Webb DuncanDr DUNCAN WEBB (Labour—Christchurch Central): Kia ora Mr Assistant Speaker. It's disappointing that the National Party hasn't chosen to take this bill as seriously as it might because this is of course the first reading and this is a matter of considerable importance. This codification of trust law will be a major change in the way we approach these matters.It's worth noting that amongst many people—many ordinary citizens—they don't really even understand what a trust is. They've heard about it they know that it's handy from time to time to protect assets from creditors or the taxman or ex-partners but they don't quite understand that it's a division of ownership and entitlement. What this bill does is it makes very clear what a trust is how a trust comes about and the duties that attach to trustees. And I must say that's the other thing that will come perhaps as quite a surprise to trustees should they take the time to look at those duties because the duties are indeed very demanding. Many people in fact think that trusts are more or less an alter ego where they can dip into trust funds and make decisions pretty much unilaterally but it's simply not the case.This matter was referred to the Law Commission way back in 2009 so that's how long it's taken us to get to this point. This Government is committed to clearing the decks because we've got some serious business to do. We're not going to sit on our hands for that long. One of the really important things here as the former Attorney-General member Finlayson mentioned is the select committee process. If I must say the former Attorney-General did turn to the substance of the bill and made some meaningful comments and I commend him for that. I hope his other members will follow him in future.This is about trusts as a vehicle. It's not about what trusts do; what we're talking about is the structure of trust law. So it is worth just looking at what the bill does. In fact the law of trusts at the moment—if you're trying to find a definition of what a trust is you'll be looking for quite some time and I sympathise. It's a pity Miss Swarbrick's left as well because I could've educated her—and she sounds like she needs it. Ha ha!The creation of a trust is set out in clause 15 and look it's pretty straightforward. We've got to have trust property we've got to have beneficiaries we've got to have an intention to create a trust—and we can't have a beneficiary and a trustee and that's the end of the matter; we've got to have more than that to the matter. So straight away what we've got here in this bill is some clarity about how a trust is created and what a trust is.Of course the other thing that's being abolished or at least replaced is that arcane rule against perpetuities where we have that a trust can only exist for a life in being plus 70 years with all kinds of strange rules around whether we can have a fertile toddler or a precocious octogenarian. Now those rules whilst law lecturers might like them are utterly meaningless to ordinary people and so it's now being replaced with a rule that says a trust can last for only 125 years—a great clarification.But probably most important as member Finlayson pointed out are the trust duties. In fact those duties are quite onerous right from the duty to know the terms of the trust the most fundamental duty of all—to simply know what the terms of the trust are. Now we know as a matter of fact that many trustees don't even know what the trust deed is let alone where to find it—yet another duty. There is a duty to actually act in accordance with the terms of the trust—pretty fundamental but if you don't know what those terms are you're not going to be acting in accordance with them—and some of those perhaps more well-known duties. A duty to act in good faith—a duty to act only in the interests of beneficiaries. In fact there is the heart of trust law the idea that a trustee has fiduciary obligations—an obligation to put aside all other interests and put the beneficiary's interests first. Now the fact of the matter is that many trustees out there don't understand in any real detail the concept of conflict of interest but at last it's out there in black and white in Part 3 of the bill setting out what those obligations are.The other really important thing that we need to point out is the liabilities of trustees because many people think I'll be a trustee of this or that." and my colleague Tamati Coffey tells me he's a trustee of many trusts. Does he know—a highly educated young man like him—that he's personally liable for his actions as trustee and that if he slips up the trust and the beneficiaries through the trust can look to him and his enormous wealth to make good that loss? So that's a really important point that trustees need to know that whilst there is some protection whilst the trust will indemnify them for their actions if taken honestly in good faith the assets of the trust might not be enough certainly if third parties have suffered. So it's really important that we understand that.The former Attorney-General also mentioned the fact that that indemnity of the trust is not unlimited. It is limited. Certainly where a trustee acts dishonestly the law will give them no protection. It never has and nor should it and that's certainly a good thing.He also mentioned gross negligence that a trustee who acts in a grossly negligent fashion will not get the protection of those statutory indemnities. Now that also is an important point and I accept that those kinds of concepts lie at the boundaries. It will be important for this to go to select committee.If I may say the Law Commission report is an exceptionally well-drafted report. It has been given assistance by many learned minds and what's more I'm aware that the previous Government put a draft bill out for consultation. That also went through a number of iterations and I commend that process. So this is not a bill that has come to the House without a great deal of careful thought already. Having said that I look forward to it going to select committee where those matters of detail will be looked at—things like whether gross negligence will indeed be an excuse or whether they will be liable.The other really important reform in this piece of legislation is a great clarification around the information that trustees must give beneficiaries. In fact it seems almost bizarre that we have to have a piece of legislation to say that a beneficiary must be told that they're a beneficiary but you know that is actually an important clarification. A discretionary beneficiary tucked away in a trust over there—the trustee actually has an obligation to let that beneficiary know that they're named as a beneficiary in a trust and also if requested to provide relevant trust documentation. Now that means not only the trustee—"the trustee" almost goes without saying—but also any other information so that the beneficiary can understand whether the trust has been properly administered. That's going to include things like trust accounts and things like that.So look those are all really important points but probably most important of all is really bringing all this law together. This is not an absolute codification—the common law will still exist. It doesn't deal with all trusts; it deals only with express trusts. So there's still a whole lot of trust law that those academics can get excited about and I'll leave them to do that. But what it does do is it brings together in a really coherent way and a really understandable way these core duties—these critical duties.So to the drafters of this bill I commend them for great drafting. To the Law Commission I commend it for its extensive work. To the National Party I commend it for eventually coming up with something and it's great to see that we now have it in front of the House. We're going to get this bill passed so that we have a clear trusts law so trustees and beneficiaries can understand their duties and really get on with it. I commend this bill to the House.Bill read a first time. Bill referred to the Justice Committee."