In late July 2019, after a May 2019 revision of its arbitration act (the Arbitration Act 1996), New Zealand adopted an arbitration-friendly provision in the new Trusts Act 2019.
Alternative dispute resolution (including both mediation and arbitration) is discussed in the new Trusts Act, which allows for arbitration of internal trust disputes, meaning those involving beneficiaries, through a provision in the trust itself. Arbitration of external trust disputes (such as those with external advisors of the trust) is also allowed, although those types of matters are not in any way controversial.
Two of its most important provisions are section 145, which allows a court to enforce an arbitration provision in a trust, and section 144, which deals with unborn or unascertained beneficiaries. In adopting these provisions, New Zealand joins a number of other trust-friendly jurisdictions that are adopting trust arbitration but is putting its own unique stamp on the issue.
Section 145 provides:
- The court may, at the request of a trustee or a beneficiary or on its own motion,
- enforce any provision in the terms of a trust that requires a matter to be subject to an ADR process; or
- otherwise submit any matter to an ADR process (except if the terms of the trust indicate a contrary intention).
- In exercising the power, the court may make any of the following orders:
- an order requiring each party to the matter, or specified parties, to participate in the ADR process in person or by a representative;
- an order that the costs of the ADR process, or a specified portion of those costs, be paid out of the trust property; or
- an order appointing a particular person to act as a mediator, an arbitrator, or any other facilitator of the ADR process.
- This section applies in relation to internal matters only.
Section 144 provides:
- If a trust has any beneficiaries who are unascertained or lack capacity, then, for a matter relating to that trust that is subject to an ADR process,
- the court must appoint representatives for those beneficiaries;
- those representatives may agree to an ADR settlement, or agree to be bound by an arbitration agreement and any arbitral award under that agreement, on behalf of the beneficiaries who are unascertained or lack capacity; and
- any ADR settlement must be approved by the court.
- If representatives have been appointed under subsection (1) for beneficiaries who are unascertained or lack capacity,
- the representatives must act in the best interests of the beneficiaries on whose behalf they have been appointed;
- the court may order that a representative’s costs be paid out of the trust property; and
- the court may make any order that it thinks fit regarding the terms of a representative’s appointment.
- This section applies only to internal matters.