Contents

Chapter 12
Other powers of the court

Section 66 – Power of court to give directions

RECOMMENDATION

R33 The new Trusts Act should provide:
(1) That any trustee may apply to the court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power or discretion vested in the trustee (replacing section 66 of the Trustee Act 1956).
(2) Whenever possible, a trustee should present to the court a proposed course of action or possible course of action regarding the matter on which the trustee seeks directions.
(3) Every application for directions should be served upon, and the hearing attended by, any person interested in the application or such interested persons as the court otherwise determines.
(4) For the avoidance of doubt:
(a) a court may refuse to provide directions if it would be more expedient for the issues to be addressed through a different form of proceedings;  (b) an application for directions under the section can only be made by a trustee for the time being of the trust in question; and  
(c) the court’s power to give directions under (1) does not restrict the ability of the trustee to apply to the court for a declaration as to the interpretation of the trust instrument.

12.3Section 66 of the Trustee Act provides that a trustee may apply to the court for directions concerning the trust property, the management or administration of trust property or the exercise of a power of discretion of the trustee. The section gives no further guidance.

12.4However, case law has established some parameters as to when the section should or should not be used. The section is intended to assist trustees facing a choice between two or more courses of action, either of which might expose the trust to risk. Further, section 66 should only be used in the following circumstances: when the facts are clear, agreed upon and fully disclosed to the court; when no breach of trust is alleged or questions of law or interpretation are at issue; and when the issue cannot be simply resolved through legal advice or the independent exercise of discretion.274 It is also established that the court should not go further than answering the questions posed. The courts have developed such parameters to prevent section 66 being used by overly-cautious trustees who should be exercising their discretion or seeking legal advice, or where alternative proceedings, such as breach of trust, would be more appropriate.

12.5The new Trusts Act will need to retain the power to apply to the court for directions. In the interests of ensuring that the replacement section’s meaning is clear on its face, we consider that the provision should include more detail about the types of circumstances for which directions may be sought and clarification about the availability of alternative proceedings. We do not think the revised section should go as far as detailing the case law principles that have been developed because it is desirable to have a relatively broad power of direction and for the courts to retain some discretion as to whether section 66 applies to the circumstances.

12.6Submitters who commented on section 66 generally considered that it would be beneficial to incorporate case law principles into legislation so that the purpose of the section is more readily apparent, although most warned that the legislation should not be too prescriptive and that the court should retain discretion. Our recommended revision balances these competing concerns.

12.7We also recommend the new provision clarify that only trustees can apply under the section, and should make it clear that this is only current trustees. We consider that this is unmistakeably the intention of the current section despite some inconsistency in the case law that has suggested that beneficiaries may apply for directions under section 66.

12.8Finally, we consider that it would also be helpful for the new provision to note the court’s ability under its supervisory jurisdiction over trusts to make a declaration on the interpretation of a trust deed. It should also state that the court may refuse to provide directions if alternative proceedings would be better.

274Noel C Kelly, Chris Kelly and Greg Kelly Garrow and Kelly Law of Trusts and Trustees (6th ed, LexisNexis, Wellington, 2005) at 711−715; Andrew S Butler “Trustees and Beneficiaries” in Andrew S Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 105 at 144.