Contents

Chapter 4
Trustees’ powers

Power to appoint agents

Proposal
P15 New legislation should adopt the approach taken in the Select Committee version of the Trustee Amendment Bill 2007, which proposed new sections 29 to 29E to replace section 29 of the Act. The new provision would:
(a)allow a trustee to appoint an agent to exercise a trustee’s “administrative functions”. “Administrative functions” would be defined as any function other than a “trustee function”. The provision would define a “trustee function” as:
(i) a function related to a decision regarding the distribution, use, possession, or other beneficial enjoyment of trust property;
(ii) a power to decide whether any fees should be paid or other payment should be made out of income or capital;
(iii) a power to decide whether payments received should be appropriated to income or capital;
(iv) a power to appoint a person to be, or to remove, a trustee of the trust;
(v) a power of appointment (including a power to appoint a person to be, or to remove, a beneficiary);
(vi) a power to appoint or change the distribution date of trust funds;
(vii) a power to resettle the trust, or to amend, revoke, or revoke and replace terms or provisions of a trust deed;
(viii) a right conferred by this Act to apply to the court;
(ix) the power to authorise another person to perform any of the functions of the trustees or trustee.
(b)require trustees to keep under review the agency arrangements and the way the arrangements are being put into effect, to consider whether to intervene, and to intervene if necessary. In reviewing the agency and actions of the agent, the trustee must consider whether a trustee exercising reasonable care, diligence and skill would intervene and intervene if such a trustee would consider it necessary to do so.
(c)provide that trustees are not liable to a beneficiary for the acts or defaults of an agent, unless the appointment was not made in good faith and with reasonable care, diligence and skill, or the trustee failed to review the agency and agent’s actions, or an intervention by the trustee was not made in good faith and with reasonable care, diligence and skill.
(d)make clear what fees and charges the trustee may pay the agent and what the trustee may be paid for employing the agent and reviewing the arrangement.
(e)differ from the Select Committee’s version of the Bill by:
(i) removing the list of example professionals that may be appointed as agents;
(ii) not stating the duty of care, diligence and skill that applies to professional trustees;
(iii) adding a non-exhaustive list of criteria that a trustee must consider when appointing an agent, including:
  • whether the intended agent has the appropriate skills, expertise and experience to carry out the task; and
  • whether employing the intended agent is a cost-effective option.
Please give us your views on this proposal.

Current law

4.29Section 29 of the Trustee Act authorises trustees to employ agents to transact trust business or do anything required in executing the trust or administering trust property. It permits delegation of administrative or ministerial functions, but does not enable a trustee to delegate the trustee’s fundamental decision-making powers. A trustee is not liable for the acts of the agent if the agent was employed in good faith. The section also permits a trustee to appoint an agent to carry out the trust outside of New Zealand including exercising any discretion, trust, or power vested in the trustee.

4.30Following the 2002 Law Commission Report, Some Problems in the Law of Trusts,133  the Trustee Amendment Bill 2007 was introduced. It proposed new sections to replace section 29. The proposed reforms:

4.31The Select Committee that considered the Bill recommended making it clearer that in reviewing the agency and the agent’s actions the trustee must consider whether a trustee exercising reasonable care would intervene and intervene if such a trustee would consider it necessary to do so.

Issue

4.32The current section 29 is not sufficiently clear in how it describes which of a trustee’s functions an agent can be employed to carry out. The list of examples of professionals who may be employed as an agent in section 29(1) is also often interpreted as meaning only professionals can be appointed, despite the phrase “or other person”.

Discussion

4.33We consider that it is sensible to make clear the types of functions that can be given to an agent. Nearly all submitters agreed that new legislation should contain the same types of agency provisions as were included in the Select Committee version of the Trustee Amendment Bill 2007. Several, including Chapman Tripp, Greg Kelly Law, Cone Marshall and the Trustee Corporations Association, thought that differentiating between trustee functions and administrative functions was useful and meant that trustees would be required to carry out certain important tasks themselves.

4.34The NZLS raised the concern that the provisions on the payment of fees and charges were too prescriptive. This is a valid concern, but it can be addressed through revised drafting.

4.35The only significant alteration from the Bill’s approach that we propose is to include a non-exhaustive list of factors for a trustee to take into account in appointing an agent. We consider that this will help trustees to appoint appropriate agents and to better meet their duties under the Act. It will provide greater guidance to trustees than the law does currently.

133Law Commission Some Problems in the Law of Trusts (NZLC PP48, 2002).