It is common practice for professional trustees to act as the director of a trustee company rather than personally. The use of a corporate trustee can limit the liability that the professional adviser might otherwise incurred had the adviser acted personally (see McNulty v McNulty where the beneficiaries claim against the director of a corporate trustee was struck out). Another advantage conferred through the use of a corporate trustee is the ability to effectively change trustee by changing the director of the trustee company. This is becase the professional acts as the trustee’s director, rather than as the trustee personally. This mechanism means that there is no need to incur the cost of a legal conveyance that will normally be required where there is a change of trustee. Instead there can simply be a change of director.
However, corporate trustees are not a perfect solution. Where a corporate trustee acts for a number of trusts, the insolvency of one trust can have implications for all the other trusts the trustee acts for (see for example CIR v Newmarket Trustees (under appeal); CIR v Chester Trustee Services).
Another problem with corporate trustees is that where companies office filing obligations are not maintained, the corporate trustee can be struck off. Where this happens the trust for which the corporate trustee was acting can be somewhat compromised, especially if the corporate trustee is the legal owner of trust property, as was the case with a recent decision involving the trustees of the Angletree Trust.
However, where this happens s. 52 of the Trustee Act can be utilised so that High Court orders can be obtained to enable the transfer of property from the company that has been struck off to a new trustee. A cheaper and more straight-forward solution will normally be to have the corporate trustee reinstated. However, where that is not possible, say where the former director and shareholders cannot or will not seek this, it is useful to appreciate that there are remedies available.
- Trustee Act 1956, s 52
- McNulty v McNulty  NZHC 1173
- Rewa Stanley Clark and Brian James Gauld as Trustees of the Angletree Trust  NZHC 426
- CIR v Chester Trustee Services  1 NZLR 395
- Newmarket Trustees v CIR  NZHC 810
- CIR v Newmarket Trustees  NZHC 107