Law Commission’s Key Proposals for New Trusts Legislation

By | February 15, 2013

Whilst the Law Commission is reviewing trust law, we’ve undertaken to keep you up-to-date with its recommendations; which is much easier than you having to read the 300+ pages of the Commission’s report.

Core trust concepts

The Commission has recommended that new trust law will define the requirements for the creation of an express trust and a provision confirming no trust exists if the ‘three certainties’ are not present: the settlor’s intention to create a trust, the beneficiary or beneficiaries, or permitted purpose, and the trust property.

Trustees’ duties, restrictions on the use of exemption clauses and a default provision on the requirements of the duty to inform beneficiaries will be clearly set out.


Further to our article in Trust eSpeaking/15 Spring 2012, the Commission makes the following recommendations:

  • Giving trustees the same powers in relation to trust property that a trustee would have if the property was owned by the trustee absolutely
  • Allowing trustees the power to determine what is income and capital for the purposes of distribution to allow them to invest assets without regard to whether the return is of an income or capital nature
  • Providing Public Trust with a role to carry out official administrative procedures and to provide advice, including to issue vesting certificates, confirm the removal of an incapacitated trustee and to oversee the retirement and replacement of sole trustees
  • Confirming that a trustee’s indemnity cannot be limited or excluded by the trust deed
  • Requiring companies, when acting as trustees, to clearly describe their status in all communications and contracts
  • Making directors of companies acting as trustees directly liable for trust liabilities in some circumstances, and
  • Requiring directors of a corporate acting as a trustee to have the same obligation to the beneficiaries as they would have had they, and not the company, been the trustees.

Court powers and jurisdiction

The Commission has recommended:

  • Statutory restatement of the rule in Saunders v Vautier (see footnote3) (where all the beneficiaries of a trust are adult and of sound mind can bring a trust to an end) regarding revocation and variation by beneficiaries, and the power of the court, following consideration of specified factors, to waive the requirement for consent of any person and approve a revocation, variation or re-settlement or any change to the scope or nature of the trustees powers
  • Extend the power of the court to review the exercise of a trustee’s discretion to a decision made under a power in trusts legislation or a trust deed
  • Extend the District Court’s jurisdiction under new trusts legislation to determine any proceedings where the amount claimed or the value of the property in issue is $500,000 or less, subject to the right of any party to give notice objecting to the proceeding being determined in that court and to have the proceeding transferred to the High Court, and
  • Extend the Family Court’s jurisdiction to make any orders and give any directions under new trusts legislation where the orders or directions are necessary to give effect to a determination of other proceedings properly before it.

General trust issues

On a more general note, the Commission has also proposed:

  • Replacing the Perpetuities Act 1964 and the rules against perpetuities and remoteness of vesting with a rule limiting the duration of non-charitable trusts to 150 years
  • The Official Assignee should have standing to challenge a trust regardless of whether the bankrupt could have done so prior to the bankruptcy, and
  • Amending s182 of the Family Proceedings Act 1980 (which gives the court power to vary a marriage settlement trust on dissolution of marriage) so it covers de facto relationships in addition to marriages and civil unions.

Space limits greater detail about these proposals but we intend to cover the more contentious proposals in more detail in future issues of Trust eSpeaking. If you would like to talk to us on any aspect of your trust or how these proposals may affect your trust, please don’t hesitate to contact us.

Footnote 3 =(1841) 49 ER 282; 4 Bea v 115 (Ct of Chancery)

DISCLAIMER: This article is true and accurate to the best of our and the author(s)’ knowledge. It should not be a substitute for legal advice. No liability is assumed by us or the author(s) or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are the views of the author(s) individually and do not necessarily reflect the view of this firm. This article may not be reproduced without prior approval from us and the editor.

Copyright, NZ LAW Limited. Editor: Adrienne Olsen. E-mail: Ph: 029 286 3650.

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