Trustees act personally. Where a trustee enters into a transaction the trustee is personally liable unless that liability can be limited. Sometimes this is possible by way of a contract term, in some instances standard from agreements can include a limitation of liability.
However, in other instances, for example where liability is imposed by statute for policy reasons, it may not be possible to contract out of, or limit liability. Cox v Green Gecko Limited provides a sobering example.
In this case, Mr Cox, a solicitor, acted personally as a trustee for a trust settled by a client. The trust owned shares that were issued in circumstances where a prospectus should have been registered and provided. As a consequence of this failure, the subscriber was entitled under the [then] Securities Act 1978 to seek a refund of the subscription price of $700,000 from the offeror.
Mr Cox was held to be the offeror, and thus liable to refund the $700,000 paid to him. The fact that he was a trustee did not in anyway limit his liability. Nor did the fact that he did not receive the subscription price on his own account. The fact that he did enter into the transaction as a trustee only confirmed his personal liability. As noted by the Court of Appeal at  “… a trustee entering into a transaction is personally liable, and there was no provision in the [Securities] Act that limited his liability under s 37 because he was a trustee.” This outcome was in accordance with the policy objective of the Securities Act, which was to protect unsophisticated investors.
If only there was comparable protection for trustees of the same ilk.
An attempt to argue that Mr Cox was a bare trustee, and that that distinction would exonerate him was not successful.
There is no dispute that the shares were subscribed for. The purchase price of $700,000 was received by Mr Cox and disbursed in accordance with his client’s instructions. As noted at  by the Court of Appeal:
“[Mr Cox] facilitated a transaction under which Green Gecko unknowingly paid $700,000 for the benefit, ultimately, of an undischarged bankrupt. These facts are sufficient to exclude him as a bare trustee and establish him as an offeror of the shares. The things he did happened after the offer was made to Green Gecko, but it is enough that they were done during the negotiations and before completion.”
An argument that Mr Cox should be treated as a director and escape liability that would otherwise accrue to him if he was acting personally (as in fact he was) was not sucessful.
The result may seem harsh. Mr Cox did not benefit from the allotment of shares, other than to the extent of any professional fees derived. The structure was put in place to facilitate a transaction that his bankrupt client could no longer personally participate in in any legitimate fashion. Some may consider that speaks for itself. The end result is that Mr Cox has incurred a significant liability, which it is presumed that the trust for which he acted is no longer good for.
- Cox v Green Gecko Limited  NZCA 404
- Green Gecko Limited v Cox  NZHC 2034