Chapter 1 - Jurisdiction of the High Court

Reviewing trustees under section 68

In addition to the jurisdiction to review discussed above, the High Court also has a statutory power of review where trustees are exercising a power conferred by the Act rather than a discretion under the deed of trust. The grounds on which the court will intervene and set aside a trustee’s decision differ from those discussed above.

Under section 68 a beneficiary with an interest in trust property may apply to the court for a review if:

(a)he or she is aggrieved by any act or omission or decision of a trustee exercising any power conferred by the Act; or

(b)he or she has reasonable grounds to anticipate that an act or omission or decision of a trustee will aggrieve him or her.

The court may make any order that is required in the circumstances. In the case of an anticipated act, omission or decision the court may give directions. Injunctions have, for example, been granted to restrain sales in breach of trust or at less than commercial value to protect the interests of beneficiaries in some cases.40 Where the court is asked to make an order that may prejudicially affect the rights of a person who is not a party to the proceedings, it may direct that the person be made a party to the proceedings.

A number of issues have arisen over the scope and application of section 68.

Applicant must be “beneficially interested”

The court has jurisdiction to review a decision of a trustee under section 68 only where an applicant has a beneficial interest in the trust fund.41 The specific wording in the section is “any person who is beneficially interested in any trust property”. One important issue, therefore, is whether discretionary beneficiaries are able to apply for a review under section 68. Professor Rickett says that it is arguable that discretionary beneficiaries cannot apply under the section.42 Garrow and Kelly expresses the view that it is likely that a person with contingent or vested interests (whether indefeasible or subject to divestment) would be considered “beneficially interested”.43

The Commission considers that clarification as to who may bring an application under the provision would be desirable. The phrase “any person who is beneficially interested in any trust property” is used also in section 67 of the Act to describe one of the classes of persons who may apply to the court for an order appointing a new trustee. Clarification as to who is beneficially interested is therefore equally important to the correct interpretation of section 67.


Onus on trustees to defend their actions

When reviewing a trustee’s actions under section 68, the court may require the trustee to appear before it to “substantiate and uphold” the action being reviewed.44 In one of the very few cases on the provision, Rossiter v Wrigley, Doogue J interpreted this to place the obligation on the trustee to defend their actions rather than on the applicant to show the actions were unreasonable.45 Professor Rickett says that as it has been interpreted and applied in Rossiter, “the applicant may need to satisfy no more than the minimal standing requirement, whilst the trustee then has the heavy onus of showing that he has not breached a duty or standard”.46 He contrasts this with the approach taken by the courts in Queensland under a similarly worded legislative provision.47 In Queensland the onus has been clearly placed on the applicant to show that the trustee’s actions are unreasonable before the trustee will be required to appear to defend their actions.48 Professor Rickett has argued that the Queensland approach is preferable because, as a matter of policy, powers and discretions are given to trustees, and the courts ought to be wary of exercising those powers and discretions differently.49 The Commission is interested in comment on this issue and whether the provision should be amended to place the onus on the applicant to show the trustee has breached the appropriate standard of conduct required of trustees.

What should the standard for review be?

The provision is silent on the appropriate standard to be applied to trustee actions. In Rossiter v Wrigley the High Court determined that the appropriate standard for review was one of determining on the evidence whether the trustees “acted reasonably or not in the steps that they took”.50 Professor Rickett raises this point as a further question that needs to be resolved.51 Should the appropriate standard for review under the section be whether the decision was “reasonable”, or should it be a stricter one, such as the whether the decision was one that was “reasonably open” to the trustees in the circumstances?

This question raises quite a fundamental issue of the threshold that should apply before the courts interfere with the exercise of discretions entrusted to trustees. Section 68, depending on the applicable standard, is potentially very broad.


Only powers granted by the Act

The power of review under section 68 only extends to acts, omissions or decisions of the trustee under a power granted by the Act. It does not extend to powers given to trustees by the trust deed or by any other Act. Where the alleged act or omission arises from the operation of the trust deed, section 68 has no application.52 Where the trustees are exercising specific powers and discretions conferred by the trust deed, as already discussed, the traditional attitude of the court has been not to interfere with the exercise of those powers or discretions unless the trustees have acted in bad faith or outside the scope of their powers (ultra vires).

