Chapter 4 - A new mechanism for trust disputes resolution

Is a further mechanism for trustee accountability needed?

Some commentators consider that the existing arrangements for the supervision of trustees are no longer adequate given the rapid growth in the number of trusts in New Zealand in the last 20 years and the inevitability that problems will arise with some of these.111 The fiduciary duties of trustees in a trust relationship are meaningful only if they can be enforced.

There are two main problems that this discussion of new dispute resolution mechanisms for trusts seeks to address. First, the High Court is relatively inaccessible as the only dispute resolution decision-maker for trusts. As discussed in chapter 3, District Courts are not able to exercise powers under the Trustee Act 1956 (“the Act”) so do not have the jurisdiction to, for instance, appoint a new trustee or replace an existing trustee,112 authorise dealings with trust property,113 authorise variations of the trust,114 review the acts and decisions of a trustee,115 or relieve a trustee from personal liability.116 For the majority of situations requiring external intervention to resolve a problem with a trust, it is necessary for the case to go to the High Court.

In order for court proceedings to be warranted and to have a reasonable chance of success, the complaints against trustees must be at the most serious end of the spectrum. In a case of serious default by a trustee, it will be possible for a beneficiary to obtain a remedy through the court, although it is likely to involve expense and delay. Chris Kelly suggests that where breaches of trust are less serious, involve less financial loss, or the beneficiary simply wants to warn a trustee before the trustee goes too far, there are few appropriate, satisfactory solutions available.117

A second problem is that trust disputes are often not well suited to litigation, but beneficiaries have no other way of holding trustees to account. Trust disputes can often involve private matters and family relationships. Litigation can be a heavy-handed response to these types of issues. The adversarial approach is unlikely to improve, and may impair, family relationships.

Kelly considers that in this context the exclusive jurisdiction of the High Court in some trust matters is of increasing concern.118 He argues that the system needs a low key, early intervention warning and monitoring mechanism. Early intervention is preferable to allowing minor disputes to escalate. It allows more face-saving compromises and can limit damage to family relationships.119

However, it may be preferable to improve access to the courts, to clarify the courts’ powers and to improve the processes in the legislation so that there is less need to go to court. The cost of any alternative mechanism may be too high to be commensurate with the likely scale of the problem it will address.

Chris Kelly “Supervision of Trustees: Enforcement or Problem Solving” (LLM Thesis, Victoria University of Wellington, 2009) at 1 [Supervision of Trustees].

Trustee Act 1956, s 51.

Trustee Act 1956, s 64.

Trustee Act 1956, s 64A.

Trustee Act 1956, s 68.

Trustee Act 1956, s 74.

Kelly Supervision of Trustees, above n 111, at 104.

Ibid, at 108.

Ibid, at 106.