Hipkins ChrisTRUSTS BILLSecond ReadingHon CHRIS HIPKINS (Minister of Education) on behalf of the Minister of Justice: I move That the Trusts Bill be now read a second time.I want to thank the Justice Committee for its work in considering the bill which is a highly complex and technical bill. I therefore apologise to the House for all that's about to follow. I do want to thank the independent adviser to the committee David Goddard QC. The committee received written submissions from 34 submitters of whom 14 presented an oral submission. The submissions included the judiciary professional organisations and interested groups and individuals and I thank those who took the time to submit to the committee.Trusts are a key part of our legal infrastructure. They provide a mechanism for New Zealanders to manage their family home and protect assets for future generations and they're also a part of the economic backbone of our commercial financial and social sectors. Given the importance and prevalence of trusts in New Zealand the law of trusts must be fit for purpose. However the current law of trusts is convoluted and it's out of date. The bill will replace current trust legislation to ensure that trust law is accessible. It'll allow people to better understand their rights and obligations and it will support them to resolve their disputes both inside and outside of the courts system. The bill achieves these goals in two main ways. First it makes the core trust law principles much clearer. This is achieved by providing a plainly worded modern statute that incorporates core principles currently only found in common law. An important aspect of this is the clear statement of the duties of trustees. This is both mandatory duties that apply to all trustees and the default duties that can be excluded by the terms of the trust.Secondly the bill is about making day-to-day trust administration easier. It entirely replaces outdated and convoluted provisions of the Trustee Act 1956. The archaic and complex rules against perpetuities are replaced with a clear-cut rule. The bill also facilitates the resolution of trust disputes outside of the courts.The bill represents the culmination of many years of extensive work on the law of trusts and largely reflects the recommendations of the Law Commission from its comprehensive review of general trust law conducted from 2009 to 2013. It's also been informed by public consultation on an exposure draft of the bill which was released in 2016.Following the select committee process the committee has recommended further refinements and I'll highlight some of the key changes to the bill that the committee has recommended and outline the key issues considered by the committee where it has ultimately decided not to change the bill. The committee recommended changes to assist the bill to achieve its aims of enhancing the accessibility of trust law principles and improving the day-to-day administration of trusts. In addition to the highlighted changes the bill as reported back also incorporates many minor and technical changes that will further clarify its application.The revised bill has some clarifications about how the new Trusts Act would work as a whole. These are designed to clarify the flexibility of the legislation and in particular the flexibility of the duties of trustees set out in the legislation to apply effectively to different trust arrangements. The bill now clarifies the meaning of the terms of the trust. This is so that the trust users understand this concept covers terms implied in the trust rather than only express terms. The bill also now includes a guiding principle for performing trustee duties. This provides that the duties are to be read in light of the context and objectives of the individual trust.The revised bill will also apply to trusts already in existence on its enactment. The committee considered whether this should be the case. A key aim of the bill is to ensure that trustees and beneficiaries can easily understand the law that applies to them. Having one law that applies to all trusts is important to achieve this. As the Trusts Bill largely restates existing law many trusts will be able to operate without modification. However as the bill does make some changes to the default positions in the Trustee Act of 1956 trusts may therefore wish to seek legal advice to ensure that they are meeting the requirements of the new Act and there is a period of 18 months before the Act would apply to give those trustees time to do so.The bill provides that a trustee cannot be indemnified for dishonesty wilful misconduct or gross negligence. This provision was designed to address an unclear area of the common law with a statement of when trustees should be able to exclude liability. The bill captures trustee conduct that is intentionally in breach of the trust. The inclusion of gross negligence is intended to also capture trustees who according to their own abilities and knowledge have not attempted to fulfil the role that they had agreed to. It's important that this is assessed in light of the trustees' actual knowledge and skills and the purpose for which they were appointed.Submissions to the committee made it clear that many submitters were uncertain about the meaning of gross negligence and were concerned that it did not factor in the trustees' actual skills and knowledge. The revised bill now provides a non-exhaustive list of what a court must consider when a trustee has been grossly negligent. It emphasises that the particular circumstances of the trustee in the trust must be considered and this will provide greater certainty about what is gross negligence while still providing flexibility for the courts to assess the particular circumstances of each case.An important aspect of the bill is describing when and what information a trustee is required to provide to beneficiaries. The committee considered whether these rules should be changed in light of submissions which for example suggested narrowing of the clauses of beneficiaries who could access trust information. However it was determined that the provisions in the bill strike an appropriate balance. Providing some information to beneficiaries is vital because beneficiaries must be informed about the trust to be able to hold the trustees to account.One way that the Trusts Bill improves the day-to-day administration of trusts is by replacing complex rules against perpetuities and the related Perpetuities Act of 1964. Perpetuities rules limit the life of a trust. Instead the bill replaces perpetuities with the term maximum duration" so that people understand what is meant. The bill introduces a specific maximum duration period of 125 years for most trusts. The committee considered whether this period should be increased to 150 years but decided that 125 years is the appropriate period and the period strikes the right balance between flexibility for settlors and the need to have some limit on trusts durations.The Trusts Bill will be a significant benefit by supporting a wide and varied use of trusts. The bill is a modern statute that is fit for purpose in the 21st century. It's also an ambitious bill because it seeks to keep alive much of the common law on trusts developed over many centuries. The approach will allow the courts to interpret the provisions of the bill in light of the common law giving a rich in-principle basis on which to continue to evolve our trust law. I commend the bill to the House.DEPUTY SPEAKER: I didn't interrupt the member for reading the speech because it would not have been fair because he is not the Minister in charge of the bill and therefore could not have been expected to deliver the second reading verbatim.Hon Maggie Barry: Madam Chair.DEPUTY SPEAKER: Sorry to do this—the debate is interrupted and is set down for resumption next sitting day.Debate interrupted.The House adjourned at 10 p.m."