In Bank of New Zealand v Rowley and Skinner  NZHC 2835 the High Court determined that it could have the jurisdiction to liquidate a trust. See Liquidation of trusts – more clever ways to winkle assets from trusts for the background facts.
The matter has now been reconsidered, following service of the judgment referred to above on the Official Assignee, who the court considered the most appropriate liquidator in the circumstances of the matter. The court has now formed the view that while there is a compelling argument for the appointment of a liquidator (in accordance with the Judicature Act) the court does not have the jurisdiction to do so. Reference was made in the judgment to the same conclusion that was reached by the Law Commission in its review of the law of trusts. The Law Commission suggesting that the lack of jurisdiction to appoint a liquidator represents a gap in current insolvency law.
However, the decision does not end there. The court found that while it could not extend the scope of the Judicature Act to address BNZ’s plight (BNZ recognising that even if it got access to the trusts’s assets, the chest may well be bare), the scope of its inherent jurisdiction allowed the appointment of recievers. Recognising the more limited powers a receiver has, compared with those of a liquidator, the court made the appointment on terms that included most powers conferred on liquidators by statute. The court also noted that the powers conferred allowed the trust to be treated as a company, the settlor and trustees – directors and the beneficiaries – shareholders.
The solution is neat and pragmatic. The question is how the approach taken to address the unusual facts of these apparently poorly served and administered trusts will fare in the bright light of day and how quickly this solution might be sought for other trusts.
It is undenible that remedies available to companies with solvency issues are not as of right available to trusts and that the current law leaves apparent gaps due to the fact that access to the trust’s assets for creditors is not direct, but via the trustee’s right of indemnity, which can be lost. Whether that means the mooted solution and the re-casting of trust relationships as company relationships is the correct solution is unclear. Trusts are not companies and the rights and obligations that a trust brings to play are not necessarily able to be re-cast as company relationships. Slippery slope territory.