The court’s power of review under section 68 is expressly limited to powers granted by the Act, but what happens where decisions involve a combination of powers under the Act and under a trust instrument? Also, what if the trust deed gives the trustee a specific power that is also a default power given to trustees generally by the Act? It would seem to be unclear whether an exercise of that power is reviewable under section 68 or not. Can trustees simply avoid review under the Act by stating clearly at the time they exercise such a power that they are exercising it under the trust deed?

This issue has not been considered by the courts in New Zealand. However, it has arisen in a Western Australian case. In Wendt v Orr the Supreme Court of Western Australia accepted that if the trustee is exercising a power only conferred by the trust instrument, the Western Australian equivalent of section 68, section 94 of the Trustees Act 1962-1972 (WA), could not be invoked. However, the Court considered that where the power that was being exercised appears in both the Act and in the trust instrument, the Court could review the exercise of the power under the provision.53 Whether the New Zealand courts would take the same approach is unclear. The authors of Garrow and Kelly express the more traditional view that if a power is given specifically to trustees by the trust document, then, so long as the power is exercised in good faith and not ultra vires, the courts would be reluctant to interfere, even if the terms of the power are similar to those of a statutory power.54

Should section 68 be extended to cover trustee decisions under trust instruments? A significant advantage of this approach would be to introduce a consistent standard that would apply to the review of the exercise of all powers by trustees. Such an extension would largely displace review by the courts under their supervisory jurisdiction. In Queensland, their equivalent provision, section 8 of the Trust Act 1973 (Qld), not only covers the exercise of any power conferred by their Act but extends to “the instrument, if any, creating the trust”.

However, if the provision was extended to cover trustee decisions under trust instruments, then consideration must also be given to the question of the appropriate grounds of review to be applied to a trustee’s actions. Instead of the test being one of reasonableness it should probably be a higher one, such as whether the decision was one that was reasonably open to the trustees in the circumstances. Alternatively, the more traditional grounds for reviewing the exercise of a trustee’s discretion the courts have developed (bad faith and ultra vires) might be considered to provide a better test. There is, in the Commission’s view, a legitimate concern that extending review under section 68 to all trustee decisions and actions could, if the grounds are not also appropriately limited, result in excessive intervention with trustees’ decision-making. That would have the potential to undermine the role of trustees and may also encourage trustees to take an unnecessarily defensive approach to their role.

Kelly, Kelly and Kelly Garrow and Kelly, above n 11, at 739.

New Zealand Guardian Trust Company Ltd v Siemonek [2007] NZCA 494, [2008] 2 NZLR 202 at [38] – [41].

CEF Rickett “Reviewing a Trustee’s Act, Omission or Decision under Section 68 of the Trustee Act 1956” [1990] NZ Recent Law Review 69.

They cite Johns v Johns [2004] 3 NZLR 202 (CA) at [49] in support of their view of what beneficially interested might include; see Kelly, Kelly and Kelly Garrow and Kelly, above n 11, at 743.

Kelly, Kelly and Kelly Garrow and Kelly, above n 11, at 740.

Rossiter v Wrigley HC Hamilton A105/80, 3 July 1989.

Rickett, above n 42, at 80.

Trustee Act 1956 (Qld), s 8.

Rickett, above n 42, at 80.


Rossiter v Wrigley HC Hamilton A105/80, 3 July 1989 at 33.

Rickett, above n 42, at 80.

Re Havill [1968] NZLR 217 (SC) at [223] and Re WEL Energy Trust  [2002] 3 NZLR 826 (HC) at [36].

Wendt v Orr [2004] WASC 28 at [20]–[31], cited in Kelly, Kelly and Kelly Garrow and Kelly, above n 11, at 740.

Kelly, Kelly and Kelly Garrow and Kelly, above n 11, at 741.