Contents

Chapter 12
Other powers of the court

Section 76 – Distribution of shares of missing beneficiaries

RECOMMENDATION

R38 The new Trusts Act should re-enact section 76 of the Trustee Act 1956 (under which the court has broad powers to approve distributions by trustees where beneficiaries cannot be traced). The following changes should be made to the advertising requirements in the provision:
(1) Trustees should be required to give notice advertising for potential beneficiaries in a manner that is likely to bring the notice to the attention of potential beneficiaries.
(2) Trustees may seek directions from the court where there is doubt as to what notice advertising for potential beneficiaries is appropriate.

12.34Section 76 provides the machinery for ascertaining the existence or whereabouts of unknown or missing claimants. It is a long and impenetrable provision that essentially sets out a process for trustees to follow where beneficiaries cannot be ascertained. Under it the court may give directions where a trustee is uncertain about what advertisements to place to notify potential beneficiaries.

12.35The court also has broad powers under the section to approve distribution where beneficiaries cannot be traced. The process has been used in a few cases involving pension funds that have largely been distributed, but where a handful of outstanding beneficiaries cannot be located despite extensive efforts on the part of trustees. Where trustees obtain and comply with such directions they are protected against personal liability.

12.36Only a few submitters commented on this section. Most submitters considered the current section to be unnecessarily detailed and long. However, all agreed that there is a need for some means to deal with missing beneficiaries. Submitters also suggested that the provisions relating to advertising need to be future-proofed so that the new Act continues to be relevant over time. Rather than specifying where and how trustees should advertise, the section should simply require trustees to make such enquiries and give notification (whether in a newspaper or a website or any other way) as the trustee considers necessary to bring the matter to the attention of any potential beneficiary. We agree and have recommended the provision be changed in this way.

12.37A few submitters responding to our original discussion on section 76 in the Fifth Issues Paper suggested that applications to the High Court for directions on advertising for missing beneficiaries could largely be avoided if trustees and their advisers were encouraged to seek advice from the Public Trust, other trustee corporations or lawyers with experience in this type of work. Some noted that trustee corporations have had experience in locating missing beneficiaries. The Public Trust in particular deals with a number of intestate estates and consequently has processes in place to deal with the identification of widely dispersed families.

12.38We agreed that it would be useful to include a mechanism for trustees to seek advice as an alternative to seeking directions from the court. In the Preferred Approach Paper we proposed that trustees should be able to seek advice from the Public Trust where there was doubt as to what notice advertising for potential beneficiaries was required.280 Under our proposal the new provision replacing section 76 would have allowed trustees to rely on the Public Trust’s advice and would have protected trustees who acted in reliance on such advice from liability. Trustees could, if they preferred, seek directions from the court, as an alternative to seeking advice from the Public Trust.

12.39However, most submitters responding to this and other proposals in the Preferred Approach Paper that conferred new roles on the Public Trust, were strongly opposed to an expansion of that entity’s functions into the advisory area. There was concern that the Public Trust was a market participant and should not have a statutory advantage over competitors in any advice-giving role.

12.40 We have taken these concerns into consideration and have reviewed our proposal. We have determined that it is not necessary for the new Act to expressly refer to the option of trustees seeking advice from the Public Trust or indeed from any other trustee corporations or lawyer with experience in this type of work. A prudent trustee, who was uncertain what notice advertising for potential beneficiaries should be given, would seek advice. Having reviewed the matter we consider that the proposed provision is unnecessary as a trustee is free to seek advice from the Public Trust anyway. It is probably also better to let trustees determine for themselves which potential adviser they wish to approach for this type of advice in all the circumstances.

12.41Provided that a trustee has made a conscientious effort to bring the matter to the attention of potential beneficiaries and, where there has been doubt about what was needed, has taken proper advice, whether from a trustee corporation or from any other similarly experienced person, the trustee is likely to be released from liability where he or she has distributed funds on the basis of the information known.

280Preferred Approach Paper, above n 273, at [11.60].