Although the case arises under New Zealand's Health and Safety at Work Act 2015, the underlying question, whether a trust can bear obligations and liabilities as if it were a distinct legal entity, raises interesting questions about the nature of trusts and trustee liability that are likely to resonate across common law jurisdictions.

A tragic accident took place in September 2020, where a young child lost their life as a result of injuries sustained on a farm owned and operated by the RH & JY Trust. At the time, the Trust had three trustees: two individual trustees (once since deceased), and Perpetual Trust Limited, a corporate trustee appointed only five weeks before the accident.

WorkSafe New Zealand, the workplace health and safety regulator, brought criminal charges under sections 37(1) and 48(1) of New Zealand’s Health and Safety at Work Act 2015 against both the Trust itself and, in the alternative, the trustees collectively. The trustees challenged whether charges could validly be brought against the Trust or against them as a collective, as distinct from charges against each trustee individually.

The case has produced a striking divergence of judicial opinion at each level.

The District Court

In the District Court, Judge Bidois held that no charges could be brought against the trust or the trustees collectively, reasoning that "a trust is not a person and cannot be held liable for the actions or failures of the trustees of the trust". On this view, only the trustees in their individual capacities could be defendants, and the charges against the Trust were dismissed.

The High Court

Harvey J allowed WorkSafe's appeal in part. He accepted that "notwithstanding the orthodox position that a trust is not a separate legal entity, the position can be displaced by specific legislation" and that "the orthodox position that a trust is not a separate legal entity is relevant but not determinative". He found that it would be a "perverse outcome" if three loosely associated persons carrying out business with an informal structure could collectively be a ‘person conducting a business or undertaking’ (PCBU), but three trustees holding business assets in trust could not be. However, Harvey J concluded that the correct defendant was the trustees collectively, not the Trust itself, preferring an interpretation that "accords more closely to civil law and to reality".

The Court of Appeal

The Court of Appeal's decision was a 2-1 split. The majority (Cooke and Palmer JJ) held that a trust, or its trustees acting collectively, can be a "person" for the purposes of the Act; Whata J dissented.

Cooke J, delivering the majority judgment, acknowledged the force of the argument that "concluding that a trust is a person who can be charged with an offence is apparently inconsistent with well-established principles of trust law". A trust is not a legal person; it is essentially a set of equitable obligations that the trustees have. Nevertheless, the majority held that "whilst trust law creates a very strong starting point for addressing the issues of interpretation that arise, it is not determinative".

The majority's reasoning rested on several pillars:

• The definition of "person" in section 16 of the Act "includes the Crown, a corporation sole, and a body of persons, whether corporate or unincorporate". The majority reasoned that these definitions "extend who can be a PCBU to unincorporated bodies of persons" and that "questions of legal form are not determinative. It depends on who is conducting the business or undertaking as a matter of substance".
• The majority also relied heavily on Discount Brands Ltd v Westfield (New Zealand) Ltd  [2005] NZSC 17, where Tipping J observed that "by making unincorporate bodies persons for Resource Management Act purposes, Parliament seems to have been looking more to substance than to legal existence or form". The Court also drew on Cometa United Corp v Canterbury Regional Council  [2007] NZCA 560, which held that unincorporated bodies with collective decision-making structures and "pseudo-corporate" features can be prosecuted as "bodies of persons".
• New Zealand’s Health and Safety at Work Act 2015 prescribes different maximum penalties depending on the type of person who is the PCBU. For individuals who are not PCBUs or officers, the maximum fine under section 48 is $150,000; for individuals who are PCBUs or officers, $300,000; and for "any other person," $1.5 million. The majority considered it "contrary to Parliament's intent to conclude that the maximum penalty in s 48(2)(c) is not available when the collective decision-making body is a trust rather than a company, partnership or similar body".
• The definition of "officer" in section 18 refers to "a body corporate or an unincorporated body, other than a company, partnership, or limited partnership" and to any person occupying a position "comparable with that of a director". The majority held that this "shows Parliament's intent to comprehensively address, in a harmonised way, all legal structures that might be employed in the undertaking of businesses to which the duties of the Act attach".
• Section 29 of New Zealand’s Health and Safety at Work Act 2015 prohibits indemnification for liability to pay a fine which, in majority's view, was "fatal for the appellants' argument". The majority held that this prohibition would prevent trustees from being indemnified from the assets of a trust. As a consequence the majority held that "trustees cannot be indemnified from the assets of the trust, and they would face personal liability in a way that is inconsistent with trust law principles". The trust assets would be "effectively immune, notwithstanding that it is the trust assets that should be at risk given that the trust has engaged in the business". Treating the trust itself as the liable "person" solves this problem: the penalty falls directly on the trust fund.
• The majority further held that either label could be used to identify the collective body: "the trustees could be named in their capacity as the trustees of the Trust acting collectively, or the Trust itself could be named. The important point is that, if the trustees are named to identify the Trust, the trustees are not defendants in any individual capacity".

