Trustees with Absolute Discretions -a Case of Dr Jekyll and Mr Hyde in the New Zealand Courts

A trend has been developing in New Zealand involving disputes between trustees and beneficiaries for judges to apply the same tests for reviewing the exercise of trust discretions whether or not the trust deed confers an absolute discretion on the trustees. Amongst those tests has been a putative requirement that trustees not overlook a relevant consideration nor take into account an irrelevant one. At the same time, in disputes between trustees or beneficiaries and outside parties, the courts tend to assume that absolute discretions are virtually unreviewable. This article argues that the judges should revert to acknowledging the import of words such as ‘absolute’ and ‘uncontrolled’. Moreover, even when a discretion is not expressed to be ‘absolute’, it is argued that the relevant/irrelevant considerations test, at least as it has developed, is not a suitable tool for reviewing the exercise of trust discretions. Also unhelpful in this context is the concept of ‘the irreducible core’ of trust duties. Much more likely to be useful in the case of absolute discretions is to ask the question whether the trustees ‘ action would have been ‘anathema’ to the settlor. The cases criticised in the article simply encourage litigation by disgruntled beneficiaries, with consequential cost to either the estate or the trustees personally, when that is the last thing the settlor wanted. In the course of its argumentation the article also criticises the approach to the review of contractual discretions adopted in Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 1 WLR 1661. This article pre-dated the decision of the New Zealand Supreme Court in Cooper v Pinney [2024] NZSC 181, [2024] 1 NZLR 935 at [116]ff. That decision has perpetuated what the article argues is a construction of trust of deeds that defeats the intentions of settlors.