The Commission has been asked to review the Trustee Act 1956 and trust law generally. In the first stage of this review, the Commission has issued a Report preceded by six Issues Papers. The Report, Review of the Law of Trusts: A Trusts Act for New Zealand (R130), was tabled in Parliament on 11 September 2013. It makes recommendations for the introduction of a modern and comprehensive Trusts Act to replace the outdated Trustee Act 1956. The Report and a summary of the recommendations are available in PDF form here. To read the Government's response, click here.
Prior to releasing the Report, the Commission released a series of five Issues Papers on different aspects of the law of trusts and the legislation, and a Paper outlining its preferred approach to reform in each of the areas covered. Each Paper asked questions and called for submissions and comments. The Issues Papers are published electronically. The Papers are as follows:
- Introductory Issues Paper (IP19) – this is primarily a background paper.
- Second Issues Paper (IP20) − covers concerns with the use of trusts (especially family trusts) in New Zealand.
- Third Issues Paper (IP22) − addresses the rule against perpetuities and the revocation and variation of trusts.
- Fourth Issues Paper (IP26) − focuses on trustees (trustee duties, the office of trustee, and trustee powers).
- Fifth Issues Paper (IP28) − addresses remaining issues such as trading trusts, registration of trusts, court jurisdiction and obligations of trust advisers.
- Preferred Approach (IP31) - outlines the Commission’s preferred approach across the range of possible reforms to trust law that were discussed in the first five Issues Papers.
References to the review in the media
NZ Herald 'Government backs Law Commission move to revise Trusts Act' 12 March 2014
Stuff 'Keeping trusts in step with the times' 8 October 2013
NZ Law Society 'Major trusts review recommends replacing Act' 11 September 2013
NZ Herald 'Law Commission recommends sweeping changes to trust legislation' 11 September 2013
Stuff 'Trusts rule makeover floated' 11 September 2013
NZ Law Society 'Law Commission’s consultation on trusts a valuable process' 25 February 2013
Stuff 'Trust shakeup is a wakeup for trustees' 18 November 2012
NZ Herald 'Law Commission targets trust 'injustice'' 13 November 2012
NZ Herald 'Super-rich tax probes net $500 m' 16 June 2012
NZ Herald 'Tax clamp aims at family trusts' 9 June 2012
Chapman Tripp 'Are trading trusts getting an easy ride, Law Commission asks' 21 February 2012
Rural News 'Courts clear on trustee duties' 15 February 2012
Stuff 'Fixing trust troubles on the cheap' 8 January 2012
Stuff 'Trusts reform in spotlight' 7 January 2012
Stuff 'Most want trusts brought to heel' 18 September 2011
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Published 11 Sep 2013
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The Law Commission’s Report, Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130), was tabled in Parliament on 11 September 2013. The Report is available below in PDF and eBook form, or you can view the online version here. The summary of the Report is also available below.
The Report recommends the introduction of a Trusts Act to replace the Trustee Act 1956. The new Act would be a comprehensive statute that modernises the law of trusts in a number of areas and addresses key matters that are currently only governed by case law.
The Report contains 51 recommendations addressing a wide range of matters relating to the roles of the different parties involved in a trust and the powers of the courts. The matters addressed by the recommendations include:
- setting out the characteristics of a trust and how a trust is created;
- setting out the duties of trustees;
- modernised trustee powers provisions;
- a modernised, flexible approach to investment;
- improved procedures for the appointment and removal of trustees;
- more comprehensive and useful provisions on the variation and revocation of trusts;
- a refined approach to the power of the courts to review the actions of trustees; and
- the replacement of the rule against perpetuities and Perpetuities Act with a new rule limiting the maximum duration of a trust.
The Government will consider the recommendations and respond to them in due course.
Obtain a Hard CopyAvailable online only.Published 13 Nov 2012
The Law Commission released the sixth issues paper on the Review of the Law of Trusts in November 2012. The paper is available below in PDF form, or you can view the online version. There is also a summary version available below, or view the summary online. This Preferred Approach Paper outlines proposals across the range of topics covered in the five preceding issues papers.
