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Corporate trustee, Trusts

Is anybody listening?

There was a little story in the Herald today.  Well a little story, but some interesting numbers.

The story was about former National Bank personal manager Mr Cooper who admitted 41 criminal offences that related to the theft of nearly $1milllion (a reasonably big number) and some related money laundering.

The theft happened over a period of about 8 years.  Not a big number, but quite a long time to sustain a financial deception.  A smaller number was 2, the number of houses owned by a trust related to Mr Cooper.  The trustees are reported as being Mr Cooper, his wife and a trustee company: Davenports West Trustee Company Limited.  One of the houses owned by that trust was reported as being involved in the money laundering charge.

Not reported was the number of trusts for which Davenports West Trustee Company Limited (Davenports) also acts.  In fact it acts for a number of trusts.  The question now, once one finishes with the Herald article, is what might the fallout be, if any, for the other trusts for whom Davenports acts as trustee?  It is to be presumed that the bank wants its money back and, if the trustees have received stolen funds, then the bank will likely be looking to recover the funds from the trust.

I am happy to concede that I have no knowledge as to the facts behind this, and nor are there sufficient reported details to speculate with confidence.  What I am more certain of is that if Davenports was acting for my family trust, I would be wondering what the consequences might be for me.  I’d also be none too happy reading about “my” trustee company in a sentence that included the words money laundering.

When the bank goes looking for its money, it is clear that Mr Cooper may not be in a position to help given his likely inceration.  As for Davenports West Trustee Company Limited, it is almost certainly an assetless corporate trustee. This means that if the trust cannot meet repayment of any valid demands, then the corportate trustee could be at risk of liquidation.  This was the fate of Newmarket Trustees Limited last year following a GST default by one of the trusts it acted for.

What I am therefore also sure about is that having an assetless corporate trustee act for a number of trusts makes little sense. Sure, there may be a small up-front cost saving due to not needing to incorporate a new company, but how much greater might the costs be if the corporate trustee is facing liquidation and every trust the trustee acts for has to convey all the trust assets to new trustee(s)?

As a trust professional I am ever amazed at the willingness of other trust professionals to disregard the simple reality that you cannot fully immunise trusts from the risks of an assetless corporate trustee that acts for multiple trusts.  This practice has been questioned for years, and yet it continues seemingly unabated.  The references below list a handful of cases spanning over ten years.  And these are just some of the reported decisions.  It is to be presumed that many more trustees are liquidated without fanfare and the client, or the lawyer or accountant, picks up the tab for the conveyancing.

References:

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