Can UK Trustees Recover Assets from a New Zealand Trust?

Question from lucie, Can UK Trustees Recover Assets from a New Zealand Trust?

Answer from AI:

When dealing with cross-border bankruptcy and trust issues, the interaction between different legal systems can be complex. Here, we will explore whether a UK trustee can recover assets from a New Zealand (NZ) trust, especially when NZ law might protect those assets.

Understanding the Legal Context

In this scenario, the individual was declared bankrupt in the UK in October 2015 and had assets in a New Zealand trust. They moved back to New Zealand in 2019. By March 2024, the six-year period had passed, which under NZ law, typically means that litigation to recover assets from the trust may not be pursued.

Key Legal Principles

1. **Bankruptcy Law in the UK**:
– In the UK, the Insolvency Act 1986 governs bankruptcy proceedings. Trustees in bankruptcy have the power to recover assets to pay off creditors.
– Trustees can seek court orders to recover assets, including those held in trusts, if they believe the assets were transferred to avoid creditors.

2. **Trust Law in New Zealand**:
– New Zealand’s trust law is governed by the Trusts Act 2019.
– NZ law generally protects trust assets from being claimed by creditors after a certain period, typically six years.

3. **Cross-Border Insolvency**:
– The UK and New Zealand are both signatories to the UNCITRAL Model Law on Cross-Border Insolvency, which aims to provide a framework for cooperation between different jurisdictions in insolvency cases.
– The Model Law allows for recognition of foreign insolvency proceedings and cooperation between courts.

Potential Legal Outcomes

1. **Recognition of UK Court Orders in NZ**:
– If a UK trustee obtains a court order to recover assets from the NZ trust, they may seek recognition of that order in New Zealand.
– NZ courts have discretion to recognize and enforce foreign judgments, but they will consider whether doing so would be contrary to NZ public policy or law.

2. **NZ Court’s Consideration**:
– The NZ court will evaluate whether the UK court’s decision aligns with NZ law and principles.
– Given the six-year limitation period in NZ, the court may be reluctant to enforce a UK order that contradicts this protection.

Steps to Take

1. **Consult Legal Professionals**:
– Given the complexity of cross-border insolvency and trust law, it is crucial to consult with legal professionals in both the UK and NZ.
– A lawyer can provide personalized advice based on the specifics of the case.

2. **Understand the Trust’s Structure**:
– Review the terms of the trust and any relevant documentation to understand the protections in place.
– Determine if there are any clauses that might affect the ability to recover assets.

3. **Monitor Legal Developments**:
– Stay informed about any changes in the law or relevant case law in both jurisdictions.
– Legal precedents can influence how courts might rule in similar cases.

Resources for Further Information

– [Insolvency Act 1986](https://www.legislation.gov.uk/ukpga/1986/45/contents) – UK legislation governing bankruptcy.
– [Trusts Act 2019](https://www.legislation.govt.nz/act/public/2019/0038/latest/LMS170676.html) – New Zealand legislation on trusts.
– [UNCITRAL Model Law on Cross-Border Insolvency](https://uncitral.un.org/en/texts/insolvency/modellaw/cross-border_insolvency) – Framework for international cooperation in insolvency cases.

In conclusion, while UK trustees may seek to recover assets from a New Zealand trust, the NZ courts will carefully consider whether to enforce such orders, especially if they conflict with NZ law. Consulting with legal professionals is essential to navigate this complex legal landscape.