Trust disputes often arise where beneficiaries question a trustee's decision, particularly where the outcome appears inconsistent with the trust's purpose or where a beneficiary believes they have been treated unfairly. In New Zealand, the threshold for challenging a trustee's decision is high, but grounds do exist.
The legal standard for challenging a trustee
Trustees are required to act in accordance with the terms of the trust and their duties under the Trusts Act 2019. These duties include acting in good faith, for a proper purpose, and in the interests of beneficiaries.
A decision may be open to challenge where a trustee has:
Failed to take relevant considerations into account
Been influenced by irrelevant factors
Failed to exercise their discretion genuinely
Acted outside the powers conferred by the trust deed
Created or failed to address a conflict of interest
When uncertainty, not misconduct, is the issue
Not all trust litigation involves wrongdoing. In some cases, a trustee may seek the Court's direction before taking a significant step, particularly where the consequences are difficult to reverse or where beneficiaries have competing interests. Applications for directions, Beddoe orders, and blessing orders are all mechanisms available under New Zealand law for this purpose.
Early advice is often critical. Trust disputes have a tendency to escalate, particularly where relationships are strained, assets are significant, or third parties have an interest in the outcome.
