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Corporate trustee, Trustees

Inherent jurisdiction at work

Santeater Limited v Wakelin highlights issues that can arise with the use of corporate trustees when the persons with the power to appoint and remove trustees are not able to work together.

In this case the are two corporate trustees appointed to the Black Dog Trust (the Trust), one appointed by each settlor.  One of the settlors has been bankrupted, notwithstanding which a further director was appointed of the corporate trustee of which he was the sole shareholder.

Following the breakdown of the settlors’ relationship the Trust has not been able to function.

The decision in Santeater Limited v Wakelin provides a pragmatic interim solution where trustees must act unanimously, but cannot do so.

The Trust is facing significant financial issues and mortgagee sale was forecast if steps were not taken to resolve matters.  The court, pursuant to its inherent jurisdiction, made orders allowing one trustee company to:

  • deal with all Trust property including selling and refinancing, and
  • sign transfer documents.

The court also ordered the bankrupt settlor and the corporate trustee appointed by him to provide:

  • all information required for AML/CFT purposes
  • source of wealth information
  • insurer details, and
  • original trust documents.

Funds from sale or property refinance can be used to pay:

  • bank and sale costs
  • tax and accounting costs
  • rates and insurance, and
  • due diligence costs ($5,000) for a proposed new sole trustee appointment.

The sole trustee acting must report to the court regarding all steps taken the first report due within three months of the orders.  The sole trustee acting has no powers to make any discretionary distributions.

 

References:

  • Santeater Limited v Wakelin [2019] NZHC 2264

 

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