Dealing with trust owned assets following the demise of the settlors’ relationship can be tricky. Many of the traps and pitfalls that can befall trustees who have diffficulties differentiating between the rights as beneficiaries and the obligations they owe as trustees are highlighted in the cases that comprise the back story to Irvine and Taylor v Penney and Simunovich. See Trusts protect beneficiaries not trustees and Dealing with delinquent trustees
However, in what it might be hoped, is the final chapter in the saga the assets of the original trust are to be resettled on to new trusts settled for the benefit of the individual spouses and their children. Why the case found it back before the courts was because the trustees appointed during the proceedings wanted to ensure that the course of action was appopriate, and in getting the sanction of the courts, to ensure the trustees were protected from any disenfranchised beneficiaries. The following excerpt from the decision sets out the reason for concern:
“ The proposed resettlement also means that spouses of children will be removed from the class of potential discretionary beneficiaries under both new trusts, whereas they are currently discretionary beneficiaries under the existing trust. In addition, the discretionary beneficiaries under each trust will have the potential to benefit from a smaller pool of assets than is currently the case under the existing trust. … because the trustees are empowered to make decisions that choose between beneficiaries… [the lawyer acting for the unrepresented beneficiairies was satisfied] … that the trustees considered the interests of discretionary beneficiaries, and have treated them fairly.
 Section 66(1) of the Trustee Act 1966 provides as follows:
66 Right of trustee to apply to Court for directions
(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power of discretion vested in the trustee.
(2) Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
 Clause 5.4.2 of the trust deed provides the trustees with the power to resettle on trust for the final beneficiaries “such part of the Trust Fund as the Trustees decide” provided the resettlement does not transgress the rule against perpetuities. The proposal in the present case will not contravene that rule. There is therefore no dispute that the plaintiffs have the necessary power to resettle the trust in the manner proposed.
 Although there is some debate in the authorities regarding the proper scope of s 66, there can be no doubt that the present case provides an example of a situation in which it is appropriate for the trustees to have resort to the section. The situation in the present case is not dissimilar to that in Mitchell v Griffiths.In that case the trustees of a trust sought a direction under s 66(1) permitting them to distribute the trust’s assets in accordance with a Deed of Family Arrangement. Venning J described the application as being “the type of application clearly contemplated by s 66”.I take a similar view in the present case. It is appropriate for the plaintiffs to seek directions under s 66 so that the Court has the opportunity to examine and approve the proposed resettlement. If approval is given, the plaintiffs will be protected by virtue of s 69 of the [Trustee] Act against potential claims from beneficiaries of the Trust who may subsequently become disgruntled or disaffected by the implementation of the proposal.
The court then gave the directions sought satisfied that give the “discord and dysfunction that has arisen between” the settlors the proposal was the only practical way forward.
Note that section 69 of the Trustee Act provides protection for any trustee acting in accordance with court directions provided that the trustee has not been “guilty of any fraud or wilful concealment or misrepresentation in obtaining the direction”.
It is perhaps surprising that more trustees do not avail themselves of the protections the Trustee Act can afford. While the decision not to is generally one of economy, prudence would suggest that short term economies may be somewhat misguided in this domain.
- Irvine and Taylor v Penney and Simunovich  NZHC 485
- Mitchell v Griffiths  NZHC 751
- Trustee Act 1956