Contents

Chapter 12
Jurisdiction of the courts

Should the District Court have jurisdiction?

Proposal
P50
(1) The High Court should have jurisdiction to hear any matter and make any order under new trusts legislation. It should retain exclusive jurisdiction to determine any proceeding under new trusts legislation where the amount claimed or the value of the property claimed or in issue is more than [$500,000].

(2)The District Court should have jurisdiction under new trusts legislation to determine any proceeding where the amount claimed or the value of the property claimed or in issue is [$500,000] or less.
(3)The District Court should also have jurisdiction to determine any proceedings or applications (such as those to appoint or remove a trustee) not involving claims for money or property.
(4)Section 43 of the District Courts Act 1947 (dealing with the rights of defendant to object to proceedings being tried in the District Court) should apply to proceedings involving any claim for money or any claim or issue over property. Where proceedings commenced in a District Court do not involve any claim for money or property any party to those proceedings should be able to give notice objecting to the proceeding being determined in that court and should have the right to have the proceeding transferred to the High Court.
Please give us your views on this proposal.

Current law

12.3The District Court is granted by section 34(1)(a) of the District Courts Act 1947 “the same equitable jurisdiction as the High Court”, so long as “the amount claimed or the value of the property claimed or in issue” is no more than $200,000. Specific qualifications are imposed on the District Court’ equitable jurisdiction by section 34(2). Where an Act (other than section 16 of the Judicature Act 1908 – the provision conferring general jurisdiction on the High Court) has conferred equitable jurisdiction on the High Court (or any other court) over a proceeding or class of proceeding then the District Court has no jurisdiction over such proceeding.

12.4The Trustee Act 1956 is one of the Acts that confers exclusive jurisdiction on the High Court.

Issues

12.5The District Court has jurisdiction to determine breach of trust claims within their monetary limits but they cannot exercise any powers under the Trustee Act. Some inconvenience and difficulty is caused by this restriction. It might even be argued that the District Court’s jurisdiction in respect of trusts is rendered ineffective because it is not able to make orders under the Act. For example, the District Court does not have jurisdiction to appoint new trustees, remove or replace trustees, hear applications for variations to the terms of a trust, or grant relief to a trustee under section 73.

12.6The problem is well illustrated by the Court of Appeal decision in Morris v Templeton.287  In this case beneficiaries brought proceedings against a trustee in the District Court alleging that the trustee had breached his trust by investing funds in unauthorised securities. The District Court Judge found for the applicants that the trustee had breached his trust, but then purported to exercise the discretion given to the High Court under section 73 of the Trustee Act and excuse the trustee from personal liability for losses suffered as a result of the breach. The beneficiaries appealed. Eventually the case reached the Court of Appeal, which held that “[t]he Legislature specifically reserved the power to grant relief under s 73 to the High Court”.288  The District Court can hear claims for breach of trust under their equitable jurisdiction as provided for in section 34(1) of the District Courts Act but the Trustee Act reserves jurisdiction to grant relief under section 73 to the High Court so by virtue of section 34(2) the District Court has no jurisdiction.289
12.7Where the District Court makes an order against a trustee for breach of trust the trustee needs to apply to the High Court for relief if the trustee wishes to invoke section 73 of the Trustee Act and avoid personal liability. It seems an unsatisfactory situation to have two separate courts consider the same salient facts and make determinations. In addition the District Court cannot make an order under section 51 to remove and replace a trustee where the court finds that the trustee has breached his or her trust and mismanaged the administration of the trust. Again it seems unsatisfactory that a further application would have to be made to the High Court to have the offending trustee removed and replaced. To avoid such multiplicity of proceedings low value breach of trust cases may be effectively forced into the High Court notwithstanding the modest sums involved.290
12.8The equitable jurisdiction of the District Court has expanded significantly since the Trustee Act was enacted.291  The District Court is now a court of general jurisdiction. As a result it could be considered something of an anomaly that the District Court was given full equitable jurisdiction in 1992 but cannot exercise statutory powers in respect of trusts within its monetary jurisdiction.

