Contents

Chapter 3
Trustees’ duties

Retaining information

Proposal
P10 New legislation should provide that in exercising the mandatory duties of a trustee, a current trustee is required, so far as is reasonable, to retain a copy of the following documents:
(a)the trust deed;
(b)any variations made to the trust deed or trust;
(c)a list of all of the assets currently held as trust property;
(d)any records of trustee decisions made during that trustee’s trusteeship if they exist;
(e)any written contracts entered into during that trustee’s trusteeship; and
(f)any accounting records and financial statements prepared during that trustee’s trusteeship.
Please give us your views on this proposal.

Issues

3.83It appears that some trustees are not clear about what records they are required to keep about the trust and that in some trusts even the most basic records are not being retained. While information keeping obligations can be implied from some of the trustees’ duties, there is no clear statutory statement of this.

Options for reform

3.84The option for consideration in the Fifth Issues Paper was to introduce a statutory record-keeping requirement for trustees to keep copies of the trust deed and any variations made to it, minutes of decisions made by trustees, contracts entered into and accounts.

Discussion

3.85The proposed statutory provision would be intended to set out a minimum requirement for trustees. It would state what the law is in effect currently. It would not override the requirement on trustees to retain whatever information is necessary to meet their obligations as trustees. It is not possible to set out what is required by the duty to account in all trusts, but this proposal would set out the minimum information that will nearly always be required to be kept by trustees to provide an unequivocal indication to trustees that they must keep sufficient records. The provision would have educative value and may improve the amount and quality of information regarding some trusts. There is a risk that trustees may view the statutory provision as setting out all the information that is necessary for them to retain without giving consideration to what else their duties might require them to retain. In their submission, Taylor Grant Tesiram gave this as a reason they did not support the introduction of such a provision. We consider that this concern can be addressed by drafting the provision so that it is clear that trustees may be obligated by their duties to retain more information.

3.86The majority of submitters commenting on this option agree that this type of provision should be introduced. Ernst & Young thought that this provision could work as a restatement of the existing law in order to educate trustees and improve trust administration. KPMG advised that in many trusts much of this information is lost over time, mainly by lay trustees but also in some professional firms and trustee companies when personnel change. Greg Kelly Law, the TCA and Perpetual considered that a prudent trustee should be doing this, but that there was merit in having the provision to give guidance. The Inland Revenue’s view is that this would be useful as it would effectively bring trusts into line with the record-keeping requirements for companies. In their view such a requirement would assist the courts in reviewing trusts when required and assist creditors, including the Inland Revenue, to obtain disclosure of material documents.

3.87The NZLS’s view was that a template approach like that proposed would not be suitable because trusts vary so much. Chapman Tripp suggested that the provision could be in the form of non-legislative guidance issued by a professional body, such as the Society of Trust and Estate Practitioners New Zealand, the NZLS or the New Zealand Institute of Chartered Accountants.

3.88Our view is that there is merit in including the provision in the interests of educating non-professional trustees and making the law of trusts clear and accessible to the extent possible. The provision would unequivocally establish that these records must be kept by trustees. One way of adding weight to the enforcement of the provision is for the requirements to be a professional obligation for lawyers, accountants and trustee companies under their own legislation or rules. This would mean that it could be enforced through their disciplinary procedures.