This paper is divided into four parts. Part 1 addresses core trust concepts, including the context and features of trust use in New Zealand, core principles of trust law and the duties of trustees.
Part 2 focuses on trustees. It includes chapters on general powers of trustees, investment powers, the appointment and removal of trustees, and custodian and advisory trustees. It also contains a chapter looking at issues that arise in the context of corporate trustees and insolvent trusts, although some of these proposals have application to all trusts and trustees.
The powers and jurisdiction of the courts is discussed in Part 3, which includes the revocation and variation of trusts, the power to review the exercise of a trustee’s discretion, and a variety of miscellaneous court powers. Part 3 also looks at the type of trusts jurisdiction that different courts should have and methods for resolving disputes outside of the courts.
Part 4 contains chapters considering trust issues of general application, including the rule against perpetuities and the duration of trusts, and regulation, such as the registration of trusts and requirements for trust service providers. The final two chapters of Part 4 look at the interaction of trusts with other policy areas, and in particular trusts and relationship property.
Submissions for this paper closed on Friday 22 February 2013.
NZLC IP28 Court Jurisdiction, Trading Trusts and other issues: Review of Law of Trusts Fifth Issues Paper
Obtain a Hard CopyAvailable online only.Published 19 Dec 2011
The Law Commission has released a fifth Issues Paper in the Review of the Law of Trusts entitled Court Jurisdiction, Trading Trusts and Other Issues: Review of the Law of Trusts Fifth Issues Paper (NZLC IP28, 2011).
Part 1 of the paper addresses the powers of the courts in respect of trusts and trustees, including the High Court’s supervisory jurisdiction, powers exercised in breach of trust cases and the Court’s approach to intervening where trustees are exercising discretionary powers not conferred on them by the Trustee Act. It looks at whether the District Court should be able to exercise powers under the Trustee Act within their jurisdictional limit.
Part 2 discusses alternative methods to the courts for resolving trust disputes, including a new mechanism for dispute resolution and greater use of ADR in trusts.
Part 3 examines trading trusts. It looks at the interaction of trading trusts with creditors, raising options for ways in which problems may be addressed, as well as looking at the effect of trading trusts on beneficiaries, problems relating to insolvent corporate trustees and the definition of a trading trust.
Part 4 considers whether further regulatory requirements for trusts are needed, including registration and reporting requirements, and regulation of trust service providers.
Submissions for this paper closed on 2 March 2012.
NZLC IP26 The Duties, Office and Powers of a Trustee: Review of the Law of Trusts Fourth Issues Paper
Obtain a Hard CopyAvailable online only.Published 30 Jun 2011
The Law Commission has released a fourth issues paper in the Review of the Law of Trusts entitled The Duties, Office and Powers of a Trustee: Review of the Law of Trusts Fourth Issues Paper (NZLC IP26, 2011).
Part one of the paper examines the duties that a trustee owes to beneficiaries of a trust. It gives particular attention to the duty to inform beneficiaries about matters relating to the trust. Part one also looks at which of the duties should be considered part of the irreducible core of the trust, that is, which duties should be incapable of being excluded by a trust deed. The Commission considers whether there should be limits on what exemption clauses, which exclude the liability of trustees for failing to carry out the duties, can do.
Part two of the paper discusses the appointment, retirement and removal of trustees. It also addresses the powers given to a trustee. These issues are examined to identify whether the law is effective, or whether it should be modernised and improved.
Submissions on this paper closed 31 August 2011.
NB: The publication is online only, there are no hard copies available.
