6.24 A delegation under section 31 of the Trustee Act enables the substitution of a trustee by another person who can take over their duties, powers and discretions where the trustee is leaving or is about to leave New Zealand, or expects to be absent from New Zealand from time to time, or is or may become temporarily incapable of performing his or her duties on account of physical infirmity. Unlike an agent under section 29, who can only fulfil certain powers of the trustee, a delegate can take the trustee’s place in exercising all of the trustee’s duties, powers and discretions.
6.27The proposals in the Preferred Approach Paper were generally well received by submitters. However, there was considerable comment from submitters regarding the details of the proposals, which have now been given further consideration.
6.28The comment was made that having a default delegation provision is incongruous with a default duty of trustees to act personally, as had been expressed in the Preferred Approach Paper. We have adjusted the wording of the default duty recommendation by stating that the default duties can be altered by statute to address this (R2(1)). There was also concern that beneficiaries could be left in a position of having no redress. However, delegates cannot exclude liabilities to any greater extent than trustees and would have the same responsibility and liability as trustees.
6.29Some submitters were concerned about the effect of the proposals with regard to duration and notification where an instrument of delegation is executed but would only take effect when the circumstances in which delegation is allowed exist. We understand that this is a fairly common way of setting up delegations. It is a sensible way for trustees to protect against unforeseen circumstances that prevent them from carrying out their role. We would not want new legislation to prevent or inhibit this where the instrument of delegation is executed more than 12 months in advance of delegation or because notification did not occur when the instrument was executed. The new legislation should take account of this type of delegation instrument. Our recommendation uses wording similar to that in section 25 of the Trustee Act 1925 (UK). This means that the rules regarding duration and notification take effect only once a delegation takes effect and each time that instrument takes effect.
6.30Several submitters have questioned the current position with regard to whether a trustee may delegate to their only co-trustee. At present such a delegation may only occur where the co-trustee is a statutory trustee corporation. It has been suggested that it should be possible to delegate to a sole co-trustee if that trustee is any corporation. We are not recommending a change to this position at present, but this may be something that will be reconsidered by the Commission in the corporate trustee review.
6.31Submitters favoured the introduction of a notification requirement when the power to delegate is exercised. However, some have suggested that the settlor has a right to be notified. We do not think that it is necessary for a trustee to notify the settlor of a delegation because the purpose of the delegation is to ensure that the trust can continue to be enforced, a role that is carried out by the beneficiaries rather than the settlor. Other submitters questioned the way of determining which beneficiaries should be notified when a sole trustee delegates if there are no persons with the power to appoint and remove trustees. We proposed that competent adult beneficiaries or a reasonably representative sample of beneficiaries should be notified. It was suggested that the former may no longer have an ongoing role with the trust and that the latter was too vague a category to be useful. The purpose of the proposed requirement was to ensure that at least somebody knows when a sole trustee’s role has been delegated to another. We do think there is a legitimate concern that the notification requirement could be overly onerous, so we have added the proviso that only what is reasonable in the circumstances is required. It was pointed out that there may be a problem when a trustee is incapacitated and unable to carry out the notification requirement. To address this situation we now recommend that the delegate be required to do the notification.
6.32Some submitters questioned whether the Public Trust should have the role of being the delegate when a trustee is unable or unavailable to make a decision. However, we are comfortable that the Public Trust is an appropriate body to have this role. This type of role is clearly akin to the types of statutory roles that the Public Trust already has under other legislation. We discuss the roles of the Public Trust more generally in chapter 15.