Trusts Bill

It is, indeed, a great honour to be talking to this particular bill at this stage, and I just want to say of this, the Trusts Bill, and the rewrite of our principal trusts legislation, that I think this has been longstanding. It’s been a considerable piece of work. Members of the House have put a lot of time into it, and I think this is very well drafted now, and a very well-considered piece of legislation. So I think that we can be very pleased that this legislation will provide good guidance to trustees, to settlors, to beneficiaries, and to those who have an interest in this particular area; that we now have a cohesive piece of law that will provide good guidance and leave them in good stead.

The first part of the bill really provides an overview. It lays out some very basic principles, and we would expect that although the bill focuses its attention on express trusts, it is clear, also, that it has implications for resulting and constructive trusts, and, indeed, other forms of trust that may evolve through particular circumstances. It has application to charitable trusts and to the full range of trust vehicles that many New Zealanders use and rely upon in their day-to-day life. It makes some changes to the common law but otherwise leaves the inherent jurisdiction of the High Court intact in terms of dealing with the many sometimes totally unpredictable issues that arise in trusts and in trusteeship.

So I don’t want to talk for much longer in this very introductory part of the bill. The meat and gristle of the bill appears in the subsequent parts. But, by way of introduction, I think this, in terms of the layout of the bill generally, does a very good job in Part 1 of providing the overview and, as I say, is drafted in very clear language. Given the range of people who often find themselves as trustees in trusts around New Zealand, I think this provides them with a very accessible means of understanding what the law is, what their responsibilities are, what they should expect to see in a trust deed, how to delegate powers, and how to discharge their duties and obligations as trustees.

So as the debate goes through, I know it would be comprehensive and thoroughgoing. I know there are members like Andrew Bayly for whom this stuff creates a level of excitement from which we could power small cities, so I am looking forward to his contributions. I know there are other members there—Ian McKelvie, who is a settlor and a trustee, and commands great experience in this particular area. So I think the committee can look forward to this, and, indeed, the public of New Zealand can be assured that in this committee of the whole House stage, this bill will be given the thoroughgoing, comprehensive examination that we would expect.

I would like to ask the Minister in the chair a question about the rule against perpetuities. In my opinion, the rule against perpetuities, and the statutory equivalent of it, is the most important rule relating to trusts. That is the rule that we ought not to be able to for ever control the economic lives of those who come after us. People with big fortunes ought not to be able to create trusts that last for ever in a way that controls the lives of those who follow.

The rule against perpetuities was introduced by the equitable courts in the United Kingdom because there were concerns that people with large fortunes were, effectively, writing rules in trusts which determined the lives of those who followed for years and years and years. The rule against perpetuities used to be that the maximum length of a trust could be a life in being, plus 21 years, I think it was. A life in being was a person who was alive at the date of the creation of the trust. The longest period a trust could last was the life of someone who was alive at the date the trust was completed for the whole of their life, plus 21 years. So you could say the class of people that would determine the length of the trust could be any grandchild alive at the date of the death of settlor, plus 21 years. That was the limit.

Now, my understanding—and I’m sure the Minister will be able to confirm this or not—is that, effectively, we have, with this law, still maintained the rule against perpetuities, because we don’t want people of wealth to be able to let their wealth determine the lives of people for a long time in the future, and that that is the effect of clause 5(5) of the bill, which protects the common law, except to the extent that it’s modified, and that the modification, I think, elsewhere in the bill, says that the statutory equivalent of that these days is to be 125 years. I’d just like the Minister to confirm that because, for me, that is a very, very important rule relating to social justice.

I’m very happy to answer the question of that curious member, and, although it appears in Part 2 of the bill, I can confirm that clause 16 confirms the maximum duration of a trust: a statutory prescription of 125 years, and, indeed, subclause (5) of clause 16 confirms, and I quote, “The common law rule known as the rule against perpetuities is abolished.” So there is now a statutory code that replaces that old rule. It was always expected that property and assets contained in a trust would succeed in ownership at some point. That was an important part of some of the old law. It has continued under this provision, but I’m happy to answer even more questions about that when we come to Part 2.

The question was put that the amendment set out on Supplementary Order Paper 255 in the name of the Hon Andrew Little to Part 1 be agreed to.

Part 1 as amended agreed to.

Part 2 Express trusts