Contents

Chapter 13
Jurisdiction of the courts

Family Court jurisdiction

RECOMMENDATION

R41 Where the Family Court has jurisdiction under section 11 of the Family Courts Act 1980 to hear and determine proceedings:
(1) The Family Court should be able to make any order or give any direction available under the new Trusts Act during those proceedings where the Court considers such order or direction necessary to:
(a) protect or preserve any property or interest until the proceedings before the Court can be properly resolved; or  
(b) to give proper effect to any determination of the proceedings before the Court.
(2) Where the parties consent, the Family Court should also be able to make any orders under the new Trusts Act to resolve any closely related dispute or issue between the parties where this is necessary or would assist the resolution of the substantive proceedings between the parties.
Note
The Family Court’s jurisdiction under the new Trusts Act would not be subject to financial limits.

Proceedings involving trusts before the Family Court

13.18The Family Courts Act 1980 established the Family Court as a division of the District Court. Section 11 of that Act gives the Family Court jurisdiction for a wide variety of matters affecting couples, families and children.

13.19The Family Court is at times required to consider aspects of trust law when they arise in proceedings under the Family Protection Act 1955 or the Property (Relationships) Act 1976. Some relationship property matters and other family proceedings that come before the Family Court involve components of trust law. In proceedings under the Property (Relationships) Act, the Family Court may make some ancillary orders under section 33(3) of that Act in respect of trusts to give effect to decisions under the Act. Section 33(3) has been interpreted as enabling the Family Court to “adopt one or more of a number of means of dividing the property so as to give effect to its conclusions as to entitlement”.287 Section 33(3)(m) empowers the Family Court to vary the terms of an inter vivos trust, but not a testamentary trust.
13.20 Property settled on a trust by one of the partners to the relationship will only come within the Court’s jurisdiction if the disposition to the trust was a defeating disposition caught by section 44 of the Property (Relationships) Act and can be set aside, or where one or both of the relationship partners has a property interest (that is a vested or contingent interest) in the trust.288 In such cases, the Court can make orders dealing with the trust assets, including orders varying the terms of the trust under 33(3)(m).289 For example, the Court may vary the terms of the trust to confer on a spouse or partner a vested interest or remove a contingency, or it could vary the final distribution date to the date of judgment.290

13.21These ancillary powers go some way to allowing the Family Court to deal with trust law components of cases properly before the Family Court, but do not allow the court to make many of the orders or give the types of directions necessary to effectively resolve all the issues before it. In some situations this means that the parties need to make subsequent applications to the High Court to address the trust matters that are intertwined with relationship property.

13.22Given our recommendation that the District Court should have jurisdiction under new trusts legislation, we think it is difficult to argue that the Family Court, which is a division of the District Court, should not also have those powers. We see no reason why the Family Court should not have the same powers under new trusts legislation to better deal with matters properly before it and reduce the need for parties to bring subsequent proceedings in the High Court. Again our approach is that the court should be provided with the tools necessary to exercise its jurisdiction.

13.23Although submitters responding to the Preferred Approach Paper did not generally favour the Family Court having jurisdiction, over the course of the project submissions have been quite evenly divided on this issue. We have taken the differing views of submitters into account in formulating our recommendations.

Ancillary orders 

13.24We are recommending that the Family Court should be able to exercise the powers and make orders under new trusts legislation as an ancillary jurisdiction, to provide a remedy where a matter is already within its jurisdiction. The Family Court already has the ancillary jurisdiction of the District Court under section 41 of the District Courts Act to give equitable relief where a matter is within its jurisdiction, but not jurisdiction to hear a cause of action founded in equity. Our recommendation does not give the Family Court substantive equitable or civil jurisdiction. Submitters were concerned about this issue so we wish to make it clear that, subject to the recommendation concerning closely related matters in R41(2), the Family Court could only exercise powers and make orders where the proceedings in question are already within its jurisdiction.

13.25We recommend that the Family Court should be able to make orders under the new Act where these are necessary during the proceedings to protect or preserve any property or interest that is the subject of those proceedings until the issues are fully resolved by the court. Our recommendation would allow the Family Court to, for example, make an order removing one trustee and appointing (even on a temporary basis) a new independent trustee where this is necessary to manage serious deadlock, hostility between trustees, ascertain the nature of the trust assets, or to preserve those assets until the property claims of the parties can be properly resolved.

Closely related matters

13.26In addition we consider that there would be merit in the Family Court also being able to make orders, with the consent of the parties, to resolve a closely related dispute or issue between the parties where this is necessary, or would better promote the resolution of the substantive proceedings between the parties. The intention here is to allow the parties to proceedings properly before the Family Court to consent to the court resolving closely related trust matters that may otherwise fall beyond its jurisdiction. Parties may wish to do this where those matters are so closely linked to the substantive proceedings that leaving them unsettled impedes the effective and fair resolution of the substantive proceedings. The recommendation would also allow the parties to avoid the need for a subsequent hearing to deal with closely related trusts matters that otherwise would fall beyond the Family Court’s jurisdiction.

13.27Where the parties do not consent, or a Family Court judge determines that there is not sufficient nexus between the related trusts matter and the substantive family proceedings, then the parties would need to have those matters resolved in either the District or High Court.

Transfer to High Court to be more readily available

13.28At the time of writing the Family Court Proceedings Reform Bill was before the House. That Bill includes a provision amending the Property (Relationships) Act to make it easier for parties to have relationship property proceedings transferred from the Family Court to the High Court.291 The new provision provides that a Family Court Judge may order the transfer of proceedings to the High Court if satisfied that the High Court is the more appropriate venue for dealing with the proceedings. When deciding whether the proceedings should be transferred the Judge should consider, among other issues, the complexity of the issues in question in the proceedings and also whether there are other proceedings before the High Court between the parties involving related issues. 
13.29The new provision sets a lower threshold for transferring proceedings than the current provision. At present the Judge must be satisfied that the High Court is the more appropriate venue because of the complexity of the proceedings.292 The amendment would likely mean that relationship property cases with trust issues can more readily be consolidated with other trust proceedings in the High Court.

13.30However, making transfer more readily available does not dispense with the need for the Family Court to be able to make orders under the proposed new Trusts Act. In some cases, and for a range of good reasons, the Family Court remains the most appropriate forum. We consider it is still important for the Family Court to have jurisdiction to make any orders that are necessary to effectively deal with all issues properly before it.

287Coxhead v Coxhead [1993] 2 NZLR 397 (CA) at 408.
288Substantive orders cannot be made in respect of trust assets, unless s 44 applies, if a spouse’s or partner’s interest in the trust is merely a discretionary interest because the spouse or partner has no beneficial ownership in the assets in trust. He or she merely has a hope or expectation until the trustees exercise their discretion in the beneficiary’s favour: see Nation v Nation [2005] 3 NZLR 46 (CA) and the discussion in Nicola Peart (ed) Brookers Family Law — Family Property (online looseleaf ed, Brookers) at [PR33.12].
289At [PR33.12].
290At [PR33.12].
291Family Court Proceedings Reform Bill 2012 (90-2), cl 95.
292Property (Relationships) Act 1976, s 22(3)–(4).