2.26The Commission is convinced that the Trustee Act must be replaced with a new Act. As discussed above, trusts are a core part of New Zealand’s legal infrastructure. There is, therefore, a strong case for ensuring that trust law is in good working order. New legislation is needed in order to achieve this for the following reasons:
2.27Furthermore, as we discuss below, the reforms we recommend are in line with moves from relevant jurisdictions throughout the Commonwealth towards updating and replacing trusts legislation.
2.28In our view it is vastly preferable that a complete new Act is introduced than that the Trustee Act is amended. We are recommending significant changes. The scope of issues that we recommend should be covered by the new Act is much broader than the current Act. Most sections of the Trustee Act would need to be totally rewritten and the structure of the Act would need to be revised.
2.29Throughout the Report we have carefully considered how a new Trusts Act would affect existing trusts. Our changes to the administrative and mechanical provisions of the Trustee Act will be of considerable benefit to existing as well as to new trusts. We have sought throughout to develop reforms that will make the administration of trusts more straightforward. We have seen the current dependence on applications to the High Court as the sole way of remedying problems and resolving disputes as a hindrance to good trusts infrastructure. We are making several recommendations in order to build a more cost-effective, efficient, accessible framework for trusts. This includes modernised, workable processes for remedying difficulties without the resort to court, a supervisory role for the Public Trust in some of these processes, greater opportunity to use alternative dispute resolution and, where a court decision is necessary, a broader ability to have a matter resolved in the District Court and in some circumstances, the Family Court.
2.31One of the important roles of the Trustee Act is to provide administrative procedures to deal with difficulties not foreseen by the trust drafter at the time of formation. Provisions of this nature currently in the Act include the ability to appoint a trustee where there are no remaining trustees, or to allow variation of the terms of a trust. These provisions are not only important for particular trusts that require help but are also central to the integrity of the institution of the trust itself, which depends on such procedures being available if necessary. It is our view, and the view of many who we have consulted, that the procedures provided in the Trustee Act are inaccessible or inapplicable in situations where accessible and applicable law is most needed. These opaque or unsuitable procedures lead to increased costs for trustees and beneficiaries through inefficient trust administration.
2.35Thus, drafters not only need to customise the trust with the settlor’s particular arrangements, but also set out basic and common understandings of trusts. In addition, drafters have to exclude the operation of doctrines that almost everyone concludes should no longer be part of our law, and essentially write in doctrines that almost everyone considers ought to be part of the underlying law. Our view is that a new Trusts Act ought to do this for all trusts.
2.36The recommendations in this Report minimise or avoid the inefficiencies resulting from the problematic and outdated default settings. We propose that the new Trusts Act contain defaults that are in line with modern trust law conventions, including modern deed drafting. This would simplify and streamline the process of drafting trust deeds and reduce the complexity of trust documents. The recommended provisions reflect modern ways of doing business and managing personal affairs. A complete new Act would be drafted in plain English, refer to modern concepts and would be structured in a logical, easy-to-follow manner.
2.39The current inaccessibility of key parts of trust law and the resultant lack of understanding about trusts can lead to further problems. If settlors and trustees are confused or unclear as to the nature and effect of settling a trust, and their obligations, there is a greater risk of trusts being improperly administered. This can increase the likelihood of disputes and litigation between settlors, trustees, and beneficiaries.
2.40The new Act would aim to remove some of the mystery of trust law by setting out basic principles in the Act. The new Act would draw together key parts of trust law that are presently only accessible in case law. Including the core characteristics of the trust and the duties of trustees would strengthen the common understanding of the institution of the trust and provide guidance to individual trustees who need to understand, without reference to large tomes or compendia of cases, what their basic obligations as trustees are. The clarification the new Act would provide as to the nature of trusts, the duties of a trustee, and processes for revocation and variation, should provide more certainty and minimise the potential for disputes and litigation on these matters. It would also help to maintain public confidence in the institution of the trust. The new Act would be a much more complete source of the law applying to trusts than is the current Trustee Act.