Contents

Chapter 12
Other powers of the court

Section 75 – Barring claims and future claims

RECOMMENDATION

R36 The new Trusts Act should:
(1) Include a provision (replacing section 75 of the Trustee Act 1956) under which a trustee may give notice to any claimant or potential claimant requiring the trustee to take proceedings within three months from the date of service; or to enforce the claim through the court.
(2) Provide that where a potential claimant on whom notice has been served fails to take proceedings, or fails to enforce the claim through the courts, the trustee may apply to the court for an order to have the claim barred.
(3) Provide that, as is currently provided in section 75, nothing in the new provision applies to any claim under the Family Protection Act 1955.

12.18Under section 75 the trustee may serve upon any claimant or potential claimant a notice requiring him or her to take legal proceedings (within three months from the date of service) to enforce and prosecute the claim through court proceedings. At the expiry of the notice period the trustee may apply to the court for an order barring the person’s claim. The claimant or prospective claimant must be served with the application seeking to bar the claim. The court may make an order barring the claim or allowing the trust property to be dealt with without regard to the claim.

12.19For the purposes of section 75, a claim or potential claim means any claim in respect of any estate or trust property or against the trustee personally where the trustee is entitled to be reimbursed out of the trust fund. The section can be used whether the claim is made under the Law Reform (Testamentary Promises) Act 1949 or as a creditor, next of kin, or beneficiary under the trust. Section 75 expressly does not apply to any claim under the Family Protection Act 1955.

12.20 Section 75 of the Trustee Act confers powers on a trustee for the dual purposes of facilitating the prompt distribution of an estate and also for managing claims that the trustee considers ill-founded. Where a trustee has received a claim but is not prepared to pay it or agree to a compromise with the claimant he or she can utilise section 75. Also, where the trustee anticipates a claim that has not been made yet he or she can use section 75 to give notice to the prospective claimant.

12.21There is no question that the provision must be retained. Except for an update of the language and drafting style, the Commission recommends that section 75 be re-enacted without change.

12.22 As briefly discussed in the Preferred Approach Paper we considered the suggestion by some submitters that it was inconsistent that section 75 extended to claims under the testamentary promises legislation but not to Family Protection Act claims.276 As noted in that paper, our view is that the Family Protection Act differs from the testamentary promises legislation in that it has more of a social welfare intent rather than the semi-contractual nature of testamentary promises claims. Further, people cannot contract out of it, which we consider means that there is less of a case for allowing the barring of Family Protection Act claims. We have consequently not recommended any change to this aspect of the provision.
12.23In the Preferred Approach Paper the Commission also decided to “test the waters” on an alternative process for barring small value claims without involving the courts.277 Our concern was that the expense and time involved in applying to the court means that it is not worthwhile for trustees to apply to bar small claims. However, such outstanding claims impede a final distribution of the trust assets and thus cause practical difficulties. We therefore proposed a simplified procedure involving an application to the Public Trust where a claim was under $15,000 and proceedings had not been commenced to establish or enforce the claim. Under the proposed small claims process the trustee would still have been required to give three months’ notice to prospective claimants. However, if proceedings were not commenced by the prospective claimant by the expiry of that period, the trustee would have applied to the Public Trust for a certificate barring the claim. The trustee would then have been free to deal with the trust property disregarding the claim.

12.24While there was some support for a simplified process, there was general opposition to proposals to expand the role of the Public Trust in this and some of the other areas. Submitters considered that this and other roles of its kind proposed elsewhere in the Preferred Approach Paper were quasi-judicial in nature, and that it would not be appropriate given the Public Trust’s involvement in the market for it to undertake these types of functions. In the face of widespread opposition from practitioners and others in the trust sector we have decided not to pursue the small claims process. The concerns of submitters and our modified proposals in respect of the Public Trust are discussed in chapter 15.

276At [11.38].
277At [11.40].