The arbitration or mediation of trust disputes can help parties to avoid publicly litigating their dispute in the courts. Litigation is not only an expensive option for disputing parties but is likely to allow the disclosure of matters which are inherently personal to the parties. This can include personal information as well as financial and other commercial matters which would otherwise remain confidential.
The NZDRC has developed a specialist private dispute resolution service for parties to disputes concerning trusts that is robust and certain, yet innovative in its commonsense approach to resolving these challenging types of disputes promptly and privately.
The new Trusts Act 2019 (Act) came into force on 30 January 2021. It brings a number of significant changes to trust law and is the first major reform in 70 years. The Act applies to existing and future family trusts, trading trusts and trusts created under wills.
One of the most significant developments in the Act is the express provision for ADR processes to resolve both internal (between trustees and/or beneficiaries) and external trust disputes involving a trustee and one or more third parties. An ADR process is defined in the Act as an alternative dispute resolution process (for example, mediation or arbitration) designed to facilitate the resolution of a matter. Prior to the Act, it was generally considered that disputes relating to trusts were not capable of resolution through mediation or arbitration because many beneficiaries of trusts were discretionary, unascertained, or lacking capacity and therefore their interests could not be safeguarded or considered. In sum, the move to expressly provide for and promote the use of ADR in the Act has been a watershed moment by global standards.
NZDRC recommends parties to contracts include model arbitration and mediation clauses to ensure they can access these processes as a dispute resolution option of choice without delay should a dispute arise between them.
Model Clause for Arbitration under the NZDRC Arbitration Rules
The following arbitration clause should be included in contracts where the parties wish to have any future disputes resolved by arbitration under the New Zealand Dispute Resolution Centre’s Arbitration Rules:
“Any dispute or difference arising in relation to the trust between a trustee and one or more beneficiaries, or a trustee and one or more other trustees, but excluding any dispute about the validity of all or part of the trust, shall be referred to and finally resolved by arbitration in accordance with the Arbitration Rules of the New Zealand Dispute Resolution Centre.”
Model Clause for Mediation under the NZDRC Mediation Rules
The following mediation clause should be included in contracts where the parties wish to have any future disputes resolved by mediation under the New Zealand Dispute Resolution Centre’s Mediation Rules:
“Any dispute or difference arising in relation to the trust between a trustee and one or more beneficiaries, or a trustee and one or more other trustees, but excluding any dispute about the validity of all or part of the trust, shall be referred to and finally resolved by mediation in accordance with the Mediation Rules of the New Zealand Dispute Resolution Centre.”