When a trustee breaches a trust in New Zealand, a beneficiary can ask the High Court for remedies that include equitable compensation to restore the trust fund, an account of profits to strip the trustee of any gain, removal of the trustee, and court directions to correct how the trust is run.
The remedy that fits depends on the type of breach, the loss it caused, and what the beneficiary wants to achieve.
Choosing the right path early is often the difference between recovering what the trust has lost and letting the problem grow.
What Are a Beneficiary’s Main Remedies for a Breach of Trust?
A beneficiary’s main remedies for a breach of trust are equitable compensation, an account of profits, removal and replacement of the trustee, and orders or directions from the court about how the trust is administered.
These remedies aren’t mutually exclusive, and a beneficiary will often seek more than one in the same claim.
The table below compares the four main remedies so you can see at a glance what each one achieves and when it tends to apply.
| Remedy | What it achieves | When it typically applies | What the beneficiary must show |
| Equitable compensation | Restores the trust fund to the position it would be in but for the breach | Trust property is lost or reduced because of the breach | The breach caused the loss (“but for” causation) |
| Account of profits | Strips the trustee of any personal gain made from the role | The trustee profited personally, for example through a conflict of interest | The trustee made an unauthorised gain from the position |
| Removal and replacement | Ends the trustee’s role and puts a new trustee in place | Ongoing misconduct, a serious conflict, or loss of trust | Keeping the trustee in office is against the beneficiaries’ interests |
| Court directions and orders | Corrects trust administration and prevents further harm | Disputes about how the trust is run, or urgent risk to assets | A decision or process was flawed, or guidance is needed |
The key idea behind all of these is that the law tries to put the trust and the beneficiaries back in the position they would have been in if the breach had never happened.
Where that isn’t possible, the focus shifts to stripping the trustee of any gain and protecting the trust going forward.
How Does Equitable Compensation Restore the Trust Fund?
Equitable compensation requires a trustee to make good any loss the trust has suffered because of the breach, paid from the trustee’s own assets.
In Bank of New Zealand v New Zealand Guardian Trust Co Ltd, the Court of Appeal grouped breaches by people in fiduciary roles into three types: breaches that directly cause loss to trust property, breaches of the duty of loyalty, and breaches involving a lack of skill and care.
Where a breach directly causes loss to trust property, the court holds the trustee responsible if the loss wouldn’t have happened but for the breach, and questions of foreseeability don’t reduce the amount owed.
This is a strict approach, and it’s designed to hold trustees firmly to their duties in relation to trust property.
For example, if a trustee sells a trust property well below value without getting proper advice, the trustee may have to pay the shortfall back into the trust.
When Can a Beneficiary Claim an Account of Profits?
A beneficiary can claim an account of profits when the trustee has made a personal gain from their position, even if the trust itself hasn’t lost anything.
This remedy makes the trustee hand the profit over to the trust, which removes any reward for disloyalty.
It often applies where a trustee has a conflict of interest, such as buying trust property for themselves, putting trust business through a company they own, or taking a secret commission.
The trustee can’t keep the gain simply because the price was fair or the trust suffered no direct loss.
The aim is to make sure trustees act only in the interests of the beneficiaries and never use the role to enrich themselves.
Can a Beneficiary Have a Trustee Removed and Replaced?
Yes, a beneficiary can apply to the High Court to remove a trustee who has breached the trust, and the court can appoint a replacement.
Removal is the right remedy when the relationship has broken down, or the trustee can’t be relied on to act properly in the future.
Once a trustee is removed, the trust property is transferred to the new and continuing trustees so the trust can keep running.
Some assets vest in the new trustees automatically, while registered assets such as land usually need a formal transfer and registration.
Powers to appoint and remove trustees must be used honestly and for a proper purpose under the Trusts Act 2019.
The Supreme Court applied that proper purpose principle to the appointment of a trustee in Legler v Formannoij.
Removal isn’t automatic for every breach, because the court focuses on the welfare of the beneficiaries and the proper running of the trust.
A trustee who’s simply slow or who has made an honest mistake may not be removed, but ongoing misconduct, a serious conflict, or a refusal to account will often justify it.
What Court Directions and Orders Can a Beneficiary Seek?
A beneficiary can ask the court for directions and orders that fix trust administration without always seeking money from the trustee.
These include an order that the trustee provide a full account of the trust’s dealings, an order putting right a flawed decision, and an injunction stopping a trustee from taking a harmful step.
In urgent cases, the court can appoint a receiver to protect trust assets while a dispute is sorted out.
This route suits disputes about how the trust is being run, rather than clear wrongdoing that has already caused loss. It gives beneficiaries a practical way to keep the trust on track and prevent further harm.
How Does a Beneficiary Find Out a Breach Has Happened?
A beneficiary usually finds out about a possible breach through the information rights the Trusts Act 2019 gives them.
New Zealand has a high rate of trust use, with the Ministry of Justice estimating there are between 300,000 and 500,000 trusts, so given those numbers, disputes between beneficiaries and trustees are a recurring issue.
