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Cases, Trustees, Trusts

Trusts and uncertain creditors

Trustees are personally liable to meet trust debts.  However, difficulties can arise when a trustee has concerns regarding the bona fides of creditors.  This issue was considered by the Court in Public Trust v Conway Madison Group Limited (In Liquidation). 

Background

The Public Trust was appointed as a trustee of the Madison Family Trust (the Trust).  Following its appointment the Public Trust advertised seeking notice of claims by creditors.  A number of creditors responded to the advertisment detailing claims, some of which far exceeded the Trust’s assets.

The issue for the Public Trust was how to determine the bona fides of the creditors and how to reconcile any conflict of interest between its obligations to the beneficiaries and the need to determine the validity of the claims.

The Public Trust proposed the appintment of a receiver to determine the validity of the claims.  The application was opposed by creditors on the grounds of the expense involved in determining the matter in that way.

Solution

While the Court accepted it had the inherent power to appoint a receiver, it was noted that the jurisdiction is required to be used sparingly.  Instead the Court decided that the appointment of a suitable expert would be an appropriate solution and directed accordingly.

References:

  • Public Trust v Conway Madison Group Limited (In Liquidation) [2012] NZHC 2071
  • High Court Rules, r 9.36(1).

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