Under the previous law, couples who were separating usually had to divide their relationship property 50/50. If they could not reach an agreement about how their property should be divided, they could apply to the Family Court who could assist them in reaching an agreement. However, property owned by a trust was usually not considered relationship property. And this could complicate the division of property.
For example, the family home was considered relationship property under the Property (Relationships) Act 1976. This means that the value would be divided 50/50 at the end of a qualifying relationship, regardless of whose name is listed on the title. However, if the home was owned by a trust set up by one of the parties, the other party may not have had a claim to any of its value at the end of the relationship.
If a trust dispute arose in a relationship property matter, the parties would have had to take it to the High Court as the Family Court does not have the authority to decide on trust issues. This could draw out the dispute and add significant costs.
The new Act
The Trusts Act of 2019 provides mechanisms for dispute resolutions that minimise the need to apply to the Court. Under the new Act, a trustee can refer a dispute to ADR if all parties agree. If the parties apply to the Court, the Court can also direct them to attempt ADR first.
Alternative dispute resolution methods such as arbitration or mediation were available under the old Act but only if it was expressly stated in the trust deed. Now, these mechanisms are available to resolve disputes even when there is no mention of them in the trust deed.
Advantages of ADR
Applying to the Court to resolve a dispute usually requires a lot of patience. There may not be an available date to hear your dispute for months. ADR mechanisms such as arbitration or mediation are generally much more efficient options. They also tend to be less expensive than going to Court.
ADR mechanisms also offer greater flexibility in the outcome of the decision. In mediation, the parties collaborate to reach a solution that both parties are satisfied with.
This usually results in a high probability both parties will comply with the agreement as they were actively involved in the decision.
Disadvantages of ADR
For most ADR pathways (except for arbitration), there is no guarantee that a resolution will be reached. The parties may attempt mediation but not reach an agreement. If this happens, they may still have to apply to the Court.
The Trusts Act of 2019 is a promising new addition to the law governing trusts. An important feature is the increased emphasis and availability of alternative dispute resolution mechanisms. Such mechanisms can result in less strain on the Courts and less time and costs incurred by the parties. However, it is not a one-size-fits-all solution. For others, they may still require the Court’s assistance.