Legislation to guide disclosure of trust information supported

The New Zealand Law Society says specific legislation to provide guidance on access to trust information is desirable.

In its response to the Law Commission’s fourth issues paper in the review of trust law, The Duties, Office and Powers of a Trustee – Review of the Law of Trusts, the Law Society says legislative clarity is a better mechanism than requiring disputed information disclosure situations to be addressed by the High Court.

It says such proceedings are often highly contentious and can also be expensive and time-consuming. An application to a court should be available as a last resort.

The Law Society says trustees need to be aware of their legal obligations – and many are not or are confused – and beneficiaries need to be aware of their rights – and again, many are not or are confused.

“The rules in this context for fixed (and contingent) trusts and discretionary trusts are not the same and it is often unclear what type of trust one is seeking disclosure from,” the response states.

The Law Society says it would be difficult to justify the need for extensive information requirements for many trusts in New Zealand – for which the family home is the single asset. However, in these cases beneficiaries should still receive information at some point about the existence of the trust and their status as a beneficiary of that trust.

“The extent of disclosure in any particular case might have to recognise express confidentiality and other mechanisms contained in the trust deed and memorandum of wishes (although this may be able to be covered by a discretion reserved in the trustee),” it says.

In comments on another question in the issues paper, the Law Society response says trust legislation should define who cannot be a trustee. It says people who should be prohibited from being appointed or continuing to hold office as a trustee are minors, corporations in liquidation or being wound up, bankrupts, persons who have been convicted of a crime involving dishonesty and legally incapacitated persons.

The Law Society also agrees that trust legislation should clearly set out the categories of persons who may be removed from office by the continuing trustees. It says these categories should be narrow so that continuing trustees cannot use removal or the threat of removal as a bargaining chip in trustee disputes.

“Any new legislation should not provide for the removal of a trustee who has been absent [from New Zealand] for 12 months or more without delegating its powers. A trustee can carry out his or her responsibilities whilst overseas. The real issue is whether the trustee is properly carrying out its obligations, and a failure to do this ought to be a ground for removal.”