Whata J's dissent was anchored in what he described as "fundamentals" and "rules made over centuries" which he listed as follows:

• A trust is an equitable obligation, not a person.
• Trustee liabilities are personal.
• Trustees are entitled to be indemnified for expenses paid or liability incurred while discharging trustee responsibilities.

Whata J rejected WorkSafe's substance-over-form argument as a "category mistake": "Every action by a trustee using trust assets is premised on the rules of trust law just mentioned. Trusts and trustee collective entities do not exist as 'persons'. Individual trustees, and only individual trustees, 'conduct' business using trust assets in law and fact. That is a matter of substance, not form".

On the indemnification question, Whata J disagreed with the majority, asserting that section 29 prohibits indemnification "by another person" and , as a trust is not a person, the prohibition does not apply: "a trustee is not being indemnified by a person, because the trust is not a person". Whata J argued that the trustee is "in no different position to that of the sole trader who invests their own money to pay business related liabilities".

Whata J proposed an alternative solution: WorkSafe may prosecute a defendant "as trustee" with payment of the fine out of the assets of the trust. This approach "gives vent to the statutory purpose, without doing serious violence to orthodox conceptions of individual trustee liability or the nature of trusts". Trust law, he argued, "provides a ready built, coherent regime for making trusts pay for doing business – through individual trustees".

The dissent also emphasised the criminal justice dimension: "criminal liability attaches to individual responsibility and individual culpability". Trustee liability should be "tied to the individual culpability of the trustee when acting in that capacity," allowing fines to "correspond to the nature and severity of the breach by individual trustees according to their individual level of culpability".

The Supreme Court granted leave to appeal in a short judgment, framing the approved question with precision: "whether a trust and/or the trustees of a trust acting collectively is a 'person' within the meaning of s 16 of the Health and Safety at Work Act 2015?"

This case arose from deeply distressing personal circumstances for the family involved.

The legal questions that the case itself touches upon are questions of trust law that have long been in the contemplation of offshore practitioners. On one hand, trusts are often used as vehicles to own and operate businesses. On the other hand, the orthodox position is that a trust is not a legal entity but an equitable relationship: it cannot sue or be sued, contract, or incur liabilities in its own name. Only the trustees can do these things, and they do so personally (albeit with rights of indemnity from the trust fund).

The majority in the Court of Appeal effectively argues that this doctrinal position cannot be allowed to defeat the practical operation of a regulatory scheme designed to impose duties on whoever is conducting a business. When a trust "undertakes the business as a matter of substance," it should be treated as the PCBU. Whata J's dissent, by contrast, insists that substance and form are not in tension: the substance is that individual trustees conduct business using trust assets, and trust law already provides a "coherent regime" for making trusts pay for doing business.

The Supreme Court's decision on the substantive appeal will be closely watched. The critical question is whether the Court adopts the longstanding approach that a trust cannot, consistent with established principle, be treated as a "person" – or a broader purposive interpretation that prioritises the functional reality of how trusts operate over their doctrinal classification.

If the Supreme Court affirms the majority, it will represent a significant doctrinal development: a recognition that trusts, when used as vehicles for business, may be treated as persons for the purposes of at least some regulatory and criminal statutes. If the Court prefers Whata J's approach, it will affirm the continuing primacy of orthodox trust principles, while potentially endorsing the novel concept of prosecution of trustees "as trustees" with recourse to the trust fund.