12.9There are also issues in respect of access to justice. The District Court has become the primary court of first instance in many areas of law. They are intended to be the “people’s courts”; to be local, readily accessible, and able to provide justice speedily with a minimum of formality and expense. Yet at present beneficiaries who are dissatisfied with the performance of a trustee’s duties must take their proceedings in the High Court if they wish to enforce the trust. Where trustees seek noncontroversial administrative changes to the terms of a trust or directions on some matter they must also take proceedings in the High Court. The question here is whether the District Court might provide a less costly and more accessible option for beneficiaries and trustees in some situations.

12.10Whether the District Court should have jurisdiction under new legislation replacing the Trustee Act is a significant issue for this review.

Options for reform

12.11The two broad options we considered are:
(a)retaining the status quo – the High Court should continue to have exclusive jurisdiction to exercise some, or all, court powers under new trusts legislation; or
(b)giving the District Court concurrent jurisdiction within specified monetary limits to exercise some, or all, court powers under new trusts legislation.
12.12As has been noted, section 34(1)(a) of the District Courts Act gives the District Court “the same equitable jurisdiction as the High Court”, so long as “the amount claimed or the value of the property claimed or at issue” is no more than $200,000. Where proceedings do not involve a claim or dispute over money or property the District Court would seem to have jurisdiction because section 34(1)(a) only limits the District Court’s equitable jurisdiction to $200,000 in respect of money and property claims.292

12.13If the District Court is given concurrent jurisdiction, as proposed by option (b), similar limits could be applied to proceeding under a new trust Act. The District Court could have jurisdiction, concurrent with the High Court, to make orders under the new Act where the amount claimed or the value of the property claimed or at issue was under a specified limit. In addition, applications under the new Act not involving money and property claims might also be made in the District Court for any relevant order or directions. For example, an application seeking the appointment of a new trustee, or an application seeking an order directing a trustee to supply information could then be brought in the District Court rather than the High Court under option (b).

Discussion

12.14Submitters were almost evenly split with half favouring preserving the status quo and the other half supported the District Court having concurrent jurisdiction within its monetary limits.

Arguments for the High Court retaining exclusive jurisdiction

12.15Most submitters who argued in favour of the status quo favour greater judicial specialisation. It was generally argued that trust law should be approached as a specialism involving issues of both legal and factual complexity. Consequently they argued that considerable expertise at both the judicial and representational level is required and that this is more readily available in the High Court. Concentrating trust cases in the one court improves both the quality of decision-making and case management. Judges with greater familiarity and expertise with the subject matter comprehend the evidence and issues more readily. Ultimately this leads to better case management and decision-making which reduces court time and cost. The New Zealand Law Society (NZLS) took the position that greater judicial specialisation in New Zealand would be desirable and that giving the District Court jurisdiction in trust matters would not achieve that end. It did not elaborate on why it considered specialisation was not an option within the District Court.

12.16A further argument that is put forward is that the case management systems and processes in the High Court are better suited to dealing with complex trust matters. Some practitioners have argued that the High Court’s originating application process is suitable for much trust work and makes the High Court relatively cost-effective. Although the fee structure is higher in the High Court than the District Court, the difference in the cost of legal representation may not be significant. These practitioners considered that the District Court’s processes are unsuitable for trust litigation. The NZLS reported that there is widespread dissatisfaction among its members with the District Court’s processes under the new District Courts Rules.

Arguments for the District Court having concurrent jurisdiction

12.17Most submitters who argued in favour of the District Court having concurrent jurisdiction did so on the basis that this would improve access to the courts, particularly for lower value disputes. The District Court is now the primary court of first instance.

12.18Since the Trustee Act came into force in 1956 the jurisdiction of the District Court has expanded, in equity, as well as in other areas. As the monetary jurisdiction of the District Court has increased, amendments have also broadened the scope of its jurisdiction under section 34. Subsection (2A) was, for example, inserted in 1996 giving the District Court the power to make orders under section 49 of the Administration Act 1969. The current section 34 replaced a list of specific matters that previously defined the Court’s equitable jurisdiction in 1992. Given the general expansion of the Court’s equitable jurisdiction during the years since the Trustee Act was enacted, it is argued that it is an anomaly that the District Court cannot exercise statutory powers in respect of trusts.

