The New Zealand Courts are making it very clear that they expect certain standards to be observed in the investment and administration of Trust assets and (where applicable) trust liabilities or potential liabilities. If the standards are not maintained, then the trustees can be held liable.
In 2009 the Law Commission was asked to review the Trustee Act 1956 and trust law generally. In September 2013 they tabled a report in Parliament, Review of the Law of Trusts: A Trusts Act for New Zealand (R130), which was preceded by six issue papers. At the heart of the report is the recommendation for the introduction of a modern and comprehensive Trusts Act to replace the outdated Trustee Act 1956 – keeping New Zealand Trusts in step with the times.
The main points addressed are:
- setting out the characteristics of a trust and how a trust is created;
- setting out the duties of trustees;
- modernised trustee powers provisions;
- a modernised, flexible approach to investment;
- improved procedures for the appointment and removal of trustees;
- more comprehensive and useful provisions on the variation and revocation of trusts;
- a refined approach to the power of the courts to review the actions of trustees; and
- the replacement of the rule against perpetuities and Perpetuities Act with a new rule limiting the maximum duration of a trust.
Essentially the 59 year old Trustee Act is not in step with how trusts are now being used. Over the past 20 years the use of trusts has grown steeply and the current estimate is that New Zealand has now somewhere between 300,000 and 500,000 trusts operating. Although the New Zealand Government agrees that there is need for a new Trusts Act it has called for further research on the implications of the new Act on existing Trusts and work still is needed on many of the Law Commissions recommendations.