An Overview of the Trusts Act 2019 - Revolutionary Changes or Much of the Same?

• Author: Rebekah McCrae and Robin Palmer
• Position: Lecturer at the School of Law at the University of Canterbury/Professor at the School of Law at the University of Canterbury
• Pages: 133-160

AN OVERVIEW OF THE TRUSTS ACT

2019 – REVOLUTIONARY CHANGES

OR MUCH OF THE SAME?

Rebekah McCrae* and Robin Palmer**

Abstract

e Trusts Act 2019 (the Act) is now fully i n force. e Act repeal s and replaces the

former Trustee Act 1956 . e Act has modernis ed the law of trusts and ma de the law more

accessible . It restates many common law pr inciples as well as modif ying some of the pre-

Act common law. Fe w provision s depart enti rely from the forme r Trustee Act 1956 and

the common law a pplicable prior to th e Act. ese changes com bined make for interesti ng

discussio n, partic ularly to what exten t the common law c ontinues to be re levant, and

whether the new p rovisions are revolut ionary or are better d escribed as improve ments to

the pre-Act positi on. e Paper f‌i nds that overal l, very lit tle has changed s ubstantively

under the Act. Wh ere the Act restates the common la w, the common law may contin ue to

provide conte xt and interpret ational ass istance. Where t he Act provisio n modif‌ies the

common law, th e common law will remain rele vant to the extent it is consist ent with the

provision . ose provisions wh ich entirely depart fro m pre-Act principles are few.  ere

is little in the Ac t that will require major adj ustments to trust deed s or the way trusts are

administered.

I. Introduction

The Trust s Act 2019 (the Act) i s the f‌irs t major reform of tr usts law i n over 60

years. The Act r epeals and replaces t he Trustee Act 1 956. The Act also cod if‌ies some

of the common law re lating t o trust s to create a c oncise piece of legi slation th at

improves accessi bility of the law.

Prior to t he Trust s Act 2019, much of law rel ating to t rust s was set out in

the common law (for ex ample, most of th e duties of tru stees were der ived from

the common law a nd did not appea r in the Tr ustee Act 1 956). This resu lted in a

* Lectu rer at the School of Law a t the Universit y of Canterbu ry.

** Professor at t he School of Law at the Un iversity of Ca nterbury.

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multifa ceted legal regi me where trustee s would need to navigat e often lengthy and

less accessible com mon law judgments to k now their obligation s.

Durin g the reform, t he former Trus tee Act 1956 w as considered t o be outdated a nd

no longer f‌it-for-purp ose. The Trust ee Act 1956 did not cont ain many of t he trustees’

legal obli gations. The rules of common l aw and equity therefore s upplemented the

former stat ute to f‌ill these ga ps. There was confusion a bout the role of settlors, t he

duties of tr ustees a nd the righ ts of benef‌iciar ies that threatened t he institution of

the tru st.1 It was import ant that the new Act a ddressed these shor tcomings.

The Act is a resu lt of many yea rs of researc h, consult ation, a nd debate.2 It

improves accessi bilit y, by including the o bligation s of trust ees into t he Act. Man y

common law pri nciples have been cod if‌ied in t he Act, thereb y providin g clarit y of

what is requ ired of trustees, a nd enabling benef‌icia ries to better unders tand their

rights.

The Act makes some n otable changes to t he pre-Act regime includ ing:

• the abolition of the r ule agains t perpetuitie s;

• the inclusion of mand atory and default du ties for trustees;

• the inclusion of inform ation retent ion and disclos ure obligat ions imposed

on trust ees;

• the prohibition of exemption s or indemni ties for dishones ty, wilf ul

misconduct , or gross negligence i n trust term s;

• providing tr ustees w ith power to det ermine whe ther a retu rn on an

investment i s income or capita l and to app ortion receip ts and outg oings

between incom e and capital;

• the appointment of speci al trust adv isors;

• modernising t he rules for the appoint ment and removal of tru stees; and

• the introduction of a lternative dis pute resolution provision s.

This Paper prov ides a high-level overview of t he Act. The focus of t his Paper is

to contra st the pre-Act po sition and t he position under t he Act, and also to a ssess

to what ext ent the chan ges ref‌lect, co dify, or depar t from common law principles.

It does not attempt t o provide an ex haustive comparison b etween the Ac t and the

former trus ts regime, nor does it prov ide a detailed ana lysis of the Act, but in stead

identif‌ies t hose changes t hat would likely be of most int erest to set tlors, tr ustees,

1 The Law Comm ission’s comprehensive rev iew took place b etween 2009 and 2013. F ive issues

papers were pub lished and consult ed on which resulte d in the f‌inal Law Com mission Paper:

Law Commission  e Law of Trusts – A Trusts Act for New Zealand ( NZLC R130, 2013) [“Repor t

130”], see “Foreword”.

2 Report 130 , above n 1.