12.19The District Court, like the High Court, is now a court of general jurisdiction. It has a broad civil and equitable jurisdiction. New Zealand’s general civil jurisdiction is divided between the High Court and District Court primarily on the basis of the monetary value of the matter in dispute, rather than principles around different functions. A strong argument can therefore be made in favour of extending the District Court’s jurisdiction based on the current division of functions between the courts. Although, in other areas of law, for example company law, statutes do reserve exclusive jurisdiction to the High Court.

12.20It was also argued that the case for specialisation and the complexity of trust law has been overstated. Many matters that need to go to court under the Trustee Act (such as approving the replacement of a retiring trustee or issuing a vesting order) are straightforward in nature and are unlikely to involve difficult questions of law. It is not necessary to reserve such powers to the High Court. Another flaw in the specialisation argument is that the District Court is already involved with trust law. Actions for breach of trust can be taken in the District Court under its general equitable jurisdiction provided the amount in dispute falls within the specified monetary limits set by section 34(1)(a). The logical extension of the argument for specialisation and a single court dealing with trust law would be to remove the District Court’s existing jurisdiction as it relates to trusts. One submitter also made the point that there could be a panel of specific judges with trust law experience assigned to hear trust cases in the District Court. It should not be assumed that the District Court means generalist judges.

12.21It is also argued that the District Court could provide a less costly and generally more accessible option for beneficiaries seeking to hold trustees to account in lower value disputes.293  In some situations where trustees need to apply to the High Court for directions or orders, the cost of such applications might be reduced if they could be made to the local District Court. At present, for example, even a comparatively straightforward application to remove a trustee on grounds of incompetence or criminal fraud requires a High Court application.
12.22Litigating in the High Court is expensive. The fee structure for the High Court’s civil jurisdiction is premised on it primarily hearing high value cases or those that raise complex issues of law. The filing fee for an application is presently $1,329.20 although a concession rate proceeding fee of $483.40 is available for some applications under the Trustee Act.294  Hearing fees for the High Court are $1,570.90 for each half day of court time.295  In contrast, an application fee in the District Court is $169.20 and hearing fees are set at $906.30 for each half day.296  It would cost the parties less if straightforward applications dealing with matters such as uncontested appointments of new trustee could be filed in the local court.

12.23The cost of legal representation between the two courts would seem to differ less. We have not found any useful statistical information on the comparative costs here. In any event comparing average costs may not be very helpful. It has been suggested to the Commission by a number of practitioners that the cost of representation will be similar regardless of whether cases are heard in the High Court or District Court. This is because, as already noted, some proceedings can be undertaken using the less costly originating application process. This process is not available in the District Court so overall the cost of representation may remain similar, even where practitioners’ charging rates are lower in the District Court.

12.24Another argument sometimes made is that a local District Court would resolve applications more quickly. This point is also very difficult to assess. In the Fifth Issues Paper we discussed the dearth of research into this question and recent attempts to address this. As noted in that paper, the picture from that preliminary research is mixed. We are not able to comment further on whether matters could be more quickly resolved by the District Court.297  Some submitters argued also that court processes, and the respective speed and efficiency of turnaround in each court change will inevitable change over time. They suggested that it would be unwise to decide this issue on the basis of current processes.

12.25Finally, the point was made by a few submitters that the current upper jurisdictional limit for the amount claimed or the value of the property at issue of $200,000 should be raised as many claims in respect of trust would exceed this.

Assessment

12.26After weighing the competing arguments our preferred approach is for the District Court to have concurrent jurisdiction under new trusts legislation (option (b)). We acknowledge that our proposal differs somewhat from the position taken by the Commission in 2004 when it recommended that the High Court retain its predominant jurisdiction in relation to trusts. There are a number of important reasons for now favouring a greater concurrent jurisdiction in respect of trusts.

