Chapter 11
Other powers of the court under the
Trustee Act

Section 66 − Power of court to give directions

P43 New legislation should:
(a)retain the power to apply to the court for directions;
(b) codify the case law principle that as far as possible trustees should present a proposed course of action regarding the matter on which they seek directions;
(c)provide that the power to apply for directions can only be exercised by current trustees of the trust;
(d) provide that for the avoidance of doubt, the statutory power to apply to the court for directions does not restrict the ability of the trustee to apply to the court for a declaration as to the interpretation of the trust deed.
Please give us your views on this proposal.

Current law

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.

11.4Case law has established more detailed parameters as to when this section should be used than appear on the face of the provision. The section is intended to assist trustees facing a choice between two or more courses of action, either of which might expose the trust to risk. For example, a decision to proceed with litigation against a third party leaves the trust fund open to costs if the litigation is unsuccessful, while not proceeding with litigation means that the trustees will not recover the loss incurred. Further, section 66 should only be used in the following circumstances: when the facts are clear, agreed upon and fully disclosed to the court; when no breach of trust is alleged or questions of law or interpretation at issue; and when the issue cannot be simply resolved through legal advice or the independent exercise of discretion.280  It is also established that the court should not go further than answering the questions posed.

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.

Options for reform

11.7The options for reforming section 66 are:
(a)incorporating some or all of the settled case law principles into an updated section 66;
(b)clarifying that the section applies to an application for directions by trustees only, and that beneficiaries cannot apply under this section; and
(c)codifying the court’s inherent jurisdiction to provide directions on the interpretation of a trust deed.

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):

66 Right of trustee to apply to Court for directions:
(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power of discretion vested in the trustee.
(2) As far as possible, a trustee should present a proposed course of action or possible course of action regarding the matter on which he or she seeks directions.
(3) Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
(4) For the avoidance of doubt:
(a) a court may refuse to provide directions if it would be more expedient for the issues to be addressed through a different form of proceedings;
(b) an application for directions under this section can only be made by a trustee for the time being of the trust in question; and
(c) the power under subsection (1) does not restrict the ability of the trustee to apply to the Court for a declaration as to the interpretation of the trust instrument.
280Noel C Kelly, Chris Kelly and Greg Kelly Garrow and Kelly Law of Trusts and Trustees (6th ed, LexisNexis, Wellington, 2005) at 711−715; Andrew S Butler “Trustees and Beneficiaries” in Andrew S Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 105 at 144.