Trustee’s indemnity, corporate trustees and insolvency
Appointment of receivers for trusts
R46 The new Trusts Act should:
(1) Recognise the court’s jurisdiction to appoint a receiver of a trust, which could manage the trust property, on application or on its own motion.
(2) Provide that applications for appointment of a receiver of a trust would be heard only in the High Court.
(3) Specify the grounds on which a receiver may be appointed; who may act as a receiver; the powers and duties of a receiver; priorities of those involved; a process for terminating the receivership; and provision for the receiver’s fees to be paid out of the trust property.
Statutory recognition of a receiver for trusts
16.30The High Court currently has the ability to appoint a receiver in respect of trust assets under its inherent jurisdiction. This jurisdiction is rarely exercised, although there is a recent example from the High Court in Bank of New Zealand v Rowley. In the Preferred Approach Paper we proposed that trust legislation should provide expressly for the appointment of a receiver or liquidator of trusts.
16.31Submitters were overall very supportive of including a mechanism for the appointment of a receiver for trusts in legislation. Submitters commented that this reform would make the ability to appoint a receiver more accessible and modern, to deal with a wider range of issues. In our view the jurisdiction should be confined to the High Court since it is the court that currently has the receivership jurisdiction for companies law.
16.32In order for the provision to be useful to creditors and others dealing with trusts, it will need to go beyond merely restating the availability of the court’s jurisdiction to appoint a receiver and will need to include further detail about the process. The recommendation has been expanded to specify the main elements of the scheme that submitters agreed will need to be included in legislation. At the same time, the flexibility of the jurisdiction is preserved so that the court can make orders that are appropriate to the particular case.
16.33The New Zealand Law Society submitted that the provision should limit the range of applicants to creditors, in the same manner as for other entities, rather than an open-ended scope for other parties to apply. However, the jurisdiction to appoint a receiver is broader than that for companies. It may be used when there is a risk to the trust property or there is a problem with a trustee or trustees, especially on a temporary basis. Accordingly it could be useful to permit applications by a trustee or beneficiary rather than confining it only to creditors.
16.34The Preferred Approach Paper also included a proposal to appoint a liquidator to liquidate the trust property. Submitters were divided over whether the legislation should include the ability to appoint a liquidator. Some submitters were in favour. Others opposed it on the basis that it was not appropriate to have a liquidator for trusts as a trust was not a legal person. One submitter considered that neither should be applicable to a trustee of a retail fund. There may also be a need for a statutory regime dealing with set-off under netting arrangements entered into by trusts. The Commission acknowledges that providing for a liquidator of trusts raises some complex conceptual and practical issues. In our view liquidation issues are better dealt with in a more comprehensive review of corporations as trustees, rather than in this general review. We intend, therefore, to revisit this issue in the corporate trustee review.
Application to existing trustsTop
16.35The recommended provision will enable applications to be made under it from the commencement of the Trusts Act.