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Beneficiaries, trust, Trusts

No notice of trust

Section 153 (set out below) of the Land Transfer Act 2017 provides that no notice can be given on the land title register that land is held on trust.

153       Trusts not to be entered on register

(1)        Notice of a trust, whether express, implied, resulting, or constructive, must not be registered or noted on the register and has no effect if it is.

(2)        A provision in an instrument registered or noted under this Act to the effect that a person executing the instrument is liable only to the extent of an estate or interest or assets of which the person is a trustee  is not notice of a trust.

(3)        This section is subject to—

(a)        sections 138 and 154; and

(b)        any enactment that requires or permits notice of a trust to be registered or noted on the register.

Where there is a single trustee, there is a greater risk of land dealings in breach of trust.  See for example Young v Hunt where the beneficiaries were able to recover trust funds misappropriated by a sole trustee that were then transferred to his wife on his death. 

In addition to facilitating breaches of trust there are professional considerations to keep in mind as well.  In the United Kingdom case of Gosden v Halliwell Landau, the deceased transferred the property to a trust for the purpose of bypassing inheritance tax when she died.  The deceased and the two claimants were trustees of this trust. Prior to her death, the deceased sold the property in breach of trust without consent of the claimants.

The lawyer in charge of implementing the trust was found to have negligently failed to register a restriction in the Land Registry to protect the claimants’ beneficial interest.  There is no equivalent to a restriction for the protection of third-party interests in New Zealand.  However, the cases referred to highlight the importance of suitable trustees and the risks where one natural person trustee can deal unilaterally with trust property.

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