Contents

Summary of recommendations

Chapter 14 – Resolving disputes outside of the courts

R42 The new Trusts Act should:
(1) Clarify that trustees have a power to use alternative dispute resolution (ADR) to settle an internal dispute (between trustees and beneficiaries) or an external dispute (between trustees and third parties), other than a dispute as to the validity of all or part of a trust. This should be a default power that applies unless explicitly excluded or modified by the terms of the trust.
(2) Make any provision in the terms of a trust that requires the settlement of a dispute by ADR enforceable, other than a dispute as to the validity of all or part of a trust.
(3) Give trustees a specific power to give future assurances of actions that have been agreed to as a part of an ADR settlement.
(4) Provide that trustees will not be liable to other parties for agreeing to the settlement if they acted honestly and in good faith while doing so.
(5) Provide that by virtue of this provision, an ADR settlement cannot override creditor priority rules as they affect creditors that are not party to the settlement.
(6) Provide that a beneficiary or trustee can make a request to the court that ADR be used to resolve a dispute rather than court proceedings and that the court can require ADR to be used. It should be open to the court to allow the costs of the mediation to be paid from the trust.
(7) Provide that the court can appoint representatives of unascertained and incapacitated beneficiaries, who may be other beneficiaries, who can agree to a binding ADR settlement on behalf of the unascertained and incapacitated beneficiaries, subject to the court’s approval of the settlement.