12.27The District Court has a broad civil and equitable jurisdiction. The current jurisdictional division between the High and District Courts is based generally on the monetary value of the matters in dispute. As a result the equitable jurisdiction of the District Court is of a general nature and it does seem to be an anomaly that the District Court cannot exercise statutory powers in respect of trusts. Our proposal for concurrent jurisdiction is consistent with the District Court’s jurisdiction in other areas and their overall development as the primary court of first instance.

12.28We consider that the case for specialisation based on the complexity of trust law can be overstated. Many matters that need to go to court, such as approving the replacement of a retiring trustee or issuing a vesting order, are straightforward in nature. They are unlikely to involve difficult questions of law and it is just not necessary to reserve such powers to the High Court. The District Court already has a general equitable jurisdiction. Our proposal will give them the necessary tools to exercise their jurisdiction more effectively.

12.29In formulating our proposals we have been mindful of the concerns expressed by some submitters (for instance that the District Court process is not particularly suitable for complex trusts claims). However, amendments have recently been made to the District Court Rules are intended to better deal with those cases where early access to a process aimed at adjudication might be in the best interests of the parties.298  The amendments allow litigants to seek summary judgment much earlier in the process (within 20 working days of filing the Notice of Claim). These changes may also go some way to addressing the procedural points raised by litigators in their submissions

12.30Whether trust work within the District Court is best allocated to specific judges or whether it is dealt with more generally does need some thought. The development of civil judges within the District Court is likely to continue and there is no reason why specific judges could not be assigned to hear trust cases within that court.

12.31We consider that expanding the District Court’s jurisdiction in the way we have proposed may improve access to justice because it gives potential parties a greater range of litigation options. For appropriate cases the District Court could provide a lower level dispute resolution option. There are significant differences between the civil process used in the District and High Courts. Our proposal for concurrent jurisdiction allows advantage to be taken of both of these. It does not preclude a litigant from filing their claim in the High Court if they consider that the better option, even if the amount in dispute is below the upper monetary limit for the District Court. As discussed further below, our proposed approach will include a degree of transfer to the High Court as of right where a party objects to the matter being determined in the District Court.

The proposed jurisdiction for the District Court

12.32As has been already discussed, the amount claimed or the value of the property at issue in any breach of trust claim or filed in the District Court cannot currently exceed $200,000. Where proceedings do not involve a claim or dispute over money or property the District Court has been given by section 34(1)(a) the same equitable jurisdiction as the High Court.

12.33If the District Court is to have jurisdiction under new trusts legislation, as we are proposing, then consideration needs to be given to the question of what limits should be placed on that jurisdiction. The most logical and consistent approach would be to broadly replicate the position already taken in section 34(1)(a) of the District Courts Act in respect of the District Court’s equitable jurisdiction. Taking this approach, the upper limit for money claims would be capped at the threshold set in that Act, which is currently $200,000, but there would otherwise be no restrictions on the District Court’s jurisdiction to grant any other orders or make any other directions under the new Act.

12.34Another approach which we have also considered is whether to limit the District Court’s jurisdiction under new legislation in some way by reference to the value of assets held under the terms of the trust. This type of approach is taken by section 31 of the District Courts Act to proceedings for the recovery of land. Under that provision the court has jurisdiction where the value of the land in question does not exceed $500,000. Similarly, section 34(1)(b) of the District Courts Act also determines the District Court’s jurisdiction to dissolve or wind up partnerships by reference to the total value of the partnership assets. However, unlike these examples, there is not the close nexus between the value of the assets of the trust and the court’s function. In the case of trusts the value of assets in the trust will not always be relevant to the matter before the court in the way it must always be in the case of a dispute over the ownership of land.

12.35There are many applications that could come before the courts under a new Act, which are relatively straight forward or are not contested. Two good examples are (a) approving the replacement of a retiring trustee; (b) issuing vesting orders transferring property from a retiring trustee to another trustee. Irrespective of the overall value of the assets in trust, the District Court could readily exercise such functions. It could also readily determine many other routine matters.

