Mediation under the new Trusts Act – the snake in the grass

Written by Will Story for the Family Advocate, Autumn 2021

On 30 January 2021, the Trusts Act 2019 (the Act) came into effect. This overdue overhaul of the workings of the old Trustee Act 1956 has been widely commented on by trust lawyers and there is a wealth of material to digest on the topic if you are light on some bedtime reading!

The Act brings into being significant changes to beneficiary rights and trustee obligations under New Zealand law. One of the greatest changes is the new weapon in the Court’s armory being the ability to order “Alternative Dispute Resolution” for internal matters which includes disputes between trustees and beneficiaries. The use of the word “Alternative” by Parliament is, rather frustratingly, a relic of times past. If we are to relieve the pressure from our courts and aspire to models of self-determining justice, such as mediation, then we must let go of phraseology which is fast becoming irrelevant and indeed inaccurate. I digress!

While those practicing in mediation are understandably optimistic about the changes, before dipping one’s toes into the new pool of trust disputes there is a key issue worth emphasising. For many trust disputes, beneficiary rights will be at stake. In accordance with trust law of old, any agreement reached between parties in dispute must be in good faith and should be for the benefit of the beneficiaries. But what about those beneficiaries who are unascertained, or incapacitated? Under the Act, unascertained or incapacitated beneficiaries will have representatives appointed by the Court. For mediators, therein lies the spanner in the works (or depending on the viewpoint the snake in the grass); any agreement reached at mediation will, in such cases, require the Court’s sanction.

What does that mean on a practical level for mediation practitioners? It is, of course, far too soon to foresee the consequences of this legislative change. However, there are a few things to bear in mind.

It is important to recognise at the outset that trust disputes are a complex legal area and every professional involved plays a critical role. For trustees, sound legal advice is essential. For mediators to do their job effectively, there should be no “grey areas” in terms of parties’ understanding of issues and the law. It is critical that trustees have a full understanding of the terms and implications of their decision making (and compromise) both prior to entering into and at mediation.

In my personal opinion, parties should be encouraged, not dissuaded, from having their lawyers present at the mediation table itself. There are no reasons why unascertained or incapacitated beneficiaries’ representatives should not be present at the table also, or at the least, consulted prior to any mediated agreement being signed by all parties. This will be insurance for the mediator that the agreement is not going to face being turned on its head at a subsequent date by the court.

Mediators will want to consider whether they have the requisite expertise to mediate trust disputes. While mediators do not need to be nor should they be legal experts or advisors, a good understanding of the new trust law and trust principles in general is key. While we have a disproportionately high number of family trusts in New Zealand per head of population, we are extremely fortunate to have a number of experts to match.

Here at FairWay Resolution, we are fortunate to have a network of practitioners spread across Aotearoa who have this expertise. We are here and happy to help!

If this topic interests you, you may wish to read more written by our experts both within FairWay and within our community of practitioners:

Use of mediation under the new Trusts Act 2019
Carole Smith, Barrister, Auckland

The Trusts Act 2019 – what it means for New Zealanders 
Chris Pickering, Client Manager Commercial Services

The new trust laws explained - what you need to know
Jeremy Sutton, Barrister Auckland

Trusts and Estates: the role of mediation in a changing legal landscape 
Will Story, Family Services Manager

About the author

Will Story BA LLB is Operations Manager of Family Services at FairWay Resolution Limited.

Before joining FairWay, he was a practising Lawyer with significant experience in family law, property law and general practise (both in Hawke’s Bay and Wellington).

If you would like to get in touch with Will, please contact him by email at will.story@fairwayresolution.com