Obtain a Hard CopyAvailable online only.Published 2 May 2011
The Law Commission released today a third Issues Paper in the review of the law of trusts, Perpetuities and the Revocation and Variation of Trusts: Review of the Law of Trusts
Part one of the paper examines the rules that limit the duration of a trust: the common law rule against perpetuities and the Perpetuities Act 1964. The Commission explores the underlying rationale for the rule against perpetuities and asks whether the rule continues to meet a relevant policy need or whether either the mechanism for achieving this policy or the policy basis itself should change. The paper canvasses different options, including retaining the statutory perpetuity rule, adjusting or extending the statutory rule and abolishing the rule altogether, as has been done in a number of overseas jurisdictions.
Part two of the paper looks at the rules that allow trusts to be altered. Trusts may be revoked and varied through various common law, judicial and statutory mechanisms. These rules are examined to ensure that they are clear and workable, and to determine whether reform is needed.
Submissions on this paper closed 24 June 2011.
NZLC IP20 Some Issues with the Law of Trusts in New Zealand: Review of the Law of Trusts Second Issues Paper
Obtain a Hard CopyAvailable online only.Published 20 Dec 2010
This is the second issues paper in Stage 1 of the Law Commission’s review of the law of trusts.
The second issues paper will cover issues with the use of trusts (especially family trusts) in New Zealand. This paper will look at the purposes for which family trusts are established, including reducing tax obligations, protection of assets from creditors and relationship property claims, and meeting eligibility thresholds for government assistance. The paper examines different legislative and judicial responses to the use of trusts to “look through” or disregard a trust where a trust has been used to frustrate the underlying policies of particular statutes.
The Commission poses options for how the law could address concerns about the use of trusts. The paper seeks comment from as broad an audience as possible on issues such as why trusts are so common in New Zealand, whether limits should be placed on the uses to which trusts are put, whether high levels of settlor control is an issue for concern, how effective existing legislative mechanisms are at addressing the impacts of trusts and whether the law on sham trusts is satisfactory.
Submissions on this paper closed 31 March 2011.
Please note the Paper is only available online
At paragraph [3.37] (page 26), the third and fourth sentences should read:
In Kidd, the husband’s father established a trust in 1990 and the husband and wife commenced living together in 1998 and married in 2001. The husband was a final and discretionary beneficiary of the trust, and “any spouse” of the husband was a discretionary beneficiary.
Obtain a Hard CopyAvailable online only.Published 15 Nov 2010
The first issues paper is primarily a background paper. Chapter 1 is purely introductory. Chapter 2 traces the development of the trust from its origins in England through to the present day uses of the trust both in New Zealand and internationally. Chapter 3 examines the key features of the trust with a view to finding a working definition that might possibly serve as a statutory definition for a new Trustee Act or possibly a Trusts Act. Chapter 4 looks at the Trustee Act and comparable overseas legislation and refers to issues to which the Law Commission has been alerted.
The paper asks for views about a possible legislative definition of a trust, practical issues with the Trustee Act, and whether the Act should continue to be a default statute or whether it ought to contain more mandatory provisions. The paper asks for responses to specific questions and seeks comments on Act and the law that might assist the Commission in its review.
Submissions on this paper closed 28 February 2011.
- Published 11 Sep 2013
The Law Commission is recommending a new Act clarifying the legal rights and duties of New Zealanders who use trusts to manage their assets. If enacted, the new Trusts Act would be relevant to tens of thousands of New Zealanders who use trusts as an alternative way of holding and managing property or other assets.
It is estimated New Zealand has 300,000 to 500,000 trusts used for a variety of purposes The Commission considers it is in the public interest to have a modern statute that gives trustees and others guidance as to how a trust is to be managed and increases the accountability of trustees.
The full media release is available below. The summary, recommendations and full Report are available here.
- Published 13 Nov 2012
The Law Commission is seeking feedback on a number of proposed reforms designed to make the law governing trusts clearer and more accessible to the tens of thousands of New Zealanders who use them.
There are two media releases for this paper. One gives a general overview of the Commission's Preferred Approach paper, and the other provides more detail on the publication.
- Published 28 May 2014
The Government responded to the Law Commission's Report in March 2014. The response can be found here.