Trusts Act 2019

Trustees’ duties and information obligations - Exemption and indemnity clauses

44: Court consideration of gross negligence

You could also call this:

"When a court checks if a trustee was very careless, it looks at their actions and decisions to see if they were unreasonable."

When a court is deciding if a trustee has been very careless, they look at certain things. You need to know that the court considers whether the trustee's actions were so unreasonable that no other reasonable trustee would have done the same thing. The court thinks about things like what the trustee did, what they knew, and what their job was supposed to be.

The court looks at many factors, including what happened, how bad it was, and what the trustee was thinking. They also think about what the trustee is good at, why they were chosen for the job, and whether they got paid. The court considers the type of trust, what it's for, and who it's supposed to help.

The court can think about anything else that seems important to them when deciding if a trustee was very careless, in relation to sections like section 40, 41, 75, or 82.

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This page was last updated on 18 July 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS75683.

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Money and consumer rights > Banking and loans

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Part 3Trustees’ duties and information obligations
Exemption and indemnity clauses

44Court consideration of gross negligence

This section applies when a court is deciding whether a trustee has been grossly negligent for the purposes of section 40, 41, 75, or 82.
The court must consider, having regard to the factors in subsection (3), whether the trustee’s conduct (including any action or inaction) was so unreasonable that no reasonable trustee in that trustee’s position and in the same circumstances would have considered the conduct to be in accordance with the role and duties of a trustee.
The factors to which the court must have regard are—
the circumstances, nature, and seriousness of the breach of trust; and
the trustee’s knowledge and intentions relating to the breach of trust; and
the trustee’s skills and knowledge that are relevant to the role of trustee; and
the purpose for which the trustee was appointed; and
any other circumstances, including whether the trustee has been remunerated for the role, or characteristics of the trustee that are relevant to the role of trustee; and
the type of trust, including, without limitation, the degree to which the trust is part of a commercial arrangement, the assets held by the trust, how the assets are used, and how the trust operates; and
the purpose of the trust, including, without limitation, what the trust is intended to achieve, and whom the trust is intended to benefit and in what ways; and
any other factor the court considers relevant.