12.36In the Fifth Issues Paper we also discussed the option of giving the District Court jurisdiction under some specific provisions in a new trusts statute and not others.299  We have also rejected this approach because of the potential that aspects of a trust case before that court could raise issues that fall beyond the court’s jurisdiction. Submitters who commented on this matter also favoured the District Court being able to exercise all powers under new legislation rather than a limited subset.

12.37Instead of taking either of these approaches we have opted for the District Court having jurisdiction, concurrent with the High Court, to hear and determine proceedings and make any order under new trusts legislation where the amount claimed or the value of the property claimed or in issue does not exceed a specified upper threshold. The District Court would also have jurisdiction, concurrent with the High Court, to determine any proceedings (such as those to appoint or remove a trustee) that do not involve any claim for money or any claim or issue over property. This means that irrespective of the value of the assets in the trust, that court could determine any proceeding or application under the new Act that does not involve any claim for money or property.

12.38Where proceedings are commenced in the District Court and do not involve any claim for money or property we propose that any party to those proceedings should be able to give notice objecting to the proceeding being determined in that court. The proceedings should then as of right be transferred to the High Court. Under section 47 of the District Courts Act 1947 a defendant has the right to have a proceeding transferred to the High Court if the sum sought, or the value of the property or relief claimed, exceeds $50,000. Where the amount involved in the claim is less than $50,000 the defendant may object but the transfer will be at the discretion of the Court. The Court may only order that such proceedings be transferred if it is satisfied that some important question of law or fact is likely to arise. In our view, concurrent jurisdiction and providing the parties with rights of objection and transfer are sufficient to address any concern that proceedings raising complex issues of trust law will be inappropriately determined in the District Court.

12.39A final issue here is the appropriate upper threshold for the District Court’s monetary jurisdiction under the Act. A number of submitters have commented that in practice the current upper limit for money claims of $200,000 is likely to preclude much trust litigation being undertaken in the District Court. We acknowledge this problem. Many modest family trusts, containing no more than the family home, have assets well in excess of that amount.300

12.40The Law Commission is currently considering whether the upper limit of the District Court’s civil jurisdiction should be raised as part of its reference to review the Judicature Act 1908 and consolidate courts legislation. Although that report has not yet been released, the Commission intends to recommend that the upper limit be increased significantly from $200,000. The reasons for those increases will be fully canvassed in that report when released. However, in anticipation of that recommendation we have proposed here that the upper limit for proceedings brought under new trusts legislation should be capped at $500,000.

287Morris v Templeton (2000) 14 PRNZ 397 (CA).
288At [9].
289At [9].
290Andrew S Butler “Historical Introduction” in Andrew S Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 1 at 10.
291Before the enactment of the current s 34 of the District Courts Act in 1992 a list of specific matters previously defined the District Courts’ equitable jurisdiction. The 1992 amendment reversed the approach giving the District Court the same broad equitable jurisdiction as the High Court with specific exceptions.
292As already discussed s 34(2) imposes specific limitations as well.
293Chris Kelly “Supervision of Trustees: Enforcement or Problem Solving” (LLM Thesis, Victoria University of Wellington, 2009) at 107.
294However, the Commission has been advised by practitioners that practices vary between different registries as to when this lower rate is applied.
295High Court Fees Regulations 2001, sch.
296District Courts Fees Regulations 2009, sch.
297See the discussion in Fifth Issues Paper, above n 286, at [3.28]−[3.29] and also Rachel Laing, Saskia Righarts and Mark Henaghan A Preliminary Study on Civil Case Progression Times in New Zealand (University of Otago Legal Issues Centre, Faculty of Law, 15 April 2011).
298The District Courts (General) Amendment Rules 2012 came into force on 14 June 2012.
299 Fifth Issues Paper, above n 286, at [3.31]–[3.36].
300For example, the national average sale price for a residential property in three months ending 1 August 2012 was $423,569; while the average for Wellington city was $502,319 and for Auckland city was $659,639; figures taken from Quotable Valve New Zealand Limited published sales data <www.qv.co.nz>.