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Part 5: The Court's role in regulating trusts

Home Insights Part 5: The Court's role in regulating trusts

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Contributed by: Nathaniel Walker and Fayez Shahbaz

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Published on: January 26, 2021


In our second-to-last article in the Trust Reform series looking at the issues you may be facing with the introduction of the Trusts Act 2019 (Act) on 30 January, we focus on:

  • the High Court's role which is to be preserved and enlarged; and
  • the new alternative dispute resolution (ADR) provisions which should provide trustees with greater comfort in making use of mediation and arbitration where appropriate.

The Act retains the High Court's central role as the supervisor of trusts, in a clarified and somewhat enlarged manner. The Act also provides a mechanism for trust disputes to be resolved by way of ADR processes. While that was already occurring, with many disputes resolved via mediation over the last decade in particular, the ADR provisions in the Act are intended to resolve some practical difficulties.

The High Court's role

The High Court retains its "unlimited" jurisdiction over trusts. It will be the forum to hear an expanded range of matters, including applications:

  • where the trustee decides to give no information to beneficiaries (s 54);
  • for the appointment of special trust advisers (s 74);
  • for the approval of indemnification (ss 83 and 84);
  • relating to the appointment and removal of trustees (ss 95, 109 – 111, and 114);
  • concerning the termination and variation of trusts (ss 124 – 125);
  • for review of trustee's act, omission or decision, with this power being extended (s 126);
  • for directions about trust property or the exercise of any power or performance of any function (s 133);
  • concerning allegations of breach of trust; and
  • relating to various other specific points (eg appointment of receivers).  

ADR processes

One of the stated purposes of the Act is to provide mechanisms to resolve trust-related disputes[1] which the Act looks to achieve by making ADR more accessible to trustees and beneficiaries.
The Act divides ADR process (without distinguishing between different types) into:

  • internal matters: which relate to matters where the parties are either trustee vs trustee or trustee vs beneficiary; and
  • external matters: which relate to matters where the parties are a trustee vs one or more third parties.

If the trust deed is silent on ADR processes, then the trustee may refer either internal or external matters to an ADR process. Each party to the dispute must – of course – agree, as ADR is a consensual process.
For external matters, this is straightforward, the trustee and the third party will agree to mediate (for example) and, hopefully, the mediation will provide a useful forum to ventilate and resolve the dispute.   
For internal matters, the picture is slightly more complex. The parties (eg trustee/beneficiary) can agree to mediate without the involvement of the Court, as commonly occurred prior to the Act. That said, the Court may have a role:

  • if the trust has beneficiaries who are unascertained or lack capacity, then the Court must appoint representatives for those beneficiaries (s 144); and
  • at the request of a trustee or beneficiary, or on its own initiative, the Court may enforce an ADR provision in the trust deed or refer a matter to an ADR process (except if the trust deed indicates a contrary intention) (s 145).

The Act also gives trustees a specific power to give binding undertakings in relation to the trustees' future actions in relation to ADR settlements or arbitration agreements that would otherwise breach their default duty not to fetter the future exercise or non-exercise of a power/discretion (s 146).
Finally, the Act provides protections for trustees (acting honestly, in good faith and in compliance with the duties under the trust deed) that participate in ADR process (s 147).
Some commentators have argued the definition of ADR process conflates arbitration, a binding determinative process, with mediation, a consensual process, in an unhelpful manner. Indeed, the former Chief Justice of New Zealand submitted that ADR processes in the Act should be limited to arbitration alone.


The Court's preserved and enlarged statutory powers – and interpretative uncertainty – are expected to result in increased activity before the courts. The ADR provisions are welcome, and should provide trustees with greater comfort in making use of mediation and arbitration in appropriate cases.   
Our final article in early February will wrap up the series, pulling together the various issues covered over the last six months. 
Please reach out to one of our experts listed below if you would like to discuss the Act further.

[1] Trusts Act 2019, s 3(c).

This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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