Mahuta Nanaia: Trustee Amendment Bill — First ReadingText is incorporated into the Bound VolumeMahuta Nanaia: Trustee Amendment Bill — First Reading[Sitting date: 11 October 2007. Volume:642;Page:12335. Text is incorporated into the Bound Volume.]Hon NANAIA MAHUTA (Minister of Customs) on behalf of theAssociate Minister of Justice: I moveThat the Trustee Amendment Bill be now read a first time. At the appropriate time I intend to move that the Trustee Amendment Bill be referred to the Justice and Electoral Committee for consideration. This bill amends the Trustee Act 1956 in light of the recommendations made by the Law Commission in its report entitledSome Problems in the Law of Trusts. The bill implements five statutory amendments proposed by the Law Commission report. It also contains one change to the Administration Act 1969 and the Wills Act 1837 and one technical change to the District Courts Act 1947.Trusteeship has become an increasingly specialised task often requiring in-depth financial and administrative skills. The bill addresses this need by making important improvements in the administration of trusts while protecting beneficiaries’ legal entitlements. The bill promotes the effective discharge of the obligations of trusteeship. The current limits on the actions by agents or attorneys of fiduciary discretion are too restrictive. The bill expands trustees’ collective power to authorise their agents or attorneys to administer aspects of the trust including powers of investment and management. However certain key powers are reserved to the trustees and cannot be delegated such as the power to appoint trustees or to decide how the capital or income of a trust is to be distributed.A responsible trustee is the legal owner of the trust property and retains control over the trust’s management and administration. An advisory trustee assists or advises the responsible trustee. Currently responsible trustees can legally challenge a direction of the advisory trustee by applying to the High Court for directions if they believe that the advisory trustee’s advice is objectionable or wrong. However responsible trustees are not obliged to do so and are not liable if they choose to follow any objectionable advice or direction given by an advisory trustee. For example if an advisory trustee advises a responsible trustee to invest moneys in a manner that created a conflict of interest by favouring one beneficiary over another and the responsible trustee followed this advice knowing it to be wrong he or she would not be liable. This is wrong in principle. A responsible trustee should not be able to shrug off the fact that advice from an advisory trustee is wrong or objectionable. The bill obliges the responsible trustee to seek a direction from the High Court where the trustee considers that such advice or discretion conflicts with the trust any law or exposes the trustee to any liability. Failure to do so will make a responsible trustee liable for following objectionable advice given by the advisory trustee.In some trusts trustees are obliged to act on the directions of a protector of a trust. Trustees have no statutory provision to challenge a protector’s direction if it is fundamentally objectionable. This places responsible trustees in a precarious position. A responsible trustee should be able to challenge a problematic direction from a trust protector. This bill authorises a trustee to apply to the court for directions where a trustee knows or reasonably believes that the protector’s direction or refusal to consent to exercise of a power conflicts with a trust any law or both or exposes the responsible trustee to any liability.The bill also simplifies a trustee’s ability to obtain insurance cover for trust property. Under the current Act a trustee seeking to obtain insurance cover on a replacement basis for a trust property needs the consent of the life tenant who occupies the property. If consent is withheld it may result in a situation where a property is not adequately insured. This not only affects the life tenant of the trust property but it affects thebeneficiary who stands to inherit the property. The bill simplifies the ability to obtain insurance by removing the need for trustees to obtain the consent of the life tenant and insures that the property can be properly insured for the benefit of both the life tenant and the trust beneficiaries.Finally the bill will help ensure that beneficiaries of a trust are informed of their legal entitlements. At present the law is uncertain whether a trustee is obliged to notify beneficiaries of their right to transfer or terminate the trust once the beneficiaries become entitled to do so. Often trustees take the paternalistic view that beneficiaries need not be informed of their right to end the trust or call for its transfer. This bill creates an obligation on trustees to notify beneficiaries of their right to end the trust or to call for a transfer of trust property so that beneficiaries are informed of their legal entitlements. If trustees do not do so they will be liable for damages for either a breach of trust or a breach of fiduciary duty or both.This bill which has been developed on the basis of the Law Commission’s recommendations makes the law clearer in relation to trusts and trustees by amending a number of specific provisions in the Act that have caused difficulty. The bill will improve the administration of trust property by reducing administration costs to trustees while continuing to protect the interests of beneficiaries. I want to thank all members for their consideration of the bill prior to its introduction and for their expressions of support for it. I would also like to thank the Law Commission for its report and recommendations. I commend the bill to the House.