11.3Section 66 of the Trustees Act provides that a trustee may apply to the court for directions concerning the trust property, the management or administration of trust property or the exercise of a power of discretion of the trustee.
11.5Examples of when an application under section 66 will be appropriate include for providing directions as to whether a trust should pursue litigation against a third party, a proposed sale of property at a loss or undervalue, and the final distribution of trust assets.
11.6The restrictions in the types of applications for directions that can be made under section 66 are not clear from the words of the provision, although they are relatively clear from case law. Because of this, the section may not be well understood by lay trustees. There is some case law that suggests beneficiaries can apply for directions under section 66, and some case law which holds that section 66 cannot be construed to extend to beneficiaries. It is unsatisfactory for this to remain ambiguous. At times there has also been confusion about applications that hinge on the interpretation of the trust deed. The court has an inherent jurisdiction to provide directions on the interpretation of a trust deed. The legislation may need to make it clear that questions of interpretation should not be addressed under section 66.
11.8These options are not alternatives as they address separate issues with section 66. An alternative to each of these options is to maintain the status quo.
11.9The wording of section 66 is broad, seemingly allowing trustees to apply for court directions in a wide variety of circumstances. Case law has provided restrictions on when section 66 is available to trustees that are not apparent from the words of the section. The intention of the courts is to prevent section 66 being used by overly-cautious trustees who should be exercising their discretion or seeking legal advice, or where alternative proceedings, such as breach of trust, would be more appropriate. The revised section needs to balance these concerns.
11.10Submitters who commented on section 66 generally considered that it would be beneficial to incorporate common law principles into legislation. Greg Kelly Law warned that the legislation should not be too prescriptive, but that examples might be useful. The Trustee Corporations Association considered that the scope of the section is clear, but that the legislation should clarify ambiguous areas of case law and should provide that trustees who have acted unreasonably in seeking directions should be personally required to meet the costs of the proceedings.
11.11In the interests of ensuring the section’s meaning is clear on its face, we consider that it should include more detail about the types of circumstances for which directions may be sought and clarification about the availability of alternative proceedings. This would be consistent with the approach of restating settled case law principles to make legislation more accessible. We consider that the revised section 66 should not go as far as detailing all of the case law principles because it is desirable to have a relatively broad power of direction and to retain some discretion of the court as to whether section 66 applies in the circumstances. The legislation should continue to use language that specifies that only trustees can apply, and should make it clear that this is only current trustees. We consider that this is unmistakeably the intention of the section as it stands, and the revised version should make sure this remains so. It would be helpful for the section to signal that the court has inherent jurisdiction to make a declaration on the interpretation of a trust deed and that the court may refuse to provide directions if alternative proceedings would be better.
11.12The updated section 66 would differ from the current section in the following ways (indicative drafting only):