Chapter 2
Core principles
of trust law


2.1This chapter discusses how proposed new legislation should address the concept of a trust. We see value in new legislation including sections that outline what a trust is and how a trust is created. This would provide general guidance on the nature of the trust relationship. The intention of these provisions would not be to override the traditional case law understanding of a trust in New Zealand law generally, but to summarise in one place the key features of trusts that it is important that people settling trusts and interacting with trusts comprehend.

2.2This chapter includes a proposal to restate the circumstances in which a trust is created, including the three certainties. It considers the inclusion of a provision to make it clear that the courts can declare a trust to be invalid if it fails to meet basic requirements, and the option of including a provision on sham trusts. We also discuss the option, raised in the Second Issues Paper,54  of placing statutory restrictions on the purposes for which trusts may be settled.
54Law Commission Some Issues with the Use of Trusts in New Zealand: Review of the Law of Trusts – Second Issues Paper (NZLC IP20, 2010).