific circumstances.
• Review and Update Procedures: Trustees should establish regular procedures for reviewing and updating beneficiary information and should document these reviews even when no action is taken.

Common Documentation Pitfalls to Avoid

• Retrospective Reconstruction: Never attempt to create documentation after a decision has been challenged. Courts can usually identify retrospective documentation, and it may actually harm the trustee’s position.
• Incomplete Records: Partial documentation can be worse than no documentation, as it may highlight what was not considered rather than what was.
• Reliance on Oral Communications: Important discussions and decisions should always be documented in writing, even if they occur informally.
• Failure to Document Non-Action: Trustees should document decisions not to act as thoroughly as decisions to act, including the reasons why no action was taken.
• Generic Documentation: Records should be specific to the particular trust and beneficiaries involved, not generic templates that could apply to any situation.

Practical Implementation for Trustees

Establishing Robust Procedures

The lessons from Dawson-Damer translate into specific procedural requirements that trustees should implement immediately:

• Pre-Decision Checklists: Develop standardized checklists for discretionary decisions that ensure all relevant factors are considered and documented. These should include verification of current beneficiary information, consideration of trust purposes, and evaluation of alternative approaches.
• Information Gathering Protocols: Establish clear protocols for gathering information about beneficiaries, including direct communication procedures, verification requirements, and documentation standards.
• Review Cycles: Implement regular review cycles for beneficiary circumstances, ensuring that trustee knowledge remains current and that any changes in circumstances are properly documented.
• Professional Advice Integration: Develop procedures for obtaining, evaluating, and implementing professional advice, ensuring that all aspects of advice are properly considered and documented.

Risk Management and Protection

Protecting Against Future Challenges

The Dawson-Damer decision provides clear guidance on how trustees can protect themselves against future challenges:

• Contemporaneous Documentation: All documentation must be created at the time decisions are made, not reconstructed later. Courts can readily identify retrospective documentation, which may actually harm the trustee’s position.
• Comprehensive Coverage: Documentation should cover not only what was decided but why it was decided, what alternatives were considered, and what factors influenced the final outcome.
• Regular Updates: Trustee records should be regularly updated to reflect changing circumstances, with clear documentation of when and why updates were made.
• Professional Support: Trustees should maintain relationships with qualified professional advisers and document their reliance on professional advice where appropriate.

A New Standard for Trustee Excellence

The Dawson-Damer decision marks a watershed moment in trust law, establishing new standards for trustee conduct that every professional trustee must understand and implement. While the Privy Council’s ultimate decision to uphold the appointments may provide some comfort to trustees, the clear finding of breach of fiduciary duty serves as a stark warning about the consequences of inadequate deliberation.

For trustees, the message is unambiguous: good intentions and legitimate objectives are not sufficient if the process of reaching decisions is flawed. The duty of adequate deliberation requires trustees to engage in thorough, documented consideration of all relevant factors before exercising discretionary powers.

The importance of comprehensive record-keeping cannot be overstated. In an era of increasing trust litigation and heightened scrutiny of trustee decisions, proper documentation serves as both a shield against unfounded challenges and a sword for demonstrating compliance with fiduciary duties. Trustees who fail to maintain adequate records do so at their peril.

The practical implications of this decision extend far beyond the specific circumstances of the Glenfinnan Settlement. Every discretionary trust, regardless of size or complexity, is subject to these same principles. Trustees must therefore implement robust procedures for information gathering, deliberation, and documentation that meet the standards established by this landmark decision.

Most importantly, trustees must recognize that their role extends beyond mere administration to encompass a genuine fiduciary responsibility to all beneficiaries. This responsibility requires not only technical competence but also a commitment to fairness, transparency, and thorough consideration of all relevant factors.

The Dawson-Damer decision ultimately reinforces the fundamental principle that with great power comes great responsibility. Trustees who exercise discretionary powers hold positions of significant trust and must conduct themselves accordingly. By implementing the lessons from this case, trustees can ensure they meet the highest standards of professional conduct while protecting both beneficiaries’ interests and their own positions.

The path forward is clear: embrace the principles of adequate deliberation, implement comprehensive documentation procedures, and maintain the highest standards of professional conduct. In doing so, trustees will not only comply with their legal obligations but also uphold the integrity and effectiveness of the trust institution itself.