The Law Commission’s fifth Issues Paper in the review of the law of trusts discusses the jurisdiction of the courts, other dispute-resolution mechanisms, the particular features of and possible need for a response to trading trusts, and regulatory mechanisms that could apply to trusts and trust advisors.

The Issues Papers published as part of this review are:

  • the history and nature of trusts, recent developments in the structure of trusts, and the scope and framework of a revised Trustee Act (released November 2010);1
  • problems with the use of trusts, including issues relating to relationship property, creditor protection, and sham trusts (released December 2010);2
  • the Perpetuities Act 1964 and the revocation, variation and resettlement of trusts (released May 2011);3
  • trustees’ duties and liabilities, including indemnity provisions and exemption clauses, and the office of trustee and trust administration, including the capital and income distinction, court supervision of trusts, and trustees’ powers (such as delegation, investment and insurance) (released June 2011);4
  • court jurisdiction, trading trusts, and other issues, including registration of trusts, dispute resolution for trusts and the regulation of trust advisers (this paper).

Part 1 of this Issues Paper examines the various powers the courts have in respect of trusts and trustees. There is a public interest in ensuring the effective, prudent and honest management of trusts. The courts have a crucial role in this context, and accordingly, exercise a number of powers, both facilitative and regulatory. The Commission has broken its discussion on the role of the courts down into three broad topics, addressed in separate chapters. Chapter 1 considers the High Court’s general supervisory jurisdiction in respect of trusts. The Commission examines the 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.

Chapter 2 then considers the powers the High Court currently exercises under the Trustee Act. To avoid repetition with earlier Issues Papers, the Commission focuses on the Court’s function and discusses only those provisions that have not been examined in earlier Issues Papers. Chapter 3 examines the equitable jurisdiction of District Courts in respect of trusts. This chapter considers whether District Courts should be able to exercise some (if not all) of the powers under the Trustee Act within their jurisdictional limits. It also briefly considers whether the Family Court should be able to exercise any of the powers under that Act.

Part 2 discusses alternative methods to the courts for resolving trust disputes and making decisions. Chapter 4 outlines the argument for introducing a new mechanism for trust dispute resolution and decision-making. It examines the options of an ombudsman, tribunal and commission. Chapter 5 discusses how alternative dispute resolution methods can be put to greater use in the context of trusts.

Part 3 focuses on a particular type of trust used in New Zealand – trading trusts. Chapter 6 examines the concept of the trading trusts and the Commission’s recommendations regarding them in a previous reference. It provides an overview of the issues relating to trading trusts. Chapter 7 considers the interaction of trading trusts with creditors and raises possible options for how problems relating to creditors could be addressed. Chapter 8 raises issues and options arising from the effect of trading trusts on beneficiaries, as well as looking at particular problems relating to insolvent corporate trustees and the definition of a trading trust.

Part 4 discusses placing greater regulatory requirements on trusts. Chapter 9 discusses possible problems with the current lack of regulation of trusts in New Zealand and looks at the ways in which trusts are regulated overseas. It raises several options for regulation of trusts, including registration and reporting requirements. Chapter 10 considers whether there is a need for additional regulation of those providing services to trusts. It examines existing regulation and also looks at the more comprehensive regulatory regimes some overseas jurisdictions have adopted in this area.

Law Commission Review of Trust Law in New Zealand: Introductory Issues Paper (NZLC IP19, 2010) available at <>.

Law Commission Some Issues with the Use of Trusts: Review of the Law of Trusts Second Issues Paper (NZLC, IP20, 2010) available at <>.

Law Commission Perpetuities and the Revocation and Variation of Trusts: Review of the Law of Trusts Third Issues Paper (NZLC IP22, 2011) available at <>.

Law Commission The Duties, Office and Powers of a Trustee: Review of the Law of Trusts Fourth Issues Paper (NZLC IP26, 2011) available at <>.