Since the Act came into force on 30 January 2021, there’s a presumption that trustees must tell every beneficiary the basic facts: that they’re a beneficiary, who the trustees are, and that they can ask for a copy of the trust deed and other trust information.
There’s also a presumption that trustees must give a beneficiary trust information when they ask for it, such as the trust’s accounts.
Before withholding anything, trustees must weigh a list of factors set out in the Trusts Act 2019, including the nature of the beneficiary’s interest and any confidentiality.
These rights matter because a beneficiary can’t enforce a trust they know nothing about, and a refusal to share basic information is often the first sign that something is wrong.
What Must a Beneficiary Prove to Succeed in a Breach of Trust Claim?
To succeed, a beneficiary must show that the trustee owed a duty, breached that duty, and that the breach caused a loss to the trust or produced a gain for the trustee.
Trustee duties come from both the trust deed and the Trusts Act 2019, which sets out mandatory duties that can’t be removed by the trust deed.
Mandatory duties include acting for the benefit of the beneficiaries and using trustee powers only for a proper purpose.
For a claim seeking compensation, the beneficiary needs to link the loss to the breach, and for direct loss to trust property the strict “but for” test described earlier applies.
For a claim seeking an account of profits, the beneficiary needs to show the trustee gained from the position, rather than prove any loss at all.
Good records help a great deal here, which is why a beneficiary’s right to the trust accounts is so important to building a case.
What Defences and Limits Might a Trustee Raise?
A trustee facing a breach of trust claim may raise several defences, and a beneficiary should understand them before going to court.
The court has the power to relieve a trustee from personal liability if the trustee acted honestly and reasonably and ought fairly to be excused for the breach.
A beneficiary who consented to, instigated, or later approved the breach while knowing the facts may be barred from suing over it.
Where a breach happened at a beneficiary’s request, instigation, or with their written consent, the court also has a discretion to order that beneficiary’s interest in the trust to be used to indemnify the trustee.
Trust deeds can also limit a trustee’s liability for ordinary mistakes, but they can’t protect a trustee against a breach caused by dishonesty, wilful misconduct, or gross negligence.
A beneficiary should also act promptly, because long delays can weaken a claim and make evidence harder to gather.
These limits mean the strongest claims are those involving real loss, a clear breach, and a trustee who acted badly rather than merely getting something wrong.
How Are Breach of Trust Disputes Usually Resolved?
Many breach of trust disputes can be resolved through negotiation or mediation before they reach a full court hearing.
The Trusts Act 2019 encourages alternative dispute resolution, and mediation often saves cost, time, and family relationships.
When agreement isn’t possible, a beneficiary can take the dispute to the High Court, which has wide powers to grant the remedies set out above.
Cases where a beneficiary faces off against a trustee over trust property show how these disputes end up in the High Court once trust between the parties breaks down.
Getting advice early helps a beneficiary choose between a quick negotiated fix and a formal claim.
Need Help With a Breach of Trust Claim?
A beneficiary who suspects a breach of trust has clear options, from asking for trust information and seeking compensation to having a trustee removed.
As trust dispute lawyers in New Zealand, Evolution Lawyers can help you understand your rights and pursue the right remedy.
Contact our team today to discuss your options after a breach of trust.
Frequently Asked Questions
Can a beneficiary sue a trustee personally for a breach of trust?
Yes. A trustee who breaches the trust is personally liable for any loss that wouldn’t have happened but for the breach, and may be ordered to pay it from their own assets. A beneficiary can bring a civil claim in the High Court seeking compensation, an account of profits, or the trustee’s removal, depending on the facts.
What remedies are available for a breach of trust in New Zealand?
The main remedies are equitable compensation to restore the trust fund, an account of profits to recover the trustee’s gains, removal and replacement of the trustee, and court directions about administration. The court can also order a trustee to account, set aside a flawed decision, or appoint a receiver to protect trust assets while a dispute is resolved.
How do I know if a trustee has breached their duties?
Trustees must follow the trust deed and the duties in the Trusts Act 2019, such as acting for the benefit of beneficiaries and using their powers properly. You have the right to ask for trust information, including the accounts. A breach is likely where trust money is missing, a trustee benefits personally, or basic information is refused.
Can a trustee be removed for a breach of trust?
Yes. A beneficiary can apply to the High Court to remove a trustee who has breached the trust, and the court can appoint a replacement. Removal usually follows ongoing misconduct, a serious conflict of interest, or a refusal to account, rather than a single honest mistake. The trust property then passes to the new and continuing trustees.
Is there a defence to a breach of trust claim?
Yes. The court can excuse a trustee who acted honestly and reasonably and ought fairly to be relieved. A beneficiary who consented to or requested the breach while knowing the facts usually can’t sue. Trust deeds may limit liability for ordinary errors, but never for dishonesty, wilful misconduct, or gross negligence by the trustee.