Huo RaymondARBITRATION AMENDMENT BILLIn CommitteeClauses 1 to 6RAYMOND HUO (Labour): Thank you Madam Chair. Arbitration Amendment Bill: clause 1 the title clause; clause 2 is commencement; clause 3 principal Act; and clause 4 proposes to insert new section 10A with regard to validity of arbitration clauses in trust deeds. Clause 4 is a provision that warrants some attention and close examination. The difference between arbitration and litigation is that arbitration is based on consent of the parties and litigation is through the courts. The principal legislation—the Arbitration Act 1996—does two things: it governs New Zealand's arbitration laws and also implements international obligations found in the United Nations Commission on International Trade Law and the model law on international commercial arbitration 1985 known more commonly as the model law. Sorry for sounding terribly pedagogue.The model law is important to ensure arbitration proceedings conducted in New Zealand are practicable consistent and efficient. That's the logical starting point for the Justice Committee to have carefully worked through this member's bill under Mr Andrew Bayly's name. Having said that I should acknowledge the justice Minister the Hon Andrew Little. Driven by the Justice Committee and largely through me in my capacity as the chair of the Justice Committee we convinced Minister Little at one point to set aside the departmental report prepared by the officials and instead appoint an independent adviser Mr Paul Heath QC a retired High Court judge.What we did was extraordinary. We released the departmental report to the House and through the House to the public and invited the sector to submit again. Mr Heath QC then produced two reports and the committee also received two letters from Chief Justice Sian Elias. That's where we were then and that's where we are now. All I can say is that those subsequent discussions the independent advisers' reports together with the Justice Committee's commentary and the revision-tracked version all showed that the officials were correct in the first place. The points they raised in the department report were valid and correct. I thank the officials and it's very important for me to acknowledge that. I thank the Minister who helped the Justice Committee to go beyond the ordinary scope and to go those extra miles to achieve what we have achieved now.The bill in its current form is not perfect. Like any pieces of legislation there is huge room for improvement but I can say that the Justice Committee has delivered although in this case instead of introducing many amendments or changes or deciding to do lots of things we have instead decided not to do lots of things. That's the reason why lots of provisions proposed under this bill have been deleted from the bill. The bill although a member's bill deals with some important issues such as open justice trusts and as Chief Justice Sian Elias pointed out in her letters to the Justice Committee the role that a member's bill can play especially in the area of providing a mechanism for legislation dealing directly with court function.The committee recommends clause 4 be deleted from the bill. This provision sets out that arbitration clauses in trust deeds will be valid and binding on all trustees guardians and beneficiaries. The Trusts Bill a Government bill addresses the same broad concerns. It is better suited within the Trusts Bill to consider the form of protections for unascertained and legally incompetent beneficiaries and therefore avoids possible issues about access to justice.Clause 4 of the bill proposes new section 10A in the Arbitration Act that would validate provisions in trust deeds requiring internal matters or disputes to be resolved by arbitration. As drafted the clause would bind all beneficiaries including unborn children and the wider issues of the settlor plus incapacitated and unascertained beneficiaries. The clause would bind all of them and require them to resolve by arbitration any disputes that might arise at any time in the life of the trust. The effect of the clause would be to exclude beneficiaries' entitlement to refer the conduct of trustees to the court. Needless to say the court would have always exercised supervisory jurisdiction over such matters. The Chief Justice called it a radical exclusion of beneficiaries' entitlements and it is not warranted. There is a risk that the arbitration clause would simply add another layer to the dispute.We all know that New Zealand is a rather interesting place where the notion of trusts no matter whether in the family or business context is well known. As a result there has been a proliferation of trusts in family and business contexts. The concept is quite simple. We will only need to have a settlor and normally two settlors to establish a trust and then have a trustee or two trustees—and nowadays a corporate trustee has become very popular—with a number of beneficiaries. Deeds of family trusts and business trusts used to be drafted by lawyers but it is no longer the case. Trust deeds in family or business contexts are often drafted by financial or taxation advisers rather than lawyers. With—CHAIRPERSON (Poto Williams): Order! Order! I just apologise to the member. As I understand it a lot of the work that was done on trust deeds has now actually been excluded from the bill.RAYMOND HUO: Yes that's correct and that's the reason why I want to explain why clause 4 should be deleted because the Trusts Bill a Government bill should be the place where lots of protections or mechanisms in that regard should be dealt with.CHAIRPERSON (Poto Williams): And that's appropriate but if I could ask the member to actually refer to the bill as it has been returned to the House.RAYMOND HUO: Thank you. The reason why I mentioned the trusts and the trust deeds is simply because this clause is closely related to one concept with regard to the protection of beneficiaries. That's the reason why the Justice Committee recommends that clause 4 be deleted from this bill simply because back to the original point the disputes have been exacerbated by inappropriate drafting provided to the settlor on a cut-and-paste basis and that's one of the reasons why clause 4 is not warranted.The officials probably would appreciate more the reason why the Justice Committee has decided to appoint an independent adviser simply because such kind of issues warrant close examination and scrutiny. Of course I cannot emphasise more the importance of the collegiality at the Justice Committee level. I do miss the times when Christopher Finlayson QC and the Hon Amy Adams were in the room. They were both tough but fair and professional.Andrew Bayly: I raise a point of order Madam Chairperson.CHAIRPERSON (Poto Williams): Oh right OK Andrew Bayly—are you taking a point of order or are you taking a call?