Public Trust v Kain: New Zealand courts address the relevance of a settlor’s wishes and of distributions from separate, related trusts in administering a trust

Abstract

Abstract The New Zealand High Court and Court of Appeal recently considered an application by a trustee for directions as to the administration of two high-value family trusts. The application raised two issues of general interest. First, the relevance of a settlor’s wishes. The courts held that it is necessary for a trustee to read and understand a settlor’s statement of wishes. A trustee is then entitled to take those wishes into account substantively in its decision-making, but it is not required to do so. The trustee must exercise its independent judgement within the terms and purpose of the trust. This applies also to a statement of wishes made by the settlor subsequent to the settlement of the trust, with such a later statement tending to supersede any earlier statement. Second, the courts considered the relevance of distributions from separate, related trusts. The courts held that a trustee is entitled, but not required, to take into account in administering the trust any benefits the beneficiaries have received or may receive from separate trusts established by the same settlor.