Little AndrewTRUSTS BILLFirst ReadingHon ANDREW LITTLE (Minister of Justice): I move That the Trusts Bill be now read a first time. I nominate the Justice Committee to consider the bill.In New Zealand trusts play a very important role in the life of many families and indeed in commercial life as well. Many Kiwis use trusts to manage their main asset which is their home. Trusts give protection so that future generations—our children and grandchildren—can enjoy certain property or have financial support. They're a significant part of the economic backbone of our commercial and social sectors too. They're very important in terms of charitable projects and charitable purposes and some even use them to avoid tax liabilities and responsibilities too—but I am not going to dwell upon that tonight because this is a happy occasion about a bill that is a happy bill and has the happy support of most members of this House.Trusts are a very important part of our legal infrastructure. It's the belief of this Government that all New Zealanders should have access to a justice system that protects their rights and in line with this and to achieve this trust law ought to be simple for people to find and to understand. Families and businesses need to be able to manage their affairs with confidence. In reality the essential principles of trust law are not presently located in one place. The current legislation passed in 1956 is convoluted and out of date and this bill addresses this problem.I'd like to briefly mention the background to the bill. The Law Commission undertook a comprehensive review of general trust law from 2009 to 2013. This comprehensive review recommended a new Trusts Act to modernise and improve trust law in New Zealand. The Trusts Bill largely reflects the commission's final recommendations and I want to thank the commission for its thorough work. The bill has been informed by public consultation on an exposure draft version of the bill in late 2016 and I'd like to thank those who made submissions as these enabled the bill to be further refined and improved.The consultation process highlighted the many good features of the bill which will provide welcome changes for those involved in the administration of trusts. I believe that it is fundamental in a society governed by the rule of law that the justice system is accessible to all citizens and a key part of that is ensuring—as indeed we debated in the last piece of legislation—that people can get access to information about the law so that they can understand their rights and obligations. It's also vital to support people to resolve their disputes both inside and outside the court system. The Trusts Bill advances these important aims.The Trustee Act of 1956 is outdated. Many of the provisions are difficult to understand. The Act needs to be read alongside a considerable body of case law. Trust law has evolved over centuries in the courts. This means that the core principles are often not easy for people who have no legal training to access. Many trustees don't fully understand the nature of their trust arrangements or indeed their obligations. This bill will ensure that core trust law principles are clear and accessible to all. To achieve this the bill brings common law principles into the legislation. The bill doesn't seek to alter central principles of the common law where those principles are sound. Instead including those principles in the legislation using clear and modern language supports the people that use trusts to be able to find and understand the law.The bill continues to allow the courts to refer to the depth of the common law when interpreting and applying the bill. The new bill will therefore balance certainty with flexibility so that it applies appropriately to the many different situations in which trusts are used. The bill includes foundational provisions that explain important aspects of trust law. It sets out what express trusts are how they are created and how long they last. A good example of how the bill makes the nature of trusts clearer is by setting out that a trust requires ownership of the property to be transferred to the trustee. Although this is currently required by common law many trust users may be unfamiliar with this basic concept.Being a trustee involves significant obligations. However it's apparent that trustees are often unaware of what is required of them in this role. The bill addresses this issue by providing a clear statement of trustee duties. It sets out five fundamental mandatory duties that apply to all trustees. These include knowing and acting in accordance with the terms of the trust and acting honestly and in good faith. The bill also includes other widely recognised common law duties which can be modified or excluded by the terms of the individual trust.One area where the bill provides clearer rules for trustees when compared to the common law is in the provisions that deal with providing trust information to others. For trustees to be held to account for fulfilling their obligations the beneficiaries need to have information about the trust. The bill clarifies when and what information a trustee is required to provide to beneficiaries. These provisions ensure that trustees can understand their obligations and beneficiaries have access to information about their rights—although I note in the current drafting of the bill that one of the pieces of information that a trustee is not required to give a beneficiary is the beneficiary's entitlements under the trust but that is a matter that the select committee can consider and no doubt there will be submitters who will want to seek a clarification of that particular point.Another benefit of the bill is that it replaces and modernises parts of the Trustee Act to make day-to-day trust administration easier. Many provisions of the Trustee Act are routinely overridden in trust deeds and the Act no longer reflects how trusts are currently used. This can make trust administration difficult and costly so the bill provides for a degree of flexibility in that. The bill simplifies trust administration by providing clear rules that are easy to understand. The rules are sufficiently adaptable to accommodate a wide variety of circumstances and are consistent with the way that trusts operate today.The bill removes unnecessary restrictions on trustees and provides useful and practical powers for them. The Trustee Act currently sets out highly specific powers to deal with trust property and administer the trust. This often creates unnecessary complexity when dealing with trust property. The bill replaces these specific provisions with the general powers that are necessary for the trustees to manage trust property and carry out the trusts. The bill provides general principles of trustees' liability indemnities and protections. This will assist both trustees and people who are dealing with trustees to have a good understanding of their legal position.Currently there are archaic and complex rules against perpetuities. To put it simply these perpetuity rules limit the life of a trust. The bill replaces these rules introducing a clear-cut maximum duration period of 125 years for the majority of trusts. This provides certainty regarding the life of a trust. While the courts continue to have oversight of trust issues the bill ensures that this oversight is reserved for complex or principled cases such as where it is necessary to resolve trust disputes.The bill facilitates non-contentious trust procedures that do not require court involvement. This is evident in the bill's approach to the appointment and removal of trustees. In particular the bill addresses the common situation where a trustee becomes incapacitated perhaps because of developing dementia and needs to be removed as a trustee. In this situation despite this change not being contentious under the Trustee Act it's often necessary to go to court to remove the trustee and transfer the property. This bill allows this to happen in most cases without recourse to the court. This will help to ensure that trustees don't need to make unnecessary applications to the court to ensure that the trust is properly administered.The bill also makes it clear that alternative dispute resolution such as arbitration or mediation is generally available for trusts disputes even if the trust deed is silent on this matter and supports people to resolve disputes outside of the courts in appropriate cases.This will be the first significant change to our trust legislation in over 60 years. We need to ensure that trust law is fit for purpose for the 21st century. This bill comprehensively refreshes and modernises the law while still maintaining its fundamental aspects and its ability to adapt to the evolving nature of trusts. Our trust law needs to suit the needs and realities of everything from family trusts to corporate structures. With thousands of trusts in New Zealand estimated to be somewhere between 300000 and 500000 trusts many people will benefit from an easy-to-understand more accessible and practical law. Because of the extensive number of trusts we have which have a broad range of issues it would be important to encourage submitters from a wide base of interests to come forward. Also allowing submitters sufficient time to consider in some depth the impact of the bill on their type of trust would help to ensure well-considered submissions. I'm confident that these submissions will greatly benefit the select committee consideration of the bill. I